CONTRACT LECTURE 9 TRANSCRIPT
C STRICKLAND
IMPLIED TERMS
TOTAL TIME = 47 mins 12 secs
Track/slide 8 02.49
Another interesting case is Reigate v Union Manufacturing Co (Ramsbottom) 1918.
In this case Scrutton LJ stated:
‘The first thing is to see what the parties have expressed in the contract; and then an implied
term is not to be added because the court thinks it would have been reasonable to have
inserted it in the contract. A term can only be implied if it is necessary in the business sense
to give efficacy to the contract: that is, that it is such a term that it can be confidently said to
the parties, “What will happen in such a case?” they would both have replied: “Of course, so
and so will happen; we did not trouble to say that; it is too clear.” Unless the court comes to
some such conclusion as that, it ought not to imply a term which the parties themselves have
not expressed.’
And the idea of the ‘officious bystander’ test is evidenced by the words of MacKinnon LJ in
the case of Shirlaw v Southern Foundries 1939 when he stated:
‘Prima facie that in a contract that is left to be implied and need not be expressed is
something so obvious that it goes without saying; so that, if while the parties were
making their bargain an officious bystander were to suggest some express provision
for it in their agreement, they would testily suppress him with a common, “ Oh, of
course”.’
In other words, the courts should be reluctant to imply a term into a business contract in fact,
unless they are sure that it is necessary for business efficacy and the parties would have
included such a term were it not for the fact that it is obvious that such a term is regarded as
part of the contract without the need to actually put it in the contract. In this way, the courts
are only giving effect to the presumed intentions of the parties and so are not overly
interfering with the concept of freedom of contract.