WHEN CAN IMPLIED TERMS BE READ INTO A CONTRACT?
The express terms of a contract may leave many things unsaid and the question often arises, can other terms and conditions which are not spelt out and recorded by the parties be implied?
Implied terms fall into two main categories.
Firstly, terms which are implied by law.
Terms are often implied by law in cases where it is by no means clear that the parties would have agreed to incorporate them in their contract, but such terms are not normally implied if they are in conflict with the express provisions of the contract.
Ready examples of such terms implied by law are to be found in the law of sale, e.g. the seller's implied guarantee or warranty against defects.
Secondly, terms which are unexpressed provisions of the contract which derive from the common intention of the parties, as inferred from the express terms of the contract and the surrounding circumstances. In other words, a Court would imply not only terms which the parties must actually have had in mind but did not trouble to express but also terms which the parties, whether or not they actually had them in mind, would have willingly expressed if the question, or the situation requiring the term had been drawn to their attention.
In considering whether such terms should be implied in a contract, a Court or an Arbitrator would be guided by the following legal precedents.
"The agreement so constituted may be held subject to an implied or unexpressed term where the court is satisfied that there arises from the language of the agreement itself, and the circumstances under which it was entered into, such an inference that the parties must have intended the stipulation in question that the court is necessarily driven to the conclusion that it must be implied: Douglas v Baynes 1908 TS 1207. The word ‘necessarily' is emphasized; for an implied term is not be to added merely because the court thinks it would have been reasonable to have inserted it in the agreement, or even that only an unreasonable person would have objected to its insertion" : Rapp & Maister v Aronovsky 1943 WLD 68.
As was said in the English Court of Appeal" "A term can only be implied if it is necessary in the business sense to give efficacy to the contract; that is, if it is such a term that it can confidently be said that if at the time the contract was being negotiated someone had 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; 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".
"It follows from these principles that before a term can be implied it must be capable of clear and exact formulation substantially in only one way; for the moment alternative possibilities suggest themselves, it is certain that the parties cannot have impliedly agreed on anything in particular" : Rapp & Maister v Arnovsky.
"The circumstances to which the Court will have regard in determining whether or not a term is to be implied are those existing at the time of contract. Subsequent events will not be considered since prophetic powers will not be attributed to the parties" : Van der Merwe v Viljoen 1953 (1) SA 60 (AD).
"The rule to be applied by a Court in determining whether or not a condition should be implied, is well stated by LORD ESHER in the case of Hamlyn & Co. v Wood & Co. 1821 (2) Q.B.D. at 491, as follows: ‘ I have for a long time understood that rule to be that a Court has no right to imply in a written contract any such stipulation, unless, on considering the terms of the contract in a reasonable and business manner, an implication necessarily arises that the parties must have intended that the suggested stipulation should exist. It is not enough to say that it would be a reasonable thing to make such an implication. It must be a necessary implication in the sense that I have mentioned' - per Solomon JA in (Union Government )Minister of Railways and Harbours) v Faux Ltd 1961 AD".
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