Implied Terms in Contract

Note on Implied Terms in Contract by Legum

Implied Terms in Contract:

In negotiating a contract, not every single term can be thought of and included in the contract as a term. The courts, recognizing this, sometimes import certain terms into a contract even though the parties themselves have not explicitly included such terms in the contract.

Implied Terms Defined:

Implied terms are terms a court will assume are intended to be included in a contract even though explicit provisions have not been made by the parties for such inclusion.

Where from these Terms?

Some terms in a contract are obtained from statute, others from custom, and others from the court itself (judicial precedence). Consequently, the following are categories of implied terms:

a. Terms implied by the court itself.

b. Terms implied by statute.

c. Terms implied by custom.

Terms implied by the Courts:

The courts may imply certain terms into a contract if those terms are necessary to give the contract business efficacy or make the contract work. Usually, these are terms the parties themselves would have explicitly included in the contract if their minds were drawn to it.

In the case of the Moorcock, the court held that the defendant implicitly represented to have taken steps to ensure the safety of a riverbed adjacent their jetty to ensure the safety of ships grounded at their jetty.

Sometimes, parties to a contract may claim that a particular implied term exists, but the courts will fail to uphold their claims. In the case of Atuwo versus Agip Ghana Ltd, the claimant, an accountant who was hired by Agip Ghana Ltd, had his employment terminated for redundancy. The claimant contended that although not expressly stated, there was an implied term in the contract that the defendant would hire him for 15 years. The court held that there were no grounds for implying such terms into the contract.

Also, in Eyre v Measday, the courts declined to uphold the argument that a sterilisation procedure had the implied term that the woman, who later got pregnant post the sterilisation, would not get pregnant.

Also see the case of Reigate v Union Manufacturing Co where the courts held that there was no implied term to maintain the claimant as sole agent by the defendant company.

Terms Implied by Custom and Usage:

These are standard terms that are generally well known within a particular trade or profession. Some contracts are signed against the background of customary practices peculiar to certain professions.

In Hutton v Warren for instance, the court implied a term into a tenancy agreement providing for the compensation of the claimant for his work done on a piece of land as it was deemed customary practice for farming tenancies to contain such a clause for compensation.

Also see the case of Quartey v Norgah.

Terms Implied by Statute:

For some particular types of contracts, various statutes imply certain terms into the contract even if the parties themselves do not explicitly include such terms. However, express terms can contradict the terms implied by a statute and make those statutorily-implied terms inapplicable.

In Ghana, the following terms are implied by statute:

1. Existence of Goods: In section 9 of the sale of goods act (act 137) a contract for the sale of goods has the implied term that the goods are in existence.

2. Undertaking as to Title of Goods: In section 10 of act 137, there is an implied warranty that a seller of goods “…will have a right to sell the goods at the time when the property is to pass.”

3. Description of Goods will Match Goods: In section 11 of act 137, “In a contract for the sale of goods by description whether or not the sale is by sample as well as by description, there is an implied condition that the goods shall correspond exactly with the description”.

4. Sample of Goods shall Correspond with Goods: In section 12 of act 137, “in a contract for the sale of goods by sample, whether or not the sale is by description as well as by sample there is an implied condition that the goods shall correspond exactly with the sample.”