Advanced Law Essay: A Detailed Look at Contractual Agreement Terms

This essay provides a detailed analysis of express and implied terms in contract law. It begins by defining contracts and the importance of clearly defined terms, distinguishing between express terms (mutually decided and clearly defined) and implied terms (arising from statute, common law, or business customs). The essay discusses the parol evidence rule, which restricts the use of oral statements contradicting written contracts. It examines how implied terms, while intended to address gaps in contracts, can introduce ambiguity and increase liabilities. The essay also explores terms implied by law, facts (using business efficacy and officious bystander tests), and customs, referencing key cases like Liverpool City Council v Irwin and Hutton v Warren. The argument is presented that while express terms provide clarity and agreed-upon liabilities, implied terms can lead to unexpected obligations and potential losses for parties unaware of these additional responsibilities, ultimately questioning whether contracts should be strictly limited to negotiated terms to avoid confusion and ensure fairness.

Running Head: BUSINESS AND CORPORATION LAW 0
Advanced Law
6/2/2019

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Question 2
A contract is an agreement, which can be enforced by law1. For this reason parties of the
contract should develop the terms and conditions in a reasonable and careful manner as a
breach of any term give rise to the issue of breach of contract. Parties are free to decide terms
of contract as they have the freedom to determine the extent to, which they want to be bound.
Two types of terms are there in a contract namely expressed term and implied a term2. An
express term is the one, which parties decides in mutual in a clear manner and on they become
agree to be bound by3. Apart. Another kind of term is an implied term. An implied term is the
one which parties to the contract do not decide but such terms exist in a contract because of
the application of statue and common law in addition to customs of the business.
At the development phase of the contract, each party makes certain negotiations where the
same outline their wishes and make some statements. Here it is required for the parties that
they must show their intention to make a particular statement as a term of the contract. When
parties do so in a specific and defined manner then such terms are considered as express terms
of the contract. Such terms may be developed in an oral or written manner. It means not every
discussion of parties and statement made by them can be understood as an express term, but
parties must show their intention regarding such consideration. Once a term is introduced to
the contract, failure to fulfill the same lead an issue of breach of contract and attracts penalties
for the liable party. Parol evidence rule plays an important role to determine the express terms.
1 David L. Kurtz and Louis E. Boone, Contemporary Business (Cengage Learning 2008) 132.
2 Contracts.uslegal.com, ‘Express And Implied Contracts’ <
https://contracts.uslegal.com/types-of-contracts/express-and-implied-contracts/> accessed on 02 June 2019
3 David Chappell, The JCT Standard Building Contract 2011: An Explanation and Guide for Busy Practitioners and
Students (John Wiley & Sons 2014) 43.

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The rule has been established in the case of Jacobs v. Batavia & General Plantations Trust Ltd4 .
As per the decision given in this case, no oral statement or communication can be treated as a
term of the contract where the same is in contradiction of written statements. The discussion
regarding the inclusion of terms is important because it determines liabilities of the parties and
there should not be any confusion between the parties.
The confusion regarding terms of contract enhances in case of implied terms. As stated earlier,
express terms are known to each party but the situation is not similar to implied terms. These
terms determine the rights and liabilities of parties going outside of the purview of contract.
Although these terms exist to provide a solution to the issues that are not addressed under the
contract developed between the parties but such terms increases ambiguity. In the case of
commercial contract, implied terms exist in the framework of the sale of services and goods. At
many of the places under Sale of Goods Act (1979)5 and Supply of Goods & Services Act (1982)6,
such implied terms reflect.
Under common law, terms can be implied by law as well as by facts. Implied terms by law are
the one, which courts think that the same should be there. Further terms implied by the facts is
the one, which the parties were, intended to include in the contract as per the opinion of the
court.
In order to determine whether a term is implied by the fact or not, the court may use two tests
namely business efficacy test and officious bystander test. Terms implied by law are usually the
terms, which exists in similar kind of contracts. Terms implied by law usually exist in those cases
4 Jacobs v. Batavia & General Plantations Trust Ltd [1924] 1 Ch 287
5 Sale of Goods Act (1979)
6 Supply of Goods & Services Act (1982)

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where one of the parties of the case remain in weaker situation/position and it becomes
necessary to provide them additional protection. Certain rules are there for the terms that are
implied by the law. One such rule has been determined in the case of Liverpool City Council v
Irwin7. It was given in this case that if nothing is mentioned then landlord (strong party) will be
considered liable to take reasonable care. Further, in the case of Wilson v Best Travel8, it was
given that in contracts of a defined type, the insertion of the term must be reasonable. It means
an implied term cannot be inserted anywhere in any circumstance and court are required to
check the reasonableness while allowing the implied terms. Further, in the case of Shell UK v
Lostock Garage Limited9, it was decided that a term can be treated as implied by law where the
same is certain in a sufficient manner10.
Further, terms implied by customs are usually those terms that are popular in the related
business and industry. It was given in the decision of the case of Hutton v Warren11 that court
may imply a term, which is prevalent in trade under a specific type of transactions. In this case,
the claimant was a tenant of the fields of the defendant. He made some expenditure in order to
grow the crops. When tenancy came to an end then claimant handed over a bill of expenses to
the defendant who refused to make the payment. Court provided in the decision of the case
that it is an implied term to make the payment of an expense that has been incurred by the
7 Liverpool City Council v Irwin [1977] AC 239
8 Wilson v Best Travel [1993] 1 All ER 353
9 Shell UK v Lostock Garage Limited [1976] 1 WLR 1187
10 E-lawresources.co.uk, ‘Shell UK v Lostock Garage Limited [1976] 1 WLR 1187 Court of Appeal’ <http://e-
lawresources.co.uk/cases/Shell-UK-v-Lostock-Garage.php> accessed on 02 June 2019
11 Hutton v Warren [1836] EWHC Exch J61

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tenant for growing the crops. In justification of the decision, the court stated that it was a
common practice to make the reimbursement of such expenses.
In a contract, relevant trade customs and practices forms implied term except in those
situations where an express term is already there in relation to a particular aspect, which is in
contradiction of implied term. In this manner, it is clear that implied terms have a wider scope
and the same can be included in many ways. Many of the times parties to the contact argue
that implied terms must not be allowed and only single kind of contractual term i.e. express
terms must be there. The reason behind the same is that implied terms enhance the liability of
parties in a contract. Terms of the contract is an important thing to decide as all the rights and
liabilities of parties depends on the same and for this reason, only, parties negotiates with each
other. But such negotiation remains of no use because of the existence of implied terms. This is
very genuine to think about the importance of a contract where liabilities of the parties are not
limited to the same. Further, in many cases, innocent parties face losses due to the exercise of
implied terms. The question of debate is that parties to the contract must be aware of the
potential liability in case of breach of a term. The situation remains normal and argument free
as long as a party breaches an express term because in such situation innocent party remains
aware of his/her entitlements and the liable party remains aware of the possible risks and
responsibilities. A contract is the determination of willingness of parties where they decide
what they want to do with each other’s obligation. Inclusion of implied terms goes beyond such
determination of parties. A contract is required to be limited to the discussion and negotiations
of parties and once all ten terms are decided between them, no outside force should affect the
same. Imagine a situation where a party fails to do something, which was nowhere mentioned

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in the contract with the other party, and the party who fails to do a particular thing was not
aware of anything else. If the court determines the subjective act as an implied term then it
attracts additional liability for the party who is innocent in actual. While the development of
contract, parties understand, the requirements of other party and manage his/her activity
accordingly. Insertion of implied term forms a huge confusion. Although sometimes it becomes
necessary to include an implied term to determine a matter which does not state under a
written contract or has been decided orally by the parties these are a very exceptional
circumstance and mostly such kind of terms give rise to ambiguity and therefore the same
should be scrapped. In a conclusive manner this is to state that because of implied terms,
parties to the same has to face liability outside of the decided one.

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Bibliography
Legislations
Sale of Goods Act (1979)
Supply of Goods & Services Act (1982)
Cases
Hutton v Warren [1836] EWHC Exch J61
Jacobs v. Batavia & General Plantations Trust Ltd [1924] 1 Ch 287
Liverpool City Council v Irwin [1977] AC 239
Shell UK v Lostock Garage Limited [1976] 1 WLR 1187
Wilson v Best Travel [1993] 1 All ER 353
Books/Journals
David Chappell, The JCT Standard Building Contract 2011: An Explanation and Guide for Busy
Practitioners and Students (John Wiley & Sons 2014)
David L. Kurtz and Louis E. Boone, Contemporary Business (Cengage Learning 2008)
Other Resources
Contracts.uslegal.com, ‘Express And Implied Contracts’ < https://contracts.uslegal.com/types-
of-contracts/express-and-implied-contracts/> accessed on 02 June 2019

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E-lawresources.co.uk, ‘Shell UK v Lostock Garage Limited [1976] 1 WLR 1187 Court of Appeal’
<http://e-lawresources.co.uk/cases/Shell-UK-v-Lostock-Garage.php> accessed on 02 June 2019