Common Law Implied Terms

• Implied terms are terms in a contract which are not expressly agreed between the parties but are implied into a contract by common law or by statute.
• When considering incorporation of implied terms, the court will check if any terms should be implied into the contract by common law. There are various common law tests and any satisfied then the term can be implied.
• Firstly, there is the business efficacy test. The court will imply a term into a contract if the term is necessary to make sure the contract works on a business-like basis. This was seen in The Moorcock where a term was implied, that the ship would be safe docking at low tide, to give the contract business efficacy (make it work). Otherwise the boat owner would just be 'buying an opportunity of danger.' Lord Sumption supported this rule and said in Marks and Spencers v BNP Paribas that 'a term can only be implied, if without the term, the contract would lack commercial or practical coherence.'
• There is also the officious bystander test. This is where a term will be implied into the contract where it is 'so obvious that it goes without saying.' If an 'officious bystander' were to suggest the term to the parties while they were making their contract would have said it was obviously going to be in the contract, Shirlaw v Southern Foundries.
• However, in Shell v Lostock, a term was not implied as it was not obvious that the parties would have said that it should have been in if they had thought about them. Shell argued they would never have agreed to these terms in a competitive market. In Marks and Spencers v BNP Paribas the Supreme Court said that when considering what the parties would have agreed, an objective (reasonable man) approach must be taken.
• Additionally, terms are implied because of an established local custom or custom of the particular trade as in Hutton v Warren or by prior dealing where there has been regular and consistent previous dealings as in Hillas v Arcos.