Implied terms of a contract
Discuss about the Introduction to Business Law and Ethics.
Generally, what the parties agree pursuant to the contract are terms of the contract.[1] Terms of a contract could either be express or implied English.[2] Express terms are those written down by the parties while implies terms are unwritten and are construed by the court in accordance to the contract. The discussion herein is focused on the implied terms of a contract which is relevant in this instance.
Terms of a contract can be implied in three different ways, this includes implication based on custom, law and facts.[3] An implication by custom means the parties to the contract are used to the practice they are engaged in and its notoriety.[4] The custom should be certain and well known to the parties and it ought to have been intended to form part of terms of the contract.[5] Moreover, an implied term must be reasonable and not contradicting an express term as stated by the court in the aforementioned case. Reasonable in this instance means the terms should coherently be in line with the terms of the contract. On the other hand, an implication by law is generally entailed in the statutes of respective states. Implied terms are meant to give efficacy to the whole contract. This principle was used by the court in the case of Williams v Gibbons.[6] For implication based on the facts, the court construes the terms in accordance to the intention of the parties.[7] The terms contained in the contract must be reasonable, giving contract efficacy, the term ought to be obvious and clear and not in contradiction with an express term.
In light of the above discussion, based on the facts presented, it was an implied term in the contract for the almond flour to be gluten free. There is an implication by custom here that the almond flour which is usually supplied is gluten free as evident from their telephone conversation. Secondly, the almond flour being almond free is the substratum of the contract and the efficacy of the contract would be lost if another construction is arrived at. Lastly, in light to implication by facts, there is no express term in the contract that contradicts the implied term herein. The implied term is also reasonable and it is obvious to both parties that the almond flour ought to have been gluten free.
An implied term is construed from the usage or practices between the two contracting parties.[8] The term in question ought to be notorious, certain and intended to have formed part of the contract. Where parties to the contract might have forgotten to include some basic terms of a contract, the court would construe such contracts in light of the missing terms as was in the case of Byrne v Australian Airlines Ltd. Therefore in such a scenario, the absence of a term would not justify a parties’ attempt to escape from liability unless there is a contrary express term to that effect. Implication of terms of the contract by law seeks to generally guide the parties to the contract in receipt of the overall desired result. In this instance even if some terms are not included in the contract the courts would still deem such terms to be impliedly there.
Implication of terms by custom, law, and facts
Additionally, the courts will look into the facts or terms agreed upon by the parties. The intention of the parties would be construed by the court as read from the contract.[9] The description of the types of goods has been discussed by the court in the case of Wallis v Pratt.[10] The court in this case stated that it has to establish first the words that were used in the contract. This is because the court would by all means try to implement what the parties agreed or intended to agree. What was therefore no reflected therein or not within the knowledge of the contracting parties would most probably not be implemented since they do not form part of the implied terms. Finally, implied terms seek to give effect to the efficacy of the contract. This is because most probably there is a key term missing that would most probably render the contract unsatisfactory to both parties. Implied terms would in this instance come in to fill the gaps and give effect to the intention of the parties to their satisfaction.
The facts above do not reveal a continuous and notorious engagement between the two parties. Therefore there is no implication of terms of contract by custom. Furthermore, the agreement between the two parties does not contain express or implied terms that specifically instruct Mikaela to bake cakes that are gluten free. In fact, the two parties did not talk about the quality or ingredients of the cakes. In conclusion to the above subject matter, it is fair to state that the terms in Dan and Jacob’s contract with Mikaela for the wedding cake to be gluten-free is not implied.
A condition is a term key to the formation or performance of a contract while warranty is a term subsidiary to the contract. [11] Perhaps what distinguishes the two terms is that a breach of a condition vitiates the whole contract while a breach of a warranty does not, but only gives a party a right to sue for damages.[12] The court has stated that the test of a condition or a term is dependent on the essentiality placed by the parties.[13] Therefore, where a term in the contract is precedent or key to the performance of the contract then that is a condition and not a warranty. This therefore means that the choice of a term being a condition or a warranty lies on the parties to the contract. In the case of Bettini vs. Gye, the court held that failure to attend for rehearsals before the concert started was less detrimental and was a breach of a warranty.
In the above case the parties intimated on the type of the cake to be baked. This was the key to the contract formation. As stated here above in the case of Tramways Advertising Pty Ltd v Luna Park (N.S.W) Ltd, the court would usually look at the emphasizes placed on the terms. The parties in this case actually discussed on the specific type of the cake that was to be baked. The consequence of the breach here above is detrimental to Kimiko following the intended occasion that the cake was to serve. Kimiko can argue that the efficacy of the contract has been lost following the above contravention by Mikaela. However, chances of the term being a condition cannot be eliminated since Kimiko did not intimate on the purpose of the icing colour on the cake. Mikaela could argue that the cake has been baked accordingly despite the minor variance in terms of the icing colour.
Implied terms and their importance
A contravention of a condition would repudiate the whole contract[14] unlike in cases of warranties which would only entitle an individual damages[15] and not repudiation of the contract. The court in the case of Poussard v Spiers held that failure to perform in a concert due to illness was a breach of condition and it entitled the producer to repudiate the contract. On the other hand the court in the case of Bettini v Gye held that missing 6 days of the rehearsal was breach of the a warranty. The contract could consequently be repudiated, damages given or specific performance be ordered. Specific performance entails doing specifically what the contract states[16].
The extent of responsibility of Mikaela is dependent on the finding of the court. If the court finds out that the breach is a condition then Kimiko would be entitled to repudiate the contract and be paid back all the money that he paid as highlighted in the case of Poussard v Spiers here above. Generally it is upon Kimiko to either choose to treat the icing colour as a warranty or a condition under the contract as was observed by the Supreme Court in the case of Masiye v Phiri.[17] As observed by the court herein, a party who alleges contravention would be bound to treat the contract as still valid. Kimiko in this matter would therefore be bound to the contract since he would have waived his right of repudiating the contract. Furthermore, if the court finds that the contravention is a warranty then Kimiko would be entitled to compensation or damages. This means the contract would be held not to be void despite the contravention by Mikaela. Finally depending on the facts given by Kimiko, Mikaela can be compelled by the court for specific performance in relation to the icing colour of the cake. If the court deems the circumstance herein to require specific performance, it would decide so accordingly.
Cases
Bettini v Gye (1876) QBD 183.
Byrne v Australian Airlines Ltd (1995) CLR 440.
Majeau Carrying Co Pty Ltd v. Coastal Rutile Ltd (1973) C.L.R. 48
Masiye v Phiri (2008) Z.R. 56.
Poussard v Spiers (1876) 1 QBD 410.
Tramways Advertising Pty Ltd v Luna Park (N.S.W) Ltd (1938) (SR) (NSW) 632.
Wallis v Pratt CA [1910] 2 KB 1003
Williams v Gibbons [1994] 1 NZLR 273.
Other Sources
Austen-Baker, Richard, Implied terms in English contract law (Edward Elgar Publishing) 2011.
BP Refinery (Westernport) Pty Ltd v. Shire of Hastings (1977) C.L.R. 266.
Carolyn Heaton, Partner, Morrison Kent, The Significance Of Implied Contractual Terms https://www.morrisonkent.co.nz/uploads/PDF%20Articles/THE%20SIGNIFICANCE%20OF%20IMPLIED%20CONTRACTUAL%20TERMS.pdf [Accessed 10 Apr. 2017].
E-lawresources.co.uk. (2017). Terms of a contract. [online] Available at: https://e-lawresources.co.uk/Contents-of-a-contract.php [Accessed 10 Apr. 2017].
Emily M. Weitzenböck, (2012). English Law of Contract: Terms of contract,. https://www.uio.no/studier/emner/jus/jus/JUS5260/v12/undervisningsmateriale/Terms.pdf [Accessed 10 Apr. 2017].
Anon, (2017). [online] Available at: https://www.jacmac.com.au/uploaded/News/publications/201204_Condition_vs_Warranty_in_a_Contract.pdf [Accessed 10 Apr. 2017].
Patrick S. Ottinger, ‘Principles of Contractual Interpretation’ (2000) 60 Louisiana Law Review 772.
Henrik Lando & Caspar Rose, ‘On the Enforcement of Specific Performance in Civil Law Countries’ (2003-14).
E-lawresources.co.uk. (2017). Terms of a contract. [online] Available at: https://e-lawresources.co.uk/Contents-of-a-contract.php [Accessed 10 Apr. 2017].
Emily M. Weitzenböck, English Law of Contract: Terms of contract, 2012. https://www.uio.no/studier/emner/jus/jus/JUS5260/v12/undervisningsmateriale/Terms.pdf [Accessed 10 Apr. 2017].
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