OCR A2 Law - The Law of Contract - Types of Terms (Implied) (1)

Intro: A term of a contract describes the duties and obligations each party assumes under a contract. Terms can be classified in several ways. There are 2 main types: Express; Implied terms. Express term = A term that is specifically stated orally or written down at the time of the contract. Judges only give effect to these so long as they have been incorporated. Implied term = A term that isn't stated at the time of the contract but is still very important. They can come from 3 sources: Courts (Common Law), Custom (via Common Law) and Statutes passed by Parliament (via Sales of Goods Act)

 1. Courts (via Common Law): Judges imply terms into contracts in order to make sense of an agreement. This makes it fair on both parties. To do this, the Judges apply the 'Business Efficacy Approach'. This is done by applying 'The Officious Bystander test', as discussed in the case "Shirlaw v Southern Foundaries". This is where a term is 'so obvious' to the parties that it isn't discussed, but if an officious bystander (3rd party) were to make a provision and mention a term, the parties would laugh and say "oh, of course!" CASE: "The Moorcock". The defendants owned a jetty, and made an agreement to moor the ship and unload the cargo. However, as the tide went out, the ship broke on a rocky ledge. HELD: As there was no mention of a term, judges implied the jetty would be safe, otherwise they'd be buying into an 'oppurtunity of danger'.CASE: "Financings v Stimson". Sale of a car, and a promise made that it would be in the same condition it was seen in, however this was far from the case and it failed the condition. CASE (Previous dealings): "Hilas v Arcos". In this case contract made in 1930 for the sale of wood where everything was specified i.e. quantity, price etc ... HELD: There was a contract and judges implied the same terms in the previous contract on the sale of wood.