Exemption and Limitation

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Exemption and Limitation

Terms can be implied into a contract in three ways:

1) By courts
2) By custom
3) By statute

1) The courts can imply terms in fact and in law.
A term implied in fact is a term which is so obvious to the parties that they have not specifically exressed it. A term implied by law means to insert a term into the contract regardless of whether the parties desire to have this or not.

To imply a term in fact means to apply the officious bystander test. This means asking if a reasonably intelligent observer were to ask the parties 'Should this be a term?' they would reply 'Yes, of course!'.
The officious bystander test originates from the case of Shirlaw. It was later applied in the case of Spring v National Stevedores regarding the automatic transferral of an employee to a different union.
The Moorcock establishes that terms can be impied for reasons of business efficacy. The case involved a ship which was docked at the defendant's wharf being damaged. The claimant sued for damages. The defendant argued that they had not expressly stated that they would be responsible for damage occuring to the ship during its docking at the wharf. The court held that although this had not been expressly provided for, it was implied as it was obvious and necessary to give the contract efficacy.

BP Refinery the following requirements of an implied term must be satisfied:
1) It must be reasonable and equitable.
2) It must be necessary to give business efficacy to the contract - a term will not be implied if the contract can operate effectively without it.
3) It must be so obvious that it goes without saying. (E.g: the officious bystander test.)
4) It must be capable of clear expression.
5) It must not contradict any express term of the contract.

Attorney General of Berlize built on the BP Refinery requirements by stating that the BP Refinery requirements are best viewed as a collection of requirements rather than individual ones. They all amount to the requirement that the implied term must spell out exactly what the contract means.

Liverpool City Council demonstrates a term implied through law. In this case, a council property had fallen into disrepair. (E.g: rubbish chutes were congested.) The claimant brought a case - arguing that allowing the property to fall into disrepair was a breach of their right to quiet enjoyment of property. It was held that the basic maintanence of these should be implied through law rather than in fact - it is desirable to hold that landlords should uphold the standard of their properties.

2) Terms can be implied by custom using the parol evidence rule. The parol evidence rule prevents a party to a written contract from submitting extrinsic evidence to try and vary the terms of a written document. Once the contract has been concluded and written, prior oral/ written statements will not be accepted (unless there are accusations…


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