Can businesses assume that a court will imply a term into a contract because it is reasonable to do so? Our Litigaton solicitors discuss.

A great deal of business contracts are negotiated with the parties expressly agreeing terms. What happens however where an event occurs that the contract does not expressly deal with?

Clients often assume that courts will imply terms because it would seem reasonable to do so.  That may appear fair, but it is not the law.

The core test is one of necessity.  In other words the term being implied must be necessary to give business efficacy to the contract. 

Courts will still take into account what is reasonable and equitable, but they are also very alert to the fact that business contracts are often negotiated by parties, sometimes with the help of their legal advisors, and it is not uncommon for terms to be omitted, or contracts to be phrased in a certain way for a particular reason.  This means that courts will not readily interfere with business contracts.  They will really only imply terms when the terms are so obvious they “go without saying”; they are capable of being stated in a clear way; and certainly do not contradict any term expressly agreed between the parties.

This criteria was recently confirmed through the Supreme Court’s Judgment in Marks and Spencer Plc v BNP Paribas Securities Services Trust Company (Jersey) Limited.

If you have a contract dispute and need assistance, contact one of our Dispute Resolution Lawyers for a free initial telephone discussion