Complete your contract

Now for some magic! This post is about invisible clauses.

Implied Terms

If your contract does not have enough terms to be workable, clauses can be added (implied) to make it work properly. They can be added as a result of:

  1. Custom [read more]
  2. Laws or statutes [read more]
  3. Cases on a similar type of contract [read more].

At their simplest, implied terms provide the bare minimum that you would expect.

To take a few examples:

  • time: if there is no clause then the goods, works or services have to be supplied within a reasonable time
  • cost: if there is no clause, then the recipient will have to pay a reasonable cost
  • quality: if there is no clause, the goods will have to be of ‘satisfactory’ quality and works/services provided with reasonable skill and care

Implied terms can also provide a range of remedies (eg for late payment the recipient can claim interest and suspend its duties on a construction project) or require specific behaviour such as the partners co-operating on a project.

It is not easy to know whether your contract will have terms added into it – even relatively long standard form construction contracts like JCT, NEC4 or MF/1 are not immune.

‘As she was’

As the law will intervene to supplement the terms of your contract, you should try and avoid it by clearly recording the essentials terms such as works, time, cost and quality.

When buying something second-hand, what sort of quality are you expecting? The sale of a second-hand ship included a term that the ship was to be:

delivered and taken over as she was at the time of inspection…However, the Vessel shall be delivered with her class maintained…without condition / recommendation, free from average damage affecting the Vessels class…

On the way out out of the harbour, the ship broke down. That’s like my first car, when the exhaust fell off on the garage forecourt!

Understandably, the buyers were not amused and claimed compensation from the sellers.

The buyers argued that the ship was not of ‘satisfactory’ quality, as required by the Sale of Goods Act 1979. Where your contract does not make it clear what quality is agreed, this Act intervenes to provide a minimum standard.

The sellers argued that the term ‘as she was’ was a statement of quality and ‘satisfactory’ quality could not be implied. They said the ship was ‘sold as seen.’ Essentially, they fell back on the ‘buyer beware’ approach.

The court said that the reference to the ship being sold ‘as she was’ only referred to a promise that there should be no change between inspection and sale. It was not enough to exclude the implied term for satisfactory quality.

What should you do?

In your contract, use clear objective standards and descriptions to explain the quality you expect to provide or receive.

Case: Dalmare SpA v Union Maritime Limited and Valor Shipping Limited [2012] EWHC 3537 (Comm)

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