Obvious and necessary

If your contract is silent on a specific aspect or issue, when will the English courts come to your assistance and imply a term into your contract by case law?

Test for implying terms

In Re Force Indian One (2022) the court reiterated these tests for implying terms:

  1. it must be necessary for business efficacy and/or obvious (usually both)
  2. business efficacy means the contract would lack commerical coherence without the proposed term
  3. obvious means the term goes without saying – both the need for the term and its precisely what the term is.

In addition, no implied term can contradict an express term of that contract. More details on the constraints and nuances of the test.

Reasonable not enough

An implied term should be reasonable but:

a term should not be implied into a detailed commercial contract merely because it appears fair or because the court considers the parties wold have agreed it if it had been suggested to them. The test is of necessity, not reasonableness

You can use implied terms from case law in your contracts. Terms can also be implied by statute and custom.

What should you do?

Easy: you can avoid implied terms by using an exclusive remedies clause like the one in MF/1.

Middling: you can take a pragmatic approach, realising that a clause would only be implied by case law which is reasonable, necessary and obvious. They’re rarer than businesses think!

Harder: you can try and draft a contract which covers every eventuality. If the standard form contracts at 50,000 words haven’t succeeded, then this is nigh on impossible!

Case: Force India Formula One Team Ltd, Re [2022] EWHC 933

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