Implied Terms of Contract

Evidently before any contract will be enforced, it is essential that the terms of the contract must be clear, definite, certain and complete and the contract must be free from doubt, vagueness and ambiguity so as to leave nothing to conjecture or to be supplied by the court. See Nair Service Society v. R.M. Palai, AIR 1966 Ker 311.
Lord Hoffman in Investors Compensation Scheme Ltd. v. West Bromwich Building Society, (1998) 1 WLR 896, has summarized five principles of interpretation of contracts. These are:
1. Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge.
2. The background means “matrix of fact.”
3. The law excludes from the admissible background, the previous negotiations of the parties and their declarations of subjective intent.
4. The meaning which a document (or any utterance) would convey to a reasonable man is not the same thing as the meaning of its words.
5. The rule that words should be given their “natural and ordinary meaning reflects the common sense proposition that is not easily acceptable that people have made linguistic mistakes particularly to formal documents.”
In B.P. Refinery (Westernport) Pty. Ltd. v. Shire of Hastings, (1978) 52 PLJR 20 (PC), the Privy Council has laid down five conditions which are to be satisfied for an implied terms of contract. These are: (1) It must be reasonable and equitable; (2) It must be necessary to give business efficacy to the contract; (3) It must be so obvious that it “goes without saying”; (4) It must be capable of clear expression; (5) It must not contradict any express term of the contract. So basically, every contract involves four elements, v.iz.,
1. Competency of the Parties
2. Consensus
3. Consideration and object
4. Certainty
Thus, contracts may be classified according to:
(i) Their sunject matter;
(ii) Their parties;
(iii) Their form (whether contained in deed or in writing, whether express or implied);
(iv) Their effect (whether bilateral or unilateral, whether valid, void or unenforceable). Syed M.M. Rizvi v. Subhash Singh, 2014 (6) AWC 5751.


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Filed under Contract Law, Implied Terms of Contract

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