Express vs Implied Terms: Legal Contract Terms
Difference between Express and Implied Terms
Express vs Implied Terms: Express terms are explicitly stated and agreed upon by the parties in a contract, while implied terms are understood or inferred from context, custom, or law without being overtly mentioned.
Express vs Implied Terms in Contract Law
When it comes to contract law, understanding the difference between express and implied terms is essential.
These concepts underpin how parties understand their obligations and rights and what they are entitled to expect from one another under a contract.
This article will delve deep into the difference between express and implied terms to clarify this essential distinction as applicable under the law of contractual obligations.
Before we proceed, it’s crucial to understand what a contract is. A contract is an agreement between two or more parties that creates enforceable obligations.
It may be written, oral, or implied by conduct. To be legally binding, a contract generally needs an offer, an acceptance of that offer, consideration, and an intention to create legal relations.
Express Terms
Express terms are those explicitly agreed upon by the parties and can be written or oral. These are the terms that, when you read or hear them, leave no room for doubt or ambiguity about the parties’ intentions.
Characteristics of Express Terms
- Clarity and Explicitness: Express terms are clear-cut and straightforward. They define the parties’ duties, rights, and obligations uncertainly.
- Documented or Verbal: These terms can be in a written contract or verbally agreed upon. The advantage of expressing terms in a written form is that it eliminates the “he said, she said” scenario.
- Breach Consequences: If one party fails to adhere to an express term, they often breach the contract. This can result in legal consequences or remedies, such as damages or specific performance.
Examples of Express Terms
- A lease agreement might state the rent amount and when it’s due each month.
- A job contract might specify salary, work hours, and job responsibilities.
Implied Terms
Unlike express terms, implied terms are not explicitly stated in the contract. Instead, they exist based on the law, custom, or previous dealings, ensuring fairness or giving effect to the parties’ apparent intentions.
Can parties exclude or modify implied terms in their contract?
The freedom of contract allows parties to determine the terms they wish to be bound by. Implied terms typically arise to ensure fairness, fill in gaps, or reflect industry practices.
However, if parties anticipate certain implied terms and wish to prevent their inclusion, they can expressly exclude them by adding specific clauses.
For instance, a contract might have an “entire agreement” clause stipulating that only the terms contained within the document are binding, excluding any implied terms.
Conversely, parties can modify the effect of an implied term by expressly outlining a different arrangement.
It’s crucial, however, to note that some implied terms, especially those imposed by law for public policy reasons, cannot be easily excluded or modified, and attempts to do so may be deemed void or unenforceable by courts.
Types of Implied Terms
- Implied by Fact: These terms are not expressly stated but are considered so obvious that they don’t need to be stated. The parties might believe such terms are automatically part of the agreement because of their understanding or industry practice.
- Implied by Law: These terms are imposed by law to ensure fairness and can often be seen in relationships like employer-employee contracts. For instance, an employer must provide a safe working environment, even if it’s not written in the contract.
- Implied by Custom or Practice: When a certain practice is customary in a particular industry, and both parties know it, the courts may assume such practices to be an implied contract term.
- Implied by the Courts: Sometimes, for a contract to make sense or be effective, the courts might imply certain terms.
Examples of Implied Terms
- A sales contract might not mention that the goods sold should be satisfactory quality and fit for purpose. However, this is an implied term under many jurisdictions.
- In an employment contract, even if it’s not written, there is an implied term of mutual trust and confidence between the employer and the employee.
Key Differences between Express and Implied Terms
- Stated vs. Assumed: Express terms are clearly stated and agreed upon by both parties, whereas implied terms are assumed to exist or are inferred.
- Origin: Express terms originate from direct negotiations or discussions between the parties. In contrast, implied terms often arise from the law, customs, or the nature of the contractual relationship.
- Breach of express and implied terms: Breaching an express term is straightforward as the term is clear. Breaching an implied term might be more open to interpretation and require legal expertise.
Express vs Implied Terms
| Aspect | Express Terms | Implied Terms |
|---|---|---|
| Definition | Terms explicitly stated and agreed upon by parties in a contract. | Terms that are not explicitly stated but are still legally binding based on law or context. |
| Formation | Parties intentionally include these terms in the contract, either orally or in writing. | Arise from the nature of the transaction, parties’ intentions, or law. |
| Types | It can be conditions (essential terms), warranties (ancillary terms), or innominate terms (fall in between conditions and warranties). | It can be terms implied by law (statutory) or implied by fact (necessary for the contract’s efficacy). |
| Importance | Typically more precise, addressing specific issues or requirements. | Generally more general and standardized, filling gaps that the parties might not have considered. |
| Proof in Court | They are easier to prove as they are documented or explicitly stated. | It might require more interpretation and evidence to establish their existence and nature. |
| Variation or Exclusion | Generally, parties can agree to vary or exclude express terms through mutual consent. | Implied terms may be difficult to exclude or vary, especially if they are fundamental to the contract or mandated by law. |
| Flexibility | Offers flexibility as parties can negotiate and customise terms to their specific needs. | Provides a baseline of reasonable expectations even if not explicitly discussed, adding a degree of predictability. |
| Examples | Price, delivery date, and product specifications are explicitly mentioned in a sales contract. | Goods are of merchantable quality; services are performed with reasonable care and skill (implied terms under the Sale of Goods Act). |
| Importance of Communication | Requires clear communication and understanding between parties to avoid misunderstandings or disputes. | Reduces the risk of one party taking advantage of the other due to unforeseen gaps in the contract. |
Are oral agreements considered express terms?
Oral agreements are considered express terms. When two or more parties engage in a verbal conversation and reach an agreement on certain stipulations, those stipulations become express terms of their oral contract.
While oral agreements are legally binding in many jurisdictions, the challenge often lies in their enforceability.
Unlike written contracts, where terms are clearly documented and can be referred to in case of disputes, oral agreements rely on the memory and honesty of the parties involved.
This can lead to misunderstandings, misinterpretations, or disputes over what was precisely agreed upon.
Therefore, while oral agreements can certainly constitute express terms, it is generally advisable to document significant agreements in writing to ensure clarity and ease of enforcement in potential future disputes.
How can businesses ensure they know potential implied terms in their contracts?
Businesses can adopt several strategies to ensure they are cognizant of potential implied terms in their contracts:
- Legal Consultation: Engaging with legal counsel familiar with the industry and jurisdiction can shed light on typical implied terms that courts might enforce in certain contracts. Lawyers can also guide businesses in crafting clauses that address or exclude certain implied terms.
- Industry Practices: Awareness of customary practices and norms within the industry is vital. Implied terms often arise from longstanding traditions or conventions within specific sectors. By understanding these, businesses can anticipate implied stipulations.
- Regular Training: Regular training sessions for contract negotiation and drafting employees can help them stay updated on the latest legal precedents and interpretations of implied terms.
- Clear Contract Drafting: Striving for clarity in contractual terms reduces ambiguities. A comprehensive contract, which considers potential scenarios and addresses them, lessens the chances of relying on implied terms.
- Review Past Disputes: Historical disputes can provide insights, whether resolved in court or not. By analysing past disputes, businesses can identify implied terms that have previously been an issue and address them proactively in future contracts.
- Feedback Mechanism: Establish a system for feedback from different departments. Those implementing contracts might notice recurring issues or assumptions that can hint at implied terms.
How do implied terms by fact differ from those implied by law?
Implied terms by fact and those implied by law serve distinct functions in contract law, each arising from separate rationales.
Implied Terms by Fact
- Origins: These terms arise from the circumstances surrounding the agreement or the parties’ intentions. They are essentially terms which, although not expressly stated, are deemed understood by all parties involved.
- Purpose: They exist to give effect to the unexpressed intentions of the parties, ensuring the contract operates as both parties presumably intended.
- Determination: Courts usually use the “officious bystander test” or similar principles, asking if, had an objective observer suggested the term, both parties would’ve considered it obvious or assumed.
Implied Terms by Law
- Origins: These terms are integrated into contracts based on legal statutes or common law principles, irrespective of individual parties’ intentions.
- Purpose: They are established to uphold public policy, fairness, or broader societal standards. For instance, an employer’s duty to provide a safe workplace can be implied by law.
- Determination: These are often universally applicable within specific contracts or relationships, such as employment or consumer contracts, without needing a case-by-case evaluation.
Conclusion: Express vs Implied Terms
In contract law, both express and implied terms play vital roles. While express terms express the parties’ explicit understanding, implied terms fill the gaps, ensuring that contracts operate fairly and sensibly.
When entering a contract, parties should be mindful of the distinction between express vs implied terms, ensuring their rights and obligations are clear and adhering to all the terms, express or implied.
