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Implied Term of Contract

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Last updated: 06-Oct-2014

Ford v Beech (1848) 11 QB 852, per Parke B at p. 866:

…[a contract] ought to receive that construction which its language will admit, and which will best effectuate the intention of the parties, to be collected from the whole agreement, and that greater regard is to be had to the clear intention of parties than to any particular words which they may have used in the expression of their intent.

Per Lord Diplock in The Nema [1982] AC 724 at p.736:

Of course the dispute involves some question of law. It is difficult to conceive of a dispute under a charterparty that does not do so. The dispute is likely to be about what the parties have agreed shall be their respective legal rights and obligations in events that have actually happened or, as it may occasionally be, in events that it is anticipated may happen. The answer must depend upon the true construction of the agreement between the parties; and in English jurisprudence, as the legacy of the system of trial by juries who might not all be literate, the construction of an agreement, even between private parties, became classified as a question of law. The object sought to be achieved in construing any commercial contract is to ascertain what were the mutual intentions of the parties as to the legal obligations each assumed by the contractual words in which they (or brokers acting on their behalf) chose to express them; or, perhaps more accurately, what each would have led the other reasonably to assume were the acts that were promising to do or to refrain from doing by the words in which the promises on his part expressed.

George Mitchell (Chesterhall) Ltd v Finney Lock Seedy Ltd [1983] 1 All ER 108, part of Lord Denning’s judgment under the heading ‘The secret weapon’:

Faced with this abuse of power, by the strong against the weak, by the use of the small print of the conditions, the judges did what they could to put a curb on it. They still had before them the idol, ‘freedom of contract’. They still knelt down and worshipped it, but they concealed under their cloaks a secret weapon. They used it to stab the idol in the back. This weapon was called the ‘true construction of the contract’. They used it with great skill and ingenuity. They used it so as to depart from the natural meaning of the words of the exemption clause and to put on them a strained and unnatural construction. In case after case, they said that the words were not strong enough to give the big concern exemption from liability, or that in the circumstances the big concern was not entitled to rely on the exemption clause. If a ship deviated from the contractual voyage, the owner could not rely on the exemption clause. If a warehouseman stored the goods in the wrong warehouse, he could not pray in aid the limitation clause. If the seller supplied goods different in kind from those contracted for, he could not rely on any exemption from liability. If a shipowner delivered goods to a person without production of the bill of lading, he could not escape responsibility by refer-ence to an exemption clause. In short, whenever the wide words, in their natural meaning, would give rise to an unrea-sonable result, the judges either rejected them as repugnant to the main purpose of the contract or else cut them down to size in order to produce a reasonable result. This is illustrated by these cases in the House of Lords: Glynn v Margetson & Co [1893] AC 351, [1891-4] All ER Rep 693, London and North Western Rly Co v Neilson [1922] 2 AC 263, [1922] All ER Rep 395, Cunard Steamship Co Ltd v Buerger [1927] AC 1, [1926] All ER Rep 103; and by these in the Privy Council: Canada Steamship Lines Ltd v R [1952] 1 All ER 305, [1952] AC 192, Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] 3 All ER 182, [1959] AC 576; and innumerable cases in the Court of Appeal, culminating in Levison v Patent Steam Carpet Cleaning Co Ltd [1977] 3 All ER 498, [1978] QB 69. But when the clause was itself reasonable and gave rise to a reasonable result, the judges upheld it, at any rate when the clause did not exclude liability entirely but only limited it to a reasonable amount. So, where goods were deposited in a cloakroom or sent to a laundry for cleaning, it was quite reasonable for the company to limit their liability to a reasonable amount, having regard to the small charge made for the service. These are illustrated by Gibaud v Great Eastern Rly Co [1921] 2 KB 426, [1921] All ER Rep 35, Alderslade v Hendon Laundry Ltd [1945] 1 All ER 244, [1945] KB 189 and Gillespie Bros & Co Ltd v Roy Bowles Transport Ltd [1973] 1 All ER 193, [1973] QB 400.

Per Sir Thomas Bingham MR in Phelps Electronique Grand Public SA v British Sky Broadcasting Limited  [1995] EMLR 472:

The courts’ usual role in contractual interpretation is, by resolving ambiguities or reconciling apparent inconsistencies, to attribute the true meaning to the language in which the parties themselves have expressed their contract. The implication of contract terms involves a different and altogether more ambitious undertaking: the interpolation of terms to deal with matters for which, ex hypothesi, the parties themselves have made no provision. It is because the implication of terms is potentially so intrusive that the law imposes strict constraints on the exercise of this extraordinary power.

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