Implied terms to a contract
The courts will only imply a term into a contract if it passes what is commonly referred to as the “officious bystander” test. In Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206, McKinnon LJ formulated the test thus:
“Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common 'Oh, of course!’”.
This test has universally been applied without exception in the English courts.
“An unexpressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract: it is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them: it must have been a term that went without saying, a term necessary to give business efficacy to the contract, a term which, though tacit, formed part of the contract which the parties made for themselves." Lord Pearson [609] (emphasis added)
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In Attorney General of Belize v Belize Telecom [2009] UKPC 10, the Privy Council gave the following opinion: -
“In BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 282-283 Lord Simon of Glaisdale, giving the advice of the majority of the Board, said that it was "not … necessary to review exhaustively the authorities on the implication of a term in a contract" but that the following conditions ("which may overlap") must be satisfied:
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"(1) it must be reasonable and equitable.
(2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it.
(3) it must be so obvious that 'it goes without saying'.
(4) it 7 must be capable of clear expression.
(5) it must not contradict any express term of the contract". - Lord Hoffmann.
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