Part B The law of obligations 5: Content of contracts 772.2.2 Terms implied by statute
Terms may be implied by statute. In some cases the statute may permit the parties to contract out of the
statutory terms. In other cases the statutory terms are obligatory, for example the protection given by the
Sale of Goods Act 1979 to a consumer who buys goods from a trader cannot be taken away from him.2.2.3 Terms implied by the courts
Terms may be implied if the court concludes that the parties intended those terms to apply to the
contract.The Moorcock 1889
The facts: The owners of a wharf agreed that a ship should be moored alongside to unload its cargo. It
was well known that at low water the ship would ground on the mud at the bottom. At ebb tide the ship
settled on a ridge concealed beneath the mud and suffered damage.
Decision: It was an implied term, though not expressed, that the ground alongside the wharf was safe at
low tide since both parties knew that the ship must rest on it.A term of a contract which is left to be implied and is not expressed is often something that goes without
saying; so that, if while the parties were making their bargain an officious bystander were to suggest some
express provision for it, they would say 'why should we put that in? That's obvious’. The terms are
required to give efficacy to the contract, that is, to make it work in practice.
The court may also imply terms because the court believes such a term to be a 'necessary incident' of
this type of contract.Liverpool City Council v Irwin 1977
The facts: The defendants were tenants in a tower block owned by the claimants. There was no formal
tenancy agreement. The defendants withheld rent, alleging that the claimants had breached implied terms
because inter alia the lifts did not work and the stairs were unlit.
Decision: Tenants could only occupy the building with access to stairs and/or lifts, so terms needed to be
implied on these matters.Where a term is implied as a 'necessary incident' it has precedent value and such terms will be implied
into future contracts of the same type.3 Conditions and warranties
Statements which are classified as contract terms may be further categorised as conditions or warranties.
A condition is a vital term going to the root of the contract, while a warranty is a term subsidiary to the
main purpose of the contract. The remedies available for breach are different in each case.It is fundamental to be able to explain and distinguish between conditions and warranties and innominate
terms.The terms of the contract are usually classified by their relative importance as conditions or warranties.
(a) A condition is a vital term, going to the root of the contract, breach of which entitles the injured
party to decide to treat the contract as discharged and to claim damages.
(b) A warranty is a term subsidiary to the main purpose of the contract, breach of which only entitles
the injured party to claim damages.Exam focus
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