Chapter 9The terms of business contracts2 By the common law.The courts will be prepared to
imply a term into a contract in order to give effect to the
obvious intentions of the parties. Sometimes the point
at issue has been overlooked or the parties have failed to
express their intention clearly. In these circumstances,
the court will supply a term in the interests of ‘business
efficacy’ so that the contract makes commercial com-
mon sense.
which codified the common law rules. The best example
of this process is provided by the law relating to the sale
of goods. The original Sale of Goods Act 1893 was a
codification of the common law rules which had been
developed by the courts during the 19th century. The
present Sale of Goods Act 1979 re-enacts the 1893 Act,
incorporating the changes made in the intervening
years. The Sale and Supply of Goods Act 1994, Sale of
Goods (Amendment) Acts 1994 and 1995 and the Sale
and Supply of Goods to Consumers Regulations 2002
make a number of changes to the 1979 Act.
Some terms are implied into a contract for the sale
of goods under the Sale of Goods Act 1979. The best
known are contained in ss 12–15.
(a)Section 12 (title). There is an implied condition in
every contract for the sale of goods that the seller has the
right to sell the goods and that he will transfer good title
to the buyer. The seller will break this term, for example,
if it transpires that the goods were stolen.
(b)Section 13 (description). Where there is a sale of
goods by description, there is an implied condition that
the goods will correspond with the description. A shirt
described as 100 per cent cotton, for example, should
not contain man-made fibres.
(c)Section 14 (quality and suitability). Although this
section preserves the well-established principle of
‘caveat emptor’ (let the buyer beware), it does impose
two duties on a seller who sells in the course of a busi-
ness. First, there is an implied condition that the goods
are of satisfactory quality. This means that if you buy a
washing machine, it should actually work when you get
it home. Second, where the buyer expressly or impliedly
makes known any particular purpose for which the
goods are required, there is an implied condition that
the goods will be fit for that purpose. If you ask the sales-
man to recommend a heavy-duty carpet which would
be suitable for a lounge, it should not be threadbare after
a couple of months.
(d)Section 15 (sample). In sales by sample, there is
an implied condition that the bulk will correspond with
the sample. This means that if you have curtains made
up for you, the quality of the material should match the
sample that you examined in the shop.
Similar terms are implied into contracts for the sup-
ply of goods by way of hire-purchase, hire, barter, and
under work and materials contracts. Warranties relating
to title and quality are implied on the redemption of285Huttonv Warren(1836)The tenant of a farm was given six months’ notice to quit.
His landlord insisted that he continue to cultivate the
land during the notice period in keeping with custom.
The tenant successfully argued that the same custom
entitled him to a fair allowance for the seeds and labour
he used on the land.The Moorcock(1889)The owner of a wharf agreed to provide mooring facilities
for The Moorcock. The ship was damaged when it hit a
ridge of rock at low tide. The court implied an undertak-
ing on the part of the wharf owner that it was a reasonably
safe place to moor the ship. The wharf owner had broken
his implied undertaking and was, therefore, liable in
damages to the ship owner.Certain standard terms have been implied by the
common law in a number of business contracts. The
courts will imply a term into a lease of a furnished house
that it will be reasonably fit for habitation at the start
of the tenancy. A contract of employment is subject to
a number of implied terms. An employer is under a
common law duty to provide a safe system of work for
his employees, while an employee is under common law
duties to obey legitimate orders and show good faith
towards his employer.
By implying a term into the contract, the court is im-
posing reasonable obligations, which the parties would
have no doubt included in their agreement if they had
troubled to think about the matter. These implied terms
may be excluded by express agreement between the parties.
3 By statute.A term may be implied into a contract by
Act of Parliament. In many cases, these implied terms
began life among the customs of merchants, were recog-
nised by the courts and then included in the statute