Implied Tems

Topics: Contract, Contractual term, Sale of Goods Act 1979 Pages: 7 (2426 words) Published: November 23, 2010
“To what extent do Implied Terms offer protection to contracting parties?” Case-Study assignment

The simplest definition of the contract is a “legally binding agreement”[1]. However, we need to understand that not all agreements are contracts, only those that are legally enforceable. Terms of a contract specify the promises, obligations and penalties that both parties agree to while formulating that contract. We distinguish between two specific types of these terms: express and implied.

Express terms are those specifically agreed and mentioned by at least one of the parties, either in writing or by word of mouth, when the contract is being formulated. However, if the problem arise and it cannot be solved upon the express terms of the contract it can be argued that this term can be implied.

Implied terms are not stated in the contract, but they are introduced by implication. In other words the implied terms are not actually written into the contract, but parties to the contract will be expected to adhere to it. They can be implied into the contract: • By statue (In law) (for example Sale of Goods Act 1979 applies terms into contract of sale of goods that the good should be of satisfactory quality and should fit for the purpose),

• By custom (“there may be contractual terms which are implied on the basis that they are customary in a particular trade, profession or locality”[2], in an example of Hutton v Warren (1836), it was held that customary usage permitted a farm tenant, who was about to quit his tenancy, to claim an allowance for the seed and labor, even if that had not been a part of the contract[3]) • By court (In fact) (courts may imply some necessary terms to give business efficacy to the contract, terms that are necessary to make the contract workable). This approach of implied terms in fact is based on unexpressed intention of both parties and in addition the “officious bystander” test can also be applied. The test basically means that the court will ask itself whether someone observing the making of the contract would have believed that the particular term was a part of the contract.[4]

For the purpose of this essay we will focus on the terms implied by statue, terms implied by the Sale of Goods Act 1979, to examine the extent to which the buyer and a seller can be protected.

To classify a contract as a contract of sale of goods particular requirements need to be fulfilled and we can find these required conditions in the SGA 1979 s.2(1): ` A contract of sale of goods is a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price`

Under the Sale of Goods Act 1979 Sections 12-15 the terms listed below do not need to be stated into a contract, as the will always be implied by the Act: • Seller has the right to sell the goods S.12(1)

• Warranties that goods are free from encumbrances and that the buyer will enjoy quiet possession of the goods S.12(2) • Goods sold by description will correspond with the description S.13(1) • Goods sold are of satisfactory quality (only sold in a course of business) S.14(2) • Goods are fit for the buyer`s purpose (only sold in a course of business) S.14(3) • Goods sold by a sample will match the sample in quality and will be free from defects that could not have been detected by examination of the sample S.15.[5]

We will now look into all of the stated above terms implied by the Sale of Goods Act 1979 and examine the examples of court cases in order to illustrate the different approaches to these terms, and to understand when the terms might actually be implied. We will note that they can protect especially the buyer but also in some cases seller will be able to argue the breach of the particular implied term.

Section 12 of Sale of Goods Act 1979 implies two terms into the contracts: • a condition that the seller...
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