BetterLawNotes-5 (2)

CONTRACT LAW

Terms implied by law can be split into two categories. First are those terms implied by statute. Important examples include:

Terms Implied by Statute

Sale of Goods Act 1979

S 12 Implied terms about title

S 13(1): ‘Where there is a contract for the sale of goods by description, there is an implied term that the goods will correspond with the description.’

S 14(2): ‘Where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory quality.’

S 14(3): ‘Where the seller sells goods in the course of a business and the buyer, expressly or by implication, makes known . . . to the seller . . . any particular purpose for which the goods are being bought, there is an implied term that the goods supplied under the contract are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely, on the skill or judgment of the seller. . .’

S 15 Sale by sample

Supply of Goods and Services Act 1982

S 13: ‘In a contract for the supply of a service where the supplier is acting in the course of a business, there is an implied term that the supplier will carry out the service with reasonable care and skill.’

Terms Implied at Common Law

Second are terms implied at common law. Although dicta in the more modern cases might suggest the contrary, there is nothing novel about this source of implication. Indeed many of the statutorily implied terms referred to above are merely codifications of implications formerly made at common law. When a court implies a term at common law what it is doing is “laying down a general rule that in all contracts of a certain type – sale of goods, master and servant, landlord and tenant, and so on – some provision is to be implied unless the parties have expressly excluded it”. The implication of a term at common law involves a search “for such a term as the nature of the contract might call for, or as a legal incident of this type of contract”. The court may imply a term in a contract on the ground that it is necessarily inherent in contracts of that particular type. While the implication is not based on the intentions of the parties, a term will not be implied where it would be inconsistent with the express terms of the contract.

Liverpool CC v Irwin [1977] AC 239, HL

The claimants, Mr and Mrs Irwin lived in a three-bedroomed maisonette on the 9th and 10th floors of a 15-storey tower block. The maisonettes had been intended for couples with young families. The maisonettes were served by a staircase and two lifts. There was also a rubbish chute running the height of the block. One or both lifts would often be out of action due to vandalism and were regularly used as public conveniences. The lighting on the stairs was also frequently vandalised meaning that the tenants and their visitors had to negotiate the stairs in the dark. The rubbish chute tended to become blocked due to the size of items placed in it by the tenants. Also, every time a toilet was used, the water would overflow and flood the floor and escape to the landing where it lay without any means of draining away. There was no formal tenancy agreement, but a document headed ‘Conditions of Tenancy’ which ‘imposed a great many express obligations upon the tenants but did not expressly impose any obligations of any kind upon the council’. Some of the tenants, including the claimants, went on a rent strike because of the conditions in the block. The Council sought an order for possession. The claimants counterclaimed for £10 nominal damages, alleging, inter alia, that the council was in breach of an implied covenant to keep the common parts in repair and in breach of s.32, Housing Act 1961.

The judge made an order for possession but also awarded the claimants £10 in nominal damages, holding that the council were in breach of an implied covenant to keep the common parts in repair and properly lighted and in breach of the 1961 Act.


The Court of Appeal allowed the council’s appeal. Roskill and Ormrod LJJ held that no covenant to repair could be implied. Lord Denning MR held that a covenant to take reasonable care to keep the common parts reasonably fit for use ought to be implied but, on the facts, there was no evidence that the council were in breach of this covenant. All three members of the CA held that the council was not in breach of the repairing covenant under the 1961 Act.


The House of Lords allowed the claimants’ appeal in part. The House held that there was an implied term that the Council would take reasonable care to keep the means of access to the flat in reasonable repair and useability and that that obligation extended to the lighting of the common parts premises. Nevertheless, the claimants had not shown that the council had been in breach of the obligation. The HL also held that the council were in breach in s 32 of the Housing Act 1961 as the toilet cistern could not be said to be in proper working order. Nominal damages of £5 were awarded.

Crossley v Faithful & Gould Holdings Ltd [2004] EWCA Civ 293

C was a long-standing senior employee and director of F&G. Under his contract of employment, C became a member of F&G’s long term disability insurance scheme. Under the terms of the scheme while C remained employed by F&G, he was entitled as of right to benefits in the event that was incapable of working due to illness. Once C’s employment with F&G ceased, entitlement to benefits lay at the discretion of the insurers. C suffered a nervous breakdown and went on sick leave in December 1996. C was advised by his doctor to take early retirement on mental health grounds. C then agreed with F&G that he would retire with effect from 6 September 1997. In May 1997 F&G applied on C’s behalf for long-term disability benefit under the scheme. The insurers made discretionary payments under the scheme until June 1998 but none thereafter. C claimed that that F&G had acted in breach of an implied term of the contract of employment requiring it to take reasonable care for C’s economic well-being (i) by asking him to submit a resignation letter knowing that he was applying for benefits under the scheme and that resignation would seriously prejudice his entitlement to such benefits; alternatively (ii) by failing to warn him of the effect which resigning from his employment would have on his entitlement to benefits under the scheme.

The Court of Appeal held that the judge had been right to dismiss the claim.

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