Contents of contract

CONTENTS OF A CONTRACT:

INTRODUCTION

The last lecture taught you the different forms a contract may take.  This lecture will assist you to grasp what is contained in a contract.

Contents of a contract may lead to dispute not only as to what terms it contains, but also as to what is meant by such terms.  In this regard, Hodgin correctly observes that:

"Proving that a contract exists between the two parties is one problem.  Proving what that contract consists of is another.  Both parties may agree that they did enter into a contractual relationship but when it comes to enforcing it they may not be able to agree exactly what the terms were" .

OBJECTIVES

1. CONTENTS OF A CONTRACT

The contents of a contract depend  primarily on the words used by the parties in entering into the contract.  These make up its express terms.  A contract may, in addition, contain terms which are not expressly stated, but which are implied, either because the parties so intended, or by operation of law, or by custom or usage.

1.1. Express Terms

(a) What did the Parties say or write?

Express terms means those terms which the parties clearly or expressly agree upon.  These may be discerned either from the words spoken by the parties or from the letters of the agreement where the contract is in writing.

Thus, in the event the extent of an agreement is in dispute, the court must first decide what statements were in fact made by the parties either orally or in writing.

Probably your mind has already posed a question which will intrigue you.  

Different rules are applied to establish the existence of a statement by the parties depending on whether the contract is wholly by word of mouth, or wholly in writing, or partly by word of mouth and partly in writing.

(i) If the contract is wholly by word of mouth, its contents are a matter of evidence.  It must be found as a fact exactly what it was that the parties said.  For example, in Smith vs Hughes (1871) LR 6 QB 597 the question was whether the subject matter of a contract of sale was described by the vendor as "good oats" or as "good old oats".

You need to note, however, that at times there may be no effective dispute as what was said but as to what was said meant.  The meaning of what was said has to be solved by applying the objective test.  The case of Thake vs Maurice [1986] QB 644 or [1986] I All ER 497 illustrates very well the rule and the difficulties of its application.

In that case Mr. and Mrs. Thake had five children and did not wish to have any more.  The defendant carried out a vasectomy on Mr. Thake.  In due course Mrs. Thake became pregnant but because she did not suspect that she might be pregnant no question of her having abortion arose until it was too late to have one safely.  It was agreed that it was an implied term of the contract between the plaintiff and the defendant that the sterilization would be carried out with reasonable professional care and skill and that indeed reasonable professional care and skill had been exercised.  The Thakes argued that the defendant had undertaken not merely to use reasonable care and skill but to guarantee that the operation would be successful in permanently sterilizing Mr. Thake.  This argument was based on what had been said by the defendant in the consultations with Mr. and Mrs. Thake.  It was accepted that the defendant had emphasized the irreversible nature of the operation, that is, that the Thakes would not be able to change their minds after the operation had been carried out with any significant chance of success.  The Thakes understood this conversation as stating that there was no chance of the operation failing to make Mr. Thake sterile if it was carried out with reasonable care and skill. In fact the defendant well knew that there was a not insignificant possibility of spontaneous reconalisation which, as happened in the case, would make Mr. Thake fertile once more without his knowing it.  The trial judge and one of the members of the court of Appeal thought the effect of this conversation, objectively construed, was that the defendant had warranted that the operation would make Mr. Thake sterile: the majority of the Court of Appeal thought that objectively construed the conversation did not have this effect since "in medical science all things, or nearly all things, are uncertain (since) that knowledge is part of the general experience of mankind. [NB: In fact the plaintiff succeeded on the alternative theory that the defendant was negligent in having failed to warn the Thakes of the possibility of spontaneous reconalisation].

(ii) If the contract is wholly in writing the discovery of what was written normally represents no difficulty.  The courts, in construing the written contract will confine the parties within the four corners of the document in which they have chosen to enshrine their agreement.  As a rule ("the parole evidence rule") neither of the parties will be allowed to adduce evidence to show that his intention has been misstated in the document.  An interesting case on this rule is that of Hawrish vs Bank of Montreal (1969) 2 DLR (3d) 600. A solicitor, acting for a company, signed a form proffered by the company's bank, by which he personally gave a "continuing guarantee" up to $6,000 of all present and future debts" of the company.  He wished to give evidence that the guarantee was intended to be only of a then current overdraft of $6,000.  The supreme court of Canada held that such evidence was inadmissible.

(iii) If the contract is partly by word of mouth and partly in writing the parole evidence rule may not be applied to exclude oral evidence.  But it must first be established that the parties did not intend the writing to be exclusive but wished it to be read in conjunction with their oral statements.  For example, in the case of Walker Property Investments (Brighton) Ltd vs Walker (1947) 177 LT 204 the defendants in 1938, then in treaty for the lease of a flat in a house belonging to the plaintiffs, stipulated that, if he took the flat, he was to have the use of two assessment rooms for the storage of his surplus furniture and also the use of the garden.  Subsequently, a written agreement was drawn up for the lease of the flat, which made no reference either to the storage rooms or to the garden.  The court of Appeal held that the oral agreement should be read with the written instrument so as to form one comprehensive contract.

(b) Are the Statements of the Parties Terms of the Contract?

One of the most difficult task you will have to deal with as a lawyer is to be able to distinguish which of the statements made by the parties are to be regarded as part of the contract.  This is because not everything said, particularly during the early discussions, will be considered as part of the final contract.

A statement by the parties may either constitute a term of the contract or be a mere representation.

A representation is a statement that is not within the contract.  If it turns out to be a false representation, either fraudulently or innocently made, it is called a misrepresentation.  As to the consequences of misrepresentation you have already covered in your previous studies of the essential elements of a contract and in particular in the course of your lectures on factors vitiating free consent.

If a statement is a term of a contract then you shall be called upon to decide whether it is a condition or a warranty.  Hodgin (supra) illustrates the processes in the following diagram. 

If a contractual term, then:

Whether a statement amounts to a representation or a term of the contract will depend on the circumstances of each individual case.  However, the courts have suggested three subsidiary tests as possible aids of construction as follows:

(i) At what stage of the transaction was the crucial statement made?

It must be established that the statement has been designed as a term of the contract and not merely by an incident in the preliminary negotiations.

Let us look at the illustrative case of Bannerman vs White (1861)10 CBNS 844.  A prospective buyer, in the course of negotiating for the purchase of hops, asked the seller if any sulphur had been used in their treatment, adding that, if it had, he would not even trouble to ask the price.  The seller answered that no sulphur had been used.  The negotiations there upon proceeded and resulted in a contract of sale.  It was later discovered that sulphur had been used in the cultivation of a portion of the hops - 5 acres out of 300 - and the buyer, when sued for the price, claimed that  he was justified in refusing to observe the contract.

The buyer's claim could not be upheld unless the statement as to the absence of sulphur was intended to be part of the contract.  The buyer contended that the whole interview was one transaction, that he had declared the importance he attached to his inquiry and that the seller must have known that if sulphur had been used there could be no further question of a purchase of the hops.  The seller, on the other hand, contended that the conversation was merely preliminary to, and in no sense a part of, the contract.  The jury found that there was no fraud on the part of the seller and that the seller's statement was understood and intended by both parties to be part of the contract.

The case of Schawel vs Reade (1913) 2IR 81 will perhaps throw more light on the subject.  In this case, the plaintiff, who wanted a stallion for stud purposes, started to examine a horse advertised for sale by the defendant.  The defendant interrupted him, saying, "You need not look for anything: the horse is perfectly sound".

The plaintiff therefore stopped his examination.  A few days later the price was agreed, and three weeks later the sale was concluded.  The horse in fact was unfit for stud purposes.

The trial judge asked the jury two questions:

1. "Did the defendant, at the time of the sale, represent to the plaintiff that it was fit for stud purposes?"

2. "Did the plaintiff act on that representation in the purchase of the horse?".  

The vital factor was whether the representation had been made "at the time of the sale".  The jury found that it had, and the House of Lords held that the defendant's statement was a term of the contract.

(ii) Was the Oral Statement followed by a reduction of the terms to writing?

Where the oral statement is later reduced into writing it is important to establish whether it was the intention of the parties that the contract should be comprised wholly in their document or whether the contract was to be partly written and partly oral.

Courts have assumed that where the oral statement is excluded from the document it may be suggestive that it was not intended to be a contractual term.  The case of Routledge vs Mckay [1954] 1 ALL ER 855; [1954] 1 WLR 615 is demonstrative of this point.

In that case the plaintiff and defendant were discussing the possible purchase and sale of the defendant's motorcycle.  Both parties were private persons.  The defendant, taking the information from the registration book, said on 23 October that the cycle was a 1942 model.  On 30 October a written contract of sale was made, which did not refer to the date of the model.  The actual date was later found to be 1930.  The buyer's claim for damages failed in the Court of Appeal.

However, in other cases the Courts have read together an earlier oral statement and a later document, thus writing them into a single comprehensive contract.  Such was the case in Birch vs Paramount  Estates Ltd [1956] 16 Estates Gazette 396, cited in Oscar Chess Ltd vs Williams [1957] ALL ER 325 at 329.  The defendants, who were developing an estate, offered a house they were then building to the plaintiff, saying "it would be as good as the show house".  The plaintiff later agreed to buy the house, and the written contract of sale contained no reference to this particular representation.  The house was not as good as the show house.  The Court of Appeal treated the defendant's statement as part of the concluded contract and allowed the plaintiff's claim for damages.

(iii) Had the Person who made the Statement special knowledge or skill as compared with the other Party?

If the person making the statement had special knowledge or skill as compared with the other party the courts will be more inclined to infer an intention to make the statement a term in the contract.  The cases of Schawel vs Reade and Birch vs Paramount Estates Ltd. cited above illustrate this judicial trend.

The three subsidiary tests discussed above should only be used as possible aids to the interpretation of the facts.  None of the tests is preferable or more basics than the other.  The case of Oscar Chess Ltd vs Williams [1957] 1 ALL ER 325; [1957] 1 WLR 370 is very illuminative on how the test should be applied.  The facts of the case were as follows:

The plaintiffs were car dealers, and the defendant wished to obtain from them on hire purchase a new Hillman Minx and to offer a secondhand Morris car in part exchange.  The sum available for the Morris depended on its age.  According to the registration book its date was 1948; the defendant in good faith confirmed this and the plaintiffs believed him.  On this assumption the sum to be allowed for it was £290.  The parties then orally agreed that the plaintiffs would arrange for the hire purchase of the new Hillman, would take the Morris and allow £ 290 for it.  This agreement was carried out.  Eight months later the plaintiffs found that the date of the Morris was not 1948 but 1939, the trade in price for which year was only £ 175.  The registration book had presumably been attered by a previous holder before reaching the defendant's hands.  The plaintiffs now sued the defendant for the difference between the two allowances i.e. £115.

The county Court Judge held that the statement as to the age of the car was a term in the contract and gave judgment for the plaintiffs.  This decision was reversed by a majority in the Court of Appeal (Denning and Hodson L.J.J.).  Morris L.J. dissented.  It is instructive to apply each of the suggested tests to the facts.  There was no apparent or substantial interval between the statement as to the age of the car and the agreement of hire purchase.  The first and chronological test should therefore have helped the plaintiffs.  As Morris L.J. said, "there was a statement made at the time of the transaction".  The second test was also in plaintiff's favour.  Nothing had been reduced to writing and no point could therefore have been made of the superior claims of a document over mere word of mouth.  Hodson L.J. was driven to say that "the distinction is a fine one, and one which I shall be reluctant to draw unless compelled to do so"; and Denning L.J. emphasized the undoubled truth that there is no basic difference between a written and an oral contract.  The third test, on the other hand; so far as it was applicable to the facts, told in the defendant's favour.  It was not he, the maker of the statement, but the plaintiffs as car dealers, who possessed special knowledge and skill and who, if anyone, could have discovered in time the true age of the car.

In the above case the statement was held not to be a term of the contract.  However, subsequent cases have distinguished the holding and confined it to situations where no negligence could be found.  Thus in Dick Bentley Productions Ltd vs Harold Smoth (Motors) Ltd [1965] 2 ALL ER 65; [1965] 1 WLR 623 where the statement at issue was found to have been made negligently it was held to be a term of the contract.  According to the decision in that case the rule was enunciated that a statement should be a term of the contract if it is negligent and a mere representation if it is not.

This subsequent refinement has posed a dilemma of "term" and "representation".  The Courts, in order to avoid the dilemma have resorted to the use of a "collateral" contract.  That is, the statement(s) made before the subsequent writing may be treated as collateral contract to the later written contract.  The case of City and Westminister Properties (1934) Ltd vs Mudd [1959] Ch. 129; [1958] 2 ALL ER 733 is illustrative of this later development of the rule.

1.1.1 Conditions and Warranties 

According to Hodgin's diagram (on page 13) above, if the statement has been identified as a contractual term and not mere representation, then the next step is to decide whether such a statement amounts to a condition or a warranty.

Where the statement amounts to a condition, if a party breaks it, the other party may repudiate, reject the contract and claim damages.

But, where the statement is only a warranty, breach of it only entitles a party to damages.  The contract in such a case confines to subsist.

A condition is a major or important term in the contract.  But, whether a statement is a condition, it shall depend, in each case, on the construction of the contract.

A warranty, on the other hand, is a minor term.  The interpretation clause of the English Sale of Goods Act, adopted by the East African statutes attempts to define a warranty as something:

"collateral to the main purpose of such contract, the breach of which gives rise to a claim for damages, but not a right to reject the goods and treat the contract as repudiated".

To illustrate the difference between a condition and a warranty, let us examine the facts and holding in the case of Kampala General Agency (1942) Ltd vs Mody's (E.A.) Ltd [1963] E.A. 549.

A sold certain goods to B to be delivered to Soroti Station.  Because A discovered that Aloi station was nearer to B's ginnery he sent them there.  B refused to accept the goods alleging that by changing stations, A was in breach of a contractual condition.

Now, pose briefly and ask yourself the following questions:

By an intelligent guess one would be tempted to say that, presumably something else has happened to change his mind about the entire contract and he now tries to enlarge this minor detail into one of major importance.

The court rejected B's argument and described the breach as one of warranty.  Newbold J.A. referring to the then Sale of Goods Ordinance, said:

"the position is, therefore, that the sellers have made delivery of the goods in accordance with the contract but, as agents for the buyers, have consigned the goods to a station which, though possibly more convenient to the buyers, was other than the one to which they had been instructed to consign the goods.  Is this breach of instructions a breach of a condition of the contract of sale, or is it a breach of a warranty in respect of which the buyers are, under section 53 of the Sale of Goods Ordinance, only entitled to damages equivalent to the loss resulting from the breach?  A condition of a contract is an obligation, the performance of which is so essential to the contract that if it is not performed the other party may fairly consider that there has been a substantial failure to perform the contract.  A warranty, on the other hand, is defined in Section 2 of the Sale of Goods Ordinance as, "an agreement with reference to goods which are the subject of a contract of sale, but collateral to the main purposes of such contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated".  I have no doubt that the breach by the sellers of the instructions to consign the goods to Soroti station was a breach of a warranty".

A caution which you need to bear in mind is that the word "condition" as used in its distinctive form vis-a-vis the word "warranty", should not be confused with the phrase "conditional contracts" which you may have encountered in your other lectures.  A conditional contract is a contract which is dependent for its validity on the occurrence of some particular event or occurrence.  It has nothing to do with the discussion above.

1.2 Implied Terms

Express terms as discussed above, are terms which the parties have expressly inserted in a contract.  In contrast, sometimes the parties to a contract may, either through forgetfulness, or bad drafting or at times by pure inadvertence, fail to incorporate into the contract.  These are terms which, had they adverted to the situation, they would certainly have inserted to complete the contract.  These are called implied terms.

Implied terms may be divided into three groups.  The first consists of terms implied by custom.  The second consists of terms implied in law, that is, terms imported by operation of law, although the parties may not have intended to include them.  The third consists of terms implied in fact or by the courts, that is, terms which were not expressly set out in the contract, but which the parties must have intended to include.

1.2.1 Terms Implied by Custom

Certain terms may be sanctioned by custom, whether commercial or otherwise, even where the parties have not expressly mentioned them. Baron Parke in Hutton vs Warren (1936) 1 M & W 466 explained on the possibility of importing terms into a contract and on the underlying rationale thus:

"It has long been settled, that, in commercial transactions, extrinsic evidence of custom and usage is admissible to annex incidents to written constracts, in matters with respect to which they are silent.  The same rule has also been applied to contracts in other transactions of life, in which known usages have been established and prevailed; and this has been done upon the principle of presumption that, in such transactions, the parties did not mean to express in writing the whole of the contract by which they intended to be bound, but a contract with reference to those known usages.  Whether such a relaxation of the strictness of the common law was wisely applied, where formal instruments have been entered into, and particularly leases under seal, may well be doubted; but the contract has been established by such authority, and the relations between landlord and tenant have been so long regulated upon the supposition that all customary obligations, not altered by the contract, are to remain in force, that it is too late to pursue a contrary course; and it would be productive of much inconvenience, if this practice were now to be disturbed"

The importation of usage in a contract rests on the assumption that it represents the wishes of the parties.  Therefore, where the parties do not wish usage to apply to their contract they should exclude that possibility by express language in the contract.  Hence, the parties are supposed, while appreciating the general practice, to have chosen to depart from it.  Expressum facit cessare tacitum

1.2.2 Terms Implied in Law

Treitel, G.H. in his book titled The Law of Contract (7th ed) (London: Sweet & Maxwell, 1990. pp. 160-161) explains that, many of the obligations arising out of a contract are, at any rate presumptively, determined by rules of law; and some such obligations are said to be the result of implied terms.

Terms are implied in law when the law imports into a contract, terms which were not expressly inserted by the parties and which the parties may not have intended to include.

Many terms that are implied in law have been put into statutory form.  In East Africa the most important statutory examples are found in the Sale of Goods Act of the three countries and the Hire Purchase legislation of Tanzania and Kenya.

Hodgin (supra, pp. 79-86) gives a number of examples taken from the Kenya Sale of Goods Act (Cap. 31), which are identical to the Acts of Uganda and Tanzania.  We reproduce some of the examples given for your illustration and reference.

(a) S.14 states that there shall be an implied condition that the seller has the right to sell the goods in question at the time the contract is completed.  Subsection (b) states that there shall be an implied warranty that the buyer will have quiet possession of the goods.  Subsection (c) states that there shall be an implied warranty that the goods shall be free from any charge or encumbrance.

Consider the following hypothetical case in relation to the provisions of Section 14 above.

Suppose that the seller is in fact not the owner of the goods which he or she purported to sell.  Must he or she be taken to have tacitly guaranteed the fact of his or her ownership? 

NB: Before you read the illustrative cases below, read again the provisions of section 14 and try to resolve the question of ownership in the hypothetical case.  Does your answer imply a term to the contract? Which term is implied?

Now you can proceed to read the following illustrative case.

In the case of Ali Kassam Virani Ltd vs The United Africa Co. (Tanganyika) Ltd [1958] E.A. 204 the buyer contracted to buy "Tanganyika Coffee (Morogoro District)".  His offer was accepted despite the fact that it was low in comparison with the quality of the beans.  Sometime later the consignment was seized by the police as stolen property.  The seller was in fact convicted of knowingly handling stolen property.  The buyer successfully sued for breach of Section 14.

Note: In the contract of sale the parties had not included the term that the seller tacitly guarantees the fact of his ownership of the goods, but the law (S.14) implied that condition to the contract.

(b) S.16 is perhaps the most important of the implied conditions, at least as far as the average consumer is concerned.  It starts with the general caveat-emptor caution (i.e. buyer beware).  But it goes on to state two important exceptions to that rule.  That is:

(i) there will be an implied condition that the goods will be fit for any particular purpose made known to the seller by the buyer, if the buyer shows at the time of the sale that he is placing reliance on the seller's skill and judgement, particularly if the article sold is an article normally supplied by that seller as part of his business.

(ii) that the goods will be of a merchantable quality.

Now, consider the following question:

The following two cases are illustrative of the meaning and scope of the two exemptions to section 16.

First, is the case of Henry Kendall & Sons vs William Lillico & Sons Ltd [1969] 2 A.C. 31.  Fact of the case were that:

A wholesaler sold groundnuts to X knowing that he intended to use them as a base for food for cattle and poultry which he then will resell to farmers.  The food was resold to Y who resold to a poultry farmer.  Unfortunately there was a quantity of poison in the extract and the poultry died.

Question: In view of the exceptions to S.16, can, (i) Y sue X? or X sue the wholesaler? (ii) what would be the cause of action?

Note: In the above case, Y had relied on X to be supplied with food suitable as poultry feed, and X had relied on the wholesaler to be supplied with groundnuts which were suitable as base for food for cattle and poultry.  Both Y and X had respectively communicated the specific purpose for which the goods were required.

The House of Lords held that each person could sue the next in line under the section.  That the goods were sold for a special purpose and care had been taken to inform the parties involved of the precise use to which the goods were to be put.

Second, is the case of Doola Sigh & Sons vs The Uganda Soundry and Machinery Works 12 E.A.C.A. 33.  

In this case the defendants sold a saw-bench to the plaintiffs.  After it had been installed and had worked for five minutes it suddenly ceased.  The reason was that it had been carelessly assembled by the seller and wrong components had been used.  Manning, J. explained as follows:

"This is a case of a seller who deals in goods of this particular description and there is an implied condition that the goods supplied by him shall be of a merchantable quality.  The provision to the subsection clearly does not apply as prior to delivery there was no opportunity for such examination by the applicants of the parts  as would have revealed defects therein.  As said by Farwell L.J. in his judgement the phrase "merchantable quality" must in its context be "used as meaning that the article is of such quality and in such condition that a reasonable man acting reasonably would, after full examination, accept it under the circumstances of the case in performance of his offer to buy that article".  This is not a case of a saw-bench being no saw-bench at all, but a case in which the material parts of the machine are not of a merchantable quality.

...I can conceive of no clearer case where a buyer relies on a seller's skill and judgement than where a buyer asks the seller to manufacture the parts necessary to set up a saw-bench complete.  The seller knows perfectly well the particular purpose for which the parts are required.  I think that there was an implied warranty that the parts manufactured should be such as would, when fitted together and made into a saw-bench, be reasonably fit to constitute a machine capable of doing the work usually done by a saw-bench".

Note: In the above case, the parties had not expressly inserted a term guaranteeing the merchantable quality of the machine.  Nevertheless, the court imported this term into the contract by operation of the law.  Hence the term became an implied term thereof.

There are numerous other implied terms in the Sale of Goods Acts, in the Hire Purchase legislation, in the Rent Restriction Act, in the Marine Insurance legislation (Kenya), and a number of other pieces of legislation.

The point which you need to observe, is that, in most contractual relationships which are regulated by specific statutes often there are provisions listing terms which the law shall imply to be part of the contractual terms thereof.  In each case you may be required to read the relevant regulatory enactments in order to decide on the scope of the terms of a given contract.

1.2.3 Terms Implied by the Courts

These are terms which the courts will read into a contract in order to make it effective.  By implying such terms the courts merely reflect what the parties intended, even though they did not expressly say so.  The presumption is that, the parties forgot, or due to poor draftsmanship, or by pure inadvertence may have not included such terms.

The rule is that the courts will imply a term if a reasonable bystander overhearing the contract being made would have said "of course it is obvious that they both meant to include that point-it goes without saying".

However, the courts will not imply a term if by so doing it will amount to rephrasing, or reprinting, or altering the agreement as made.  Nothing should be implied that would create an inconsistence with the express language of the bargain.

This principle was dealt with at length by the Court of Appeal of East Africa in the case of Damodar Jinabhai and Co. Ltd. vs Eustace Sisal Estates Ltd (1966) (2) A.L.R. Comm. 514. Spry, J.A. explained as follows:

"It is a general rule of interpretation that where there is an express provision in a contract, the court will not imply any provision relating to the same subject matter.  One authority for this proposition is Mills vs United Countries Bank Ltd (1912) 1 ch. 231 in which Fletcher Moulton L.J. said: "...when I find a deed which fully expresses the contract between the parties I decline to add anything by way of an implied contract..." it is not, in my opinion, open to a court to interpret [a] negative provision as a positive one; to do so is,.... to imply a term in the contract which the parties did not think fit to include, although they not only had the matter in mind but were even dealing expressly with it in the contract".

The explanation of Sir Newnham Worley V.P. in the case of Campling Bros. and Vanderwal Ltd. vs United Air Services Ltd 19 E.A.C.A 155 further illustrates the scope within which the court can imply a term.  He said:

"In Reigate vs Union Manufacturing Co. (Ramsbottom) (1918) 1 K.B., Scrutton L.J. said: "The first thing is to see what the parties have expressed in the contract and then an implied term is not to be added because the court thinks it would have been reasonable to have inserted it in the contract.  A term can only be implied if it is necessary in the business sense to give efficacy to the contract, that is, if it is such a term that can confidently be said that if at the time the contract was being negotiated someone had said to the parties "what will happen in such a case", they would both have replied, "Of course, so and so will happen; we did not trouble to say that, it is too clear".  Unless the Court comes to some conclusion as that, it ought not imply a term which the parties themselves have not expressed".

Probably now you have grasped the rationale for implied terms and the circumstances under which the courts can imply a term.  To further buttress your understanding of the subject, read the following two case examples which show how the courts have implied a term or refused to imply a term.

In the case of Lynch vs Thorne [1956] 1 ALL ER 744; [1956] 1 WLR 303, the defendant contracted to sell the plaintiff a plot of land on which was a partially erected house and to complete its construction.  The contract provided that the walls were to be of nine-inch brick.  The defendant built the house in accordance with this specification, but it was in fact unfit for human habitation because the walls would not keep out the rain.  The court of Appeal refused to imply a term as to fitness of the house for human habitation because such a term would create an inconsistency with the express language of the bargain.

In the case of Hassanali Issa and Company vs Jeraj Produce Shop [1967] E.A. 555 the plaintiff repaired and then stored the defendant's motor cycle.  The defendant paid with a cheque that was not honoured and the plaintiff sued to recover the value. The defence raised, inter alia, the argument that there had been no contract with regard to the plaintiff's claim for storage charges.  The court discussed the defence argument.  Newbold P. agreed that when an object was taken for repair the owner would not expect to be asked storage charges for the duration of the repair period.  But when the object remains on the repairer's premises for a period considerably in excess of the time it took to complete the repairs, then there "must be taken to be an implied agreement between the parties... that the person who is undertaking the storage is entitled to a reasonable sum in respect of that storage.

Note: 

(1) In the first case example, the parties had agreed on specifications by which the house was to be built.  There was no express term that if the house is so built according to the agreed specifications it should be capable of keeping out the rain.  If the court were to imply such a term, it would have added a term which is inconsistent to the express agreement of the parties.  The situation would probably be different had the parties simply agreed that the plaintiff will build a house suitable for human habitation.  

(2) In the second case example it is clear that the parties had intended that the motor cycle would be collected by the owner immediately after repairs were completed.  By implication, if the owner failed to collect the motor cycle at the contractually envisaged time, such as to cause the repairer to incur storage charges, the same will be met by the owner.  This implication neither alters nor adds anything substantially new to the agreement of the parties.  It was simply overlooked at the time the contract was concluded.

3. ESSENTIAL POINTS FOR EMPHASIS

(1) Always remember that terms of a contract are primarily those stipulated by the parties themselves i.e. express terms.

(2) Implied terms are secondary.

(3) Understand well the rationale for implying a term to a contract, whether by custom or usage, or by operation of the law, or by court.