Prepare effectively for the SQE1 FLK1 exam by delving into implied terms in contracts, sourced from both common law and statute. These terms influence contractual relationships by ensuring fairness and guiding interpretation. This guide examines the role of implied terms, their application, and their impact on contract law. Understanding these elements will equip future solicitors to handle complex contracts and offer sound legal counsel.
Terms Implied by Common Law
Common law implies terms based on the intentions of the parties, the contract's nature, or fairness principles. These terms are categorized as follows:
Terms Implied in Fact
These terms arise from specific contract situations, determined by:
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Business Efficacy Test: From The Moorcock [1889] 14 PD 64, this test implies terms essential to the contract's operation.
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Officious Bystander Test: From Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206, this test considers whether an observer would see the term as obvious to both parties.
Example: Implied Term of Best Endeavors
In a contract between a festival organizer and a band, a term requiring the band to strive for a successful performance might be implied, as it's essential for both the contract's function and obvious to an impartial observer.
Terms Implied in Law
These terms are automatically included in certain contracts based on common law fairness:
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Implied Duty to Cooperate: Requires parties to act in a way that enables contract fulfillment.
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Implied Term of Good Faith: Requires honesty and fairness in dealings.
Example: Landlord's Duty in Rental Agreements
In Liverpool City Council v. Irwin [1977] AC 239, landlords were required to maintain common areas, illustrating obligations established by terms implied in law.
Terms Implied by Statute
Legislation often dictates specific contract terms to ensure consumer protection and fairness. Key statutes include:
Sale of Goods Act 1979
This Act implies terms such as:
- Goods must be of satisfactory quality (Section 14(2)).
- Goods must be suitable for their purpose when known to the seller (Section 14(3)).
Example: Defective Appliances
A malfunctioning washing machine shortly after purchase would breach the term of satisfactory quality under this Act.
Consumer Rights Act 2015
This Act broadens consumer protection across goods, digital content, and services:
- Digital content must meet quality standards (Sections 34-36).
- Services must be performed with reasonable care (Section 49).
Example: Faulty Smartphone
If a smartphone's camera doesn't work as advertised, this breaches the satisfactory quality term under the Act.
Supply of Goods and Services Act 1982
Governs service contracts, implying terms such as:
- Services must be performed with reasonable care (Section 13).
- Services should be timely, absent a specific agreement (Section 14).
Example: The Unfinished Website
If a web developer takes too long without a deadline, it may breach the reasonable time term.
Exclusion Clauses and Statutory Implied Terms
Contracts often limit liability through clauses, but some statutory implied terms are fundamental and can't be easily excluded. The Unfair Contract Terms Act 1977 (UCTA) and the Consumer Rights Act 2015 regulate these exclusions:
- UCTA Section 6 limits exclusion for implied term breaches in consumer contracts.
- UCTA Section 7 restricts exclusions in non-consumer agreements.
Example: Excluding Liability for Defective Goods
Attempts to exclude liability for a faulty used car might fail if it breaches the satisfactory quality term.
Conclusion
Understanding implied terms is key for the SQE1 FLK1 exam and legal practice. These terms, whether from common law or statute, add rich layers to contract law. Remember:
- Common law implies terms for business efficacy and obviousness.
- Terms implied in law establish core obligations.
- Statutes like the Sale of Goods Act and Consumer Rights Act protect parties' interests.
- Excluding implied terms is limited, especially in consumer dealings.
- Understanding express and implied terms, along with exclusions, aids in contract interpretation and dispute resolution.
By mastering these aspects, future solicitors can skillfully analyze contracts and develop strategies for negotiation and dispute resolution.