IMPLIED TERMS

INTRODUCTION

“Words are not the only medium of expression. A man frequently expresses his desire to do something or to get something done by his actions. Conduct may often convey a promise, or an assent, as clearly as words.”[1] It is not necessary that the offers and acceptance to it has to be given in a formal way or writing. Sometimes, It can also be concluded from the actions and conduct of both the parties.

Almost every contract leaves things implicit. It is the parties who are responsible for defining the terms of the contract. No perfect contract can be concluded because, at the point of drafting it, the parties cannot foresee or provide for any contingencies arising, and in such circumstances, to make the contract effective, the Court implies that the parties have not specifically entered into the contractual terms themselves.[2]

‘Section 9 declares that the promises could be either expressed or implied.’[3] The promise is said to be implied when a proposal or acceptance is made otherwise than in words. An offer that is expressed by conduct is called an ‘implied offer’. An acceptance can also be given expressly or impliedly. A simple example is a bid at an auction, which is an offer to buy.

Two simple examples of implied promises could be stepping into an omnibus [4] and consuming food at a self service restaurant. An illustration of a contract arising impliedly from conduct is below.

The defendant’s farm was on fire when the fire started. He believed he was entitled to free services from the Upton Fire Brigade, and so he made a phone call. The Brigade put out the fire, thereby saving the machine shop. When the defendant’s farm was finally discovered, it was found that it was not located inside the free service zone, therefore the farmer would be compensated for the free services he provided. The reality of the issue is that the defendant requested and received the services. Consequently, service fees are included in the price of the service.

Similarly, if the regulations of a regatta yacht club made participants responsible for damage caused by flooding, they were obligated by the rules, and if one of them flew and sunk, the boat was held liable.[5] This case demonstrates that the whole circumstances under which the Parties contract and not just the formalities of offer and acceptance have to be considered in order to determine whether an agreement has formed. A series of actions may sometimes display an agreement, but offer and acceptance are inseparable.

The circumstances in another case before the Supreme Court were:[6] An Indian and a Yugoslav party struck a deal. One of the conditions of the International Chamber of Commerce for arbitration in Paris. The Indian Party cabled and also submitted his opposition to the arbitration provision immediately afterwards. The other party allowed the job to proceed, notwithstanding the failure to respond. After an argument arose, it was concluded that an implicit agreement had removed the arbitration provision from the contract. A lawsuit may lay in the court.

TYPES OF IMPLIED TERMS

Whether or not a term is inferred normally depends on the intentions of the parties in the words of the arrangement and the situations around it.

  • Implication By Custom Or Usage

Parties can imply a term into a contract if other contracts in the same market, trade, or context can be reasonably presumed to have that term. “Therefore, terms that may be implied by custom are taken to be standard practice or tradition.”

Such terms are inferred by an ordinary understanding of people that enter the same transactions under similar conditions.[7] The parties are presumed to be bound by these uses without voicing them in their contracts. The reason for the application of such an application is not that it has any underlying authority but that the parties are considered to have contracted regarding it.[8]

For example, there is a standard practice in the industry that when contracting a plumber, there might be an implied term that they will bring their tools.

To imply a term into a contract by way of custom, you must be able to show the custom or usage exists. They may not however need to be old or universal. Any local tradition or usage notorious, definite, lawful, and fair can be imported into a contract by a Court if it is shown that people in the situation and state of the parties usually follow it.[9] In India, most of these cases mentioned at the High Court tend to be subject to implicit interest payment contracts.

  • Implication By Law

A provision can be implied in the contract by statute. Parties can automatically assume that terms implied by law form part of specific categories of contracts because of legislation or previous court decisions. These words do not always represent the alleged intention of the parties but the obligations that are enforced by statute in the case of the contracts[10] or the public policy considerations which may be placed on them.[11]

WHERE CAN A TERM BE IMPLIED?

A contract is implied only when a meeting takes place.[12] The Court should not read an implicit word in a contract that is silent on this subject or which does not state explicitly the meaning of the term. It is not suggested to refute any explicit definition.[13] Until the whole matter is considered fairly, it should not be inferred that the parties meant the proposed expression. There is no discretion for the Court to enter into a new arrangement for the parties.

NO IMPLIED CONTRACT UNDER ARTICLE 299 OF THE CONSTITUTION

There can be no implicit contract between government and another party because the contract would invalidate Article 299(1)[14] and, thus, the details and circumstances of the case can be derived by no contract and the contract not by Article 299(1) is no contract at all and cannot be enforced against or by the government. However, Article 299 refers only to “executive force” contracts to be performed, and not to contracts to be executed by law.[15]

NECESSITY OF IMPLYING A TERM AND BUSINESS EFFICACY

The need to infer a term in the contract could occur because, due to inadvertence or mis-drafting, the parties did not specify them. Prima facie, what is implicit in every contract and does not have to be conveyed is so clear that it goes without saying. Parties can specifically only declare the most important terms negotiated among them and allow the others to be understood. They may have had the words in mind, but might not have shared or would likely have articulated them if they had heard the query. Otherwise, they may have interpreted the obligations following traditions already developed among them or originating from their tradition or commercial use. Later lawsuits indicate that in their contracts they did not allow for such contingencies. It will then be appropriate to determine what conditions may be inferred by the contingency.[16]

The High Court of Bombay in Devi prasad Khandelwal & Sons v UOI[17] ruled the following concerning the terms and conditions of the contract:

“It is a common experience that no ideal contract can be entered into and the parties cannot consider or provide for any contingencies at this point of conclusion. In several cases, the parties to a contract do not add them into the contract terms by forgetfulness or by mis drafting, which, had they advertised the situation, would have been incorporated for the completion of the contract. In other cases, to make the contract effective, the Court would imply contractual provisions not directly inserted by the parties themselves. It is true that the Court does not have the responsibility of contracting the parties but only of interpreting contracts already entered into.”

The Supreme Court has recognised that the five prerequisites for suggesting a term in the contract: (1) it must be rational and fair; (2) it must be appropriate to offer the contract business effectiveness; (3) it must be so evident that “it goes without saying.” (4) it must be clearly defined;

The court shall mean a phrase to make the contract more effective to preclude “exercise of the privileges conferred by the contract (being) made nugatory, null or, possibly, severely undermined.”

CONCLUSION

The terms implied are not specified in the terms and conditions of an arrangement. They are focused on the parties’ faith and trust. To enforce implied terms, a reciprocal agreement is necessary. Express terms are therefore expressly stated and written. They are normally published or spoken occasionally.

The crucial fact is that they are expressly mentioned by one side. The implicit and express words are almost part of all deals and although the explicit terms, on the other side, are comparatively less binding and are legally binding.

Author(s) Name: Jinal Prajapat ( Damodaram Sanjivayya National Law University, Visakhapatnam)

References:

[1] Restatement, Contracts, American Law Institute, s 21

[2] Deviprasad Khandelwal & Sons v UOI AIR 1969 Bom 163 : (1968) 70 Bom LR 364

[3] Indian Contracts Act, 1872, s 9

[4] Wilkie v London Passenger Transport Board, (1947) 1 All ER 258 (CA)

[5] Clarke v Earl of Dunraven (The Satanita) 1897 AC 59 (HL)

[6] Ramji Dayawala & Sons (P) Ltd v Invest Import, (1981) 1 SCC 80: AIR 1981 SC 2085

[7] Indian Evidence Act, 1872, s 92

[8] Jiwibai v Ramkuwar Shriniwas Murarka Agarwala AIR 1947 Ngp 17 (FB)

[9] Juggomohun Ghose v Manickchand (1859) 7 Moo Ind App 263

[10] Navnitlal & Co v Kishanchand & Co. AIR 1956 Bom 151

[11] Shirlaw v Southern Foundries [1939] 2 KB 206 per MacKinnon LJ at p 227

[12] Anjum Nath v British Airways (2016) 226 DLT 306

[13] State of Maharashtra v Saifuddin Mujjaffarali Saifi AIR 1994 Bom 48

[14] KP Chowdhry v State of Madhya Pradesh AIR 1967 SC 203 at p 206

[15] Steel Authority of India Ltd v State of M.P. (1999) 4 SCC 76

[16] Navnitlal & Co v Kishanchand & Co. AIR 1956 Bom 151

[17] Deviprasad Khandelwal & Sons v UOI AIR 1969 Bom 163

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