Efficacy To The Contract Essays Example

Type of paper: Essay

Topic: Contract, Education, Law, Court, Standard, Business, Vehicles, Duty

Pages: 7

Words: 1925

Published: 2020/09/13

Analysis of Implied Terms; Efficacy to the Contract

Terms in a contract mean the rules that govern a contract; these rules are either expressly set out by the parties in a contract or implied into the contract later. Implied terms consequently then translate mean the terms that are considered default to a contract and therefore applied. The aim of implied terms is to supplement the contract and ensure that the contracts efficacy in ensured. In addition, the implied terms can also apply to alleviate hardship to a party and ensure equity and fairness to either party in the fulfillment of the contract.
Terms can be implied into a contract through three primary means; by operation of the statute, by the courts and through an accepted trade or custom. Terms implied by the operation of a statute are the terms that the law drafters sought to avoid a some unfair dealing or ensure legality of contracts. The best example is the Sales of Goods Act, that assures good that are party to a contract of sale of good must be of satisfactory quality. Such a term will be implied to mean that good of unsatisfactory quality are in violation of the term. The Minimum Wage Act also demonstrates such concerns, by specifying the minimum allowed wages the term is expected to apply to all the contracts involving payment of wages.
The terms can also be implied by the courts. However, the terms to be implied by the courts must not be expressly excluded by the contract. Common law being in a state of constant evolution has developed two distinctions of the terms implied by the courts. The distinctions are the terms implied in “law” and those implied in “fact.” The terms implied, in fact, arise where whenever they are strictly necessary to realize the reasonable expectations of the parties to the
contract. The implied terms in law are specific to particular contracts such as the tenancy contracts and employment contracts.
As mentioned earlier terms can also be implied into contracts by the trade customs and practices of the market that the parties to the contracts are operating. In Cunliffe-Owen V Teather and Greenwood, Ungoed Thomas J specified that for a trade practice and custom to apply it must be; “reasonable, certain, recognized as legally binding, notorious, and not inconsistent with the express terms of the contract”. Because only courts can imply these terms, they are cannot be implied if excluded by the express terms. In addition, according to Lord Devlin in the case of Kum v Wah Tat Bank Ltd the terms must be prevalent to the extent that an outsider enquiring reasonable would be guaranteed of awareness to them.

The business efficacy test is one of the tests applied to determine whether the term to be implied is necessary for business efficacy or the contract would still make business sense without it. The courts in such a situation only imply the terms where it is necessary to do so. The business efficacy test was enunciated in the locus classicus case of The Moorcock. In this case, the owners of a water vessel named Moorcock contracted a jetty’s owner for some space in the Wharf so as to offload their goods. During the period that the boat was docked at the wharf the tide ebbed to the extent that the hull of the ship was damaged by a ridge. The plaintiff then sued the wharf owner claiming that they were under a responsibility to ensure the safety of his vessel when docked in their premises. The defendants, on the other hand, simply pointed out that the contract signed had no provisions requiring them to ensure protection of the boat. In addition, they also stated that they could not have foreseen the damage that the vessel incurred. The court determined that there existed an implied term requiring to take reasonable steps to determine the state of the riverbed and in doing so, and they would have discovered the ridge and consequently warned the ship owner.
However, this test is limited, and other tests have emerged to compensate for the possible inadequacies of the business efficacy test. One such test is the officious bystanders test. The officious bystander tests applies this logic; if a bystander or a third party present at the time the contract was being suggested the term to be implied to the parties it would have been obvious to them and that they would have accepted the term. The officious bystander test was first applied in Shirlaw v Southern Foundries . In this case, the claimant was former managing director of the Foundries for ten years. After the acquisition of the Southern Foundries by Federated Foundries, they dismissed him as a director. When he sued for wrongful termination, they claimed that since they had not fired him as the managing director. However, if he was not the director he could not operate as a managing director. The court determined that it was obvious that the defendant could not act in a way making it incapable for the plaintiff to perform his contract.
The Privy Council also developed a five stage test to establish the terms implied in fact. The test mentioned above was established in the case of BP Western Refinery v Shire of Hastings. In this case the steps set out were; First the terms must be reasonable satisfy the doctrine of equity. The implied terms should also be necessary to the business efficacy of the contract, as set in Mooring case; this as mentioned previously can be inclusive of the officious bystanders test. In fact, the presiding judge stated that the term should be so obvious that the parties to the contract would say, “Of course” to its suggestion. The term must also be so obvious that it might go without being stated by both parties. In Codelfa Construction v State Rail Authority, a South Wales case, the term regarding three shifts a day failed on its ambiguity. The term that the plaintiff wished to imply must also be a term that can be clearly expressed without advanced or technical knowledge.
It is important to note the five stage test applies only to the formal contracts. The application to the formal contracts was specified by the Australian High Court that determined that the test developed in Byrne v Australian Airlines applied to the informal contracts. The Byrne test if four steps; necessity of the term to effective operation of the contract, consistency with the express terms, capability to be clearly expressed, and finally is must be obvious to all the parties involved.
In conclusion, it seems appropriate to state that the test applied by courts in the cases of implied terms in law is not grounded on necessity alone and other test apply. The purpose of the tests has been demonstrated in this article with their value to the common law being invaluable.

Instances on Breach of Duty in the Case Provided

There are two tests for determining whether the defendant in the case has breached a duty of care; the objective test and the Bolam test. The objective test involves the liability being determined by whether the defendant met the standard of a reasonable person. The Bolam test, on the other hand, determines liability on whether the defendant has acted contrary to the practice that is accepted as standard by people in the same situation or field.
For the defendant not to have breached a duty of care he must first pass the reasonable man’s test. In the legal sense, a reasonable man is an average person who is not presumed flawless, but is expected to have an ordinary level of prudence and care. He may not foresee every risk, but he will be expected to realize the obvious and apparent risks as explained by Greer LJ in Hall V Brooklands Auto-Racing club. However, this standard is not universal in its application, and there are several special standards of care. The different standards are mainly to avoid unfairness and injustice in some instances.
Skilled specialists usually have a higher standard of duty; they are regarded as reasonable professionals. An example would be a doctor; doctors are expected to be aware of health risks and therefore ought to be regarded as such. The other standard is the standard applied to novices or amateurs. In this standard, no allowance or reprieve is granted to the novices on their lack of experiences. The novices are expected to show the same standard of care as every other person in that particular skill area. In Nettleship v Weston, a novice driver was treated the same as a court would have regarded an experienced driver. It is paramount to note that if an individual takes up a task is reserved for professionals or skilled people the individual is expected to have and exercise the same level and standard of care as the professional would. In a hypothetical instance where unskilled people hire a ship and captain it themselves, they are expected to be as competent as the captain would and will be liable for the damage resulting from their inadequacies.
Nonetheless, different standards are applied for children. The courts will lower the standard and apply the standard of care expected of children of the same age. In Mullin v Richards, a girl who had been using ruler to play fight with her friend was not held liable for a splinter breaking off and injuring the other girls eyes.
The courts will weigh the following factors in determining whether the defendant is in a breach of duty. The first factor is the likelihood of harm; it is illogical to expect that a person acts in regard to events that he cannot foresee. In Haley v London Electricity Board, it was held that it a reasonable man would foresee the fact that London being a large city would have a proportional number of blind people. It is paramount to note that the test applied here is objective i.e. of the reasonable man rather than subjective to the defendant. The next factor in determining a breach of duty is the seriousness of the harm that the action poses. Another factor is the cost of prevention, in Latimer v AFC; the defendants had water on their floor due to floods that made it slippery. Realizing the risk posed, they spread sawdust on the floor; however, a worker still slipped and sued them. The court held that they had done all that they possibly could, short of closing down and therefore not liable. The final factor is the utility of the defendant’s conduct, in Watt v Herefordshire, the plaintiff was a fireman who had a jack that was being transported to an emergency injure his leg. The court held that the utility of transporting the Jack to rescue somebody outweighed the precautions that ought to have been taken.
In the case provided, Clarkson is liable for the injuries that Lewis incurs along with the damage to his car. Amateurs are expected to exercise the same standard of care as the professionals. Clarkson entered a professional car race; he would, therefore, be regarded by the courts by the same standards as those of other professional car racers would be regarded. In addition, he failed to yield ground to a faster car contrary to the rules of the race. In summary, Clarkson reached the duty of care he owed Lewis and other racers.
The wheel of the car that Clarkson was driving escaped and injured Murray. Clarkson did not have any duty of care extending to Murray, primarily because he could not have foreseen that detaching of the wheel and there was nothing that he could have done to stop the wheel from detaching. The festival organizers, on the other hand, when a reasonable man’s test is applied to them they have breached a duty of care they owed to the spectators. They foresaw the need to erect safety barriers to protect the spectators as this had happened earlier, but they failed. However, they can rely on the defense shown in Latimer v AFC that the cost of erecting the barriers would be outweighed by the cost and inconvenience to the spectators.
Fernando liability can be viewed from two angles. First, being a graduate of medical school Fernando is expected to have and exercise the same level and standard of care as he medical doctor as experienced medical doctors. His overconfidence led him to taking a highly risky medical procedure that he was unfamiliar with; therefore, he can be held liable breaching the duty of care that he owed Murray. In Wilsher v Essex AHA, a junior doctor was expected to perform with the standard of a skilled doctor. However, Fernando aged 13 and consequently a child. His age, therefore, means that the standard of care applied to him will be correspondingly reduced to the standard of fellow 13-year-olds. 13-year-olds are expected to be overzealous and overconfident in their abilities.

UK Cases

The Moorcock [1889] 14 PD 64
Shirlaw v Southern Foundries [1939] 14 PD 64
BP Western Refinery v Shire of Hastings [1977] 180 CLR 266
Codelfa Construction v State Rail Authority [1982] 149 CLR 337
Hall V Brooklands Auto-Racing club [1933] 1 KB 205
Nettleship v Weston [1971] 2 QB 691
Mullin v Richards [1998] 1WLR 1304
Haley v London Electricity Board [1965] AC 778
Latimer v AFC [1953] AC 643
Watt v Herefordshire [1953] AC 643
Other Jurisdictions
Cunliffe-Owen V Teather and Greenwood [1967] 1 WLR 1421
Kum v Wah Tat Bank Ltd [1971] 1 Lyold’s Rep 439
Byrne v Australian Airlines [1995] 185 CLR 410

Sales of Goods Act [1979] c. 54

The Minimum Wage Act [1998] 33 ILJ 22


R Austen-Baker, Implied Terms in English Contract Law (1st, Edward Elgar, London 2011) 23-98
H Collins, 'Implied Terms: The Foundation in Good Faith and Fair Dealing' [2014] CLP 2, 11
R Craswell, 'Contract law: General theories' [2000] ELE 1, 15
S F Deakin, Markesinis and Deakin's Tort Law (1st, Oxford University Press, London 2012) 245
C J Goetz, 'The limits of expanded choice: An analysis of the interactions between express and implied contract terms' [1985] CLR 261, 303
R E Hillman, 'Court Adjustment of Long-Term Contracts: An Analysis Under Modern Contract Law' [11987] DLJ 1, 25
R A Posner, Instrumental and Noninstrumental Theories of Tort Law (1st, Marxwell Publishers, New York 2013) 34-56
R J Rhee, 'The Tort Foundation of Duty of Care and Business Judgment' [2013] NDLW 1139, 1143
P H Winfield, The Province of the Law of Tort (1st, Cambridge University Press, London 2013) 98-119
R A Hayes, H Luntz, D Hambly, Torts: cases and commentary (7th, Butterworths, London 1980) 234-345
G M Cohen, 'Implied Terms and Interpretation in Contract Law' [2000] ELE 78, 99
J C Goldberg, Philosophical Foundations of the Law of Torts (3rd, Pearson, New York 2013) 367
R E Scott, 'Contract theory and the limits of contract law' [2003] YLJ 541, 600

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