Implied terms II

Implied terms II: The importance of implied term stems from the fact that in certain circumstances, it may be difficult to know the intentions of the parties without resorting to these implied terms.

This is because express terms may not necessarilly state every detail of the intention of the parties in entering into the contract. It is not in every contractual relationship that the parties will remember to express all the terms they intended to govern their contractual relationship. Human beings cannot envisage all things or terms which will be relevant in the making of a contract.

See also:- Terms of Contract of employment; Doctrine of Estoppel; Private Privilege; Rebuttable Presumption of Law; Facts that need not be proved by Evidence.

That is why the law in its wisdom, has allowed certain terms to be implied in contract. Terms implied into a contract of employment invariably imposes rights and obligations on parties to the contract even though they have not expressly provided for them. A number of situations can give rise to implied terms. Terms may be implied into a labour contract by statute, custom or practice and by court.

In Stabilini & Co. Ltd V. Obasa, (1997) 9 NWLR (pt.520) 293; the Appellate Court emphasized that contracts need not necessarily be in writing. According to the court, the conduct of parties can give rise to contractual obligations. This is so because a contract may be created expressly or by implication.

Similarly, in Ibama V. Shell Petroleum Co. Nig. Ltd (1998) 3 NWLR (pt.542) 493; the court unequivocally stated that in certain contract where no such express words are available then implied terms may be incorporated into the contract in so far as they do not contradict the express terms of the particular contract.

By Statute – Implied terms II

A good example of statutory implication of term into a labour contract is afforded by the provisions of Section 48(2) of the Trade Dispute Act. It provides thus:

’’where it is provided by this Act that an award or the terms of a settlement shall be binding on the employers and workers to whom the award or terms relate, then, as from the date of the award or settlement (or such earlier or later date if any, as is specified therein), the contract between the employers and workers in question shall be deemed to include a provision that the rate of wages to be paid and the conditions of employment to be observed under the contract shall be in accordance with the award or terms of settlement untillvaried by a subsequent agreement, settlement or award; and accordingly the provisions of that contract shall be read subject to the award or terms of settlement, and any failure to give effect to the award or terms of settlement shall constitute a breach of contract”.

By trade and practice

Trade, customs and usages may be implied into a contract of employment even though not expressly stated by the parties in the contract. It is necessary to state that customs and usages can only be implied into a contract in the following circumstances, namely:

  1. Where its application has not been expressly or impliedly excluded by the parties in the contract. Customs cannot be implied in a contract where parties have expressly excluded its application. Thus, customary implied terms cannot override the terms of a written contract; and
  2. The custom or usage should be well-established and notorious so that both parties to the contract are either familiar with it or must be presumed to be familiar with it or must be presumed to be familiar with it.

In fact, the basis for implication is that if a custom is well-known and acquiesced in, then everyone making a contract in that situation can reasonably be presumed to have imported that terms into the contract. The custom needs to be very well established before it will be implied as a contractual requirement.

Accordingly, Lord Jenkins, London Export Corporation V. Jubilee Coffee Roasting Co. (1958) 2 All ER 411 at p. 420; stated as follows:

“an alleged custom can be incorporated into a contract only if there is nothing in the express or necessarily implied terms of the contract to prevent such inclusion and, further, a custom will only be imported into a contract where it can be so imported consistently with the tenor of the document as a whole”.

In Hutton V. Warren (1836) 1 M and W 466; Park B. spelt out clearly how this principle operates by stating as follows:
“it has long been settled that in commercial transactions, extrinsic evidence of custom and usage is admissible to annex incidents to written contracts, 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 intend to be bound, but a contract with reference to those known usages…

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.

By the court

Terms may also be implied by the courts. But it should be noted that parties to a contract have the freedom to determine the terms of their contract.

It is not the function of the court to make a contract for the parties. All that the court does is to give effect to the terms of the contract as determined by parties. Hence, the court is most times very reluctant to meddle into a contract properly concluded by the parties.

However, in every exceptional circumstances, whenever it is desirable to effectuate the intention of the parties as may be gathered from their express terms, the court may imply a term into the contract. Accordingly, the courts may imply terms into a contract in two ways.

  1. Where such a term is necessary and reasonable in order to reinforce the language of the parties and realize their manifest intentions; and
  2. Where such a term is necessary and reasonable in order to give business efficacy to the contract.

The reason for the above is that the courts implies terms just in order to give effect or do what the parties would have done themselves had they thought of the matter. Something they probably had in mind but wittingly or inadvertently did not express. It is something that without it the contract will not work or will not be effective.

Mackinnon, L. J. in Shirlaw V. Southern Foundaries Ltd, (1939) 2 KB 206 at p. 227, CA gave a classic formulation of how the court could determine the intention of parties in this circumstance so as to imply such intention to the contract. By using the officious bystander concept, he stated as follows:

‘’…that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that if while the parties were making their bargain, an officious by-stander were to suggest some express provision for it in their agreement, they would testily suppress him with a common ‘oh, of course’.

However, our minds ought to be occupied by the above analysis is the relationship and superiority between express and implied terms. That is, which of the term is superior to the other in the event of conflict? It is now a well established principle of law that express terms supersede and are superior to implied terms.

This principle of law is not far-fetched. It derives from the principle of sactity of contract. Contract is usually the outcome of negotiation and meeting of minds and agreement and should not be easily overrriden or altered in the absence of any vitiating factor.

The Supreme Court, in A. G. Rivers State V. A. G. Akwa Ibom State, (2011) 3 MJSC 1 at p.13 underscored the blindness of agreement when it held that:

“…once parties enter into an agreement voluntarily and there is nothing to show that the agreement was obtained by fraud, mistake, deception, or misrepresentation, the parties are to be bound by the terms freely extended into.

Consequently, a party no longer satisfied with the terms of the agreement cannot resile or jettison the agreement. This is the doctrine of sactity of agreement which is illustrated by the Latin maxim “Pacta sunt servanda” which means agreements is to be observed, and honoured. That is to say parties are held bound by their agreements.

This principle was again reinforced by the Supreme Court in Kayode Ventures Ltd V. Hon. Minister of FCT, (2010) 1-2 MJSC 129 at p. 132; when it held that:

…where a legally permitted contract has been concluded by parties to it, the parties become bound by the terms and conditions therein. None of the parties will be permitted by law to resile from such terms and conditions except for genuine reasons.
Therefore, since express term is the product of the agreement of parties it should naturally be superior to implied term.

Implied terms II. Implied terms II. Implied terms II.

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