When you enter a contract, you expect clarity about what’s agreed, but not every obligation needs to be written down to be legally binding. In contract law, express terms and implied terms work together to define the full scope of a party’s rights and responsibilities.
Understanding the difference between the two is crucial for protecting your business interests, managing risk, and resolving disputes.
In this article, we explain what express and implied terms are, how they arise, and why courts sometimes add terms into contracts, even when they aren’t spelt out. Whether you’re drafting agreements or facing a contractual dispute, knowing how terms are interpreted can help you stay a step ahead.
If you need tailored advice, our expert commercial law solicitors can work with you to ensure your contracts stand up to scrutiny.
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What are express terms and implied terms?
When you’re asked to sign a contract on behalf of your business, you’d think it would be reasonable to assume that the contract contains all the commercial terms. However, contracts can include both express and implied terms.
An ‘express’ term is a term of the contract between you and the other party, which is clear, unambiguous and agreed upon. It’s usually in writing, but it can be verbal if the agreement itself is verbal.
An ‘implied’ term is implied into a contract. This may be determined by a court to give effect to the overall contract, whereby the parties did not consider it, did not think the issue would arise, or omitted to include the term. Alternatively, it could be implied as a result of the term being implied through legislation or via several other routes, which are explored below.
How do implied terms arise?
When something is found to be ‘missing’ from the express terms, a court can imply additional terms to ensure the contract makes sense and satisfies legal requirements.
- Legislation, for example, the Consumer Rights Act 2015, implies that goods purchased by a consumer will be of satisfactory quality and fit for purpose.
- Custom and usage in a particular trade or industry - the way things are done in that line of business.
- Previous dealings between the parties - how they have acted towards each other over a series of regular dealings over a prolonged period.
- Intentions of the parties, e.g. to make the contract ‘work’ by implying the existence of a termination clause.
‘In fact’ implied terms, such as the need for cooperation between the parties, any discretion is to be exercised in good faith, and the existence of mutual trust and confidence.
How should I approach implied terms?
It is far better to make all terms of the contract ‘express’ - as clear and comprehensive as possible to reduce the risk of a party arguing that there are additional implied terms. This adds clarity to the contract and reduces the likelihood of ambiguity, thereby minimising the risk of disputes.
One helpful method to reduce the risk of implied terms arising is by including an ‘entire agreement’ clause, which confirms that only the terms explicitly set out in the contract form part of the agreement.
It is also sensible to take proper legal advice on your contract, so that you understand in advance where you have the possible risk of implied terms arising. You can then either elect to include an express clause to cover the issue or at least reference the implied position so that both parties are clear on it.
What if an implied term contradicts an express term?
Generally speaking, in the event of a conflict between an express term and an implied term, the express term will prevail.
What else do I need to be aware of with express and implied terms?
Courts are generally reluctant to interfere with a commercial bargain reached between two parties, particularly where they are two businesses with broadly equal bargaining power and where each has had the opportunity to take legal advice on the matter. As such, there is a degree of certainty that a court will uphold a properly drafted contract covering all bases.
Therefore, there is no substitute for a well-drafted, comprehensive and up-to-date contract. It does not guarantee that there will be no disputes, but it makes them less likely and ensures that any conflicts are less protracted. The contract should include all terms that you can think of that may be relevant to your business dealings.
Even if your business has an excellent working relationship with the other company and has been consistently dealing with them for several years, do not underestimate the importance of having a clear written contract in place with them.
Similarly, if the way that you work with the other party changes, the terms of any existing contracts should be reviewed and updated to reflect the new relationship.
Where uncertainty and litigation risk heighten is when there is no written contract, whereby people are relying on the myth of a ‘gentlemen’s agreement’, or when a written contract exists but fails to adequately or accurately cover all the agreed-upon terms. In these cases, where a dispute arises, there is a real risk that it will end up in court, and those claims tend to be highly uncertain and risky.
To avoid the possibility of costly disputes arising, feel free to reach out to our expert team of commercial lawyers, who will be delighted to draft your contract and assist you in any aspect of contract law.
Protect your business with clear contract terms
Express and implied terms are the building blocks of every contract, shaping your legal rights, responsibilities, and the outcome if things go wrong. By understanding how these terms operate, you can draft stronger agreements, minimise uncertainty, and avoid costly disputes.
If you’re unsure whether your contracts cover all necessary terms or if you need advice on a potential issue, expert legal support can make all the difference.
Get in touch with our commercial law solicitors today to safeguard your business and secure the clarity you need.
