14. Implied terms

There is a presumption that the parties have expressed, orally or in writing, every material term. Sometimes the law still fills a gap. An implied term binds as an express term does. It may reflect what the parties must have intended, or it may be implied by statute.

To find an unexpressed intention the court looks at trade custom, at how the parties behaved, and at what is needed to make the contract work. It will not imply a term that contradicts a clear express term. In commercial contracts, evidence of custom is admissible on points the writing leaves silent. The same idea applies wherever a known usage exists. The presumption is that the parties meant to contract with that usage, and did not try to write the whole of it down.

Reasonableness is not enough. The term must be obvious and necessary. The test is the officious bystander. If, while the parties were negotiating, a bystander had suggested the term, they would have said "Oh, of course." Gardner v Coutts & Co: a man sold land and promised the buyer an option if he ever wished to sell the adjoining property. He later gave that property to his sister. The written contract said nothing about a gift. Cross J implied a term covering a gift as well as a sale. Anyone who had asked him about a gift would have been told it was covered.

Conduct can also imply terms. The shop example belongs here as well as in the offer chapter. A customer who takes goods from a shelf and pays the price the cashier rings up makes a contract. The price on the labels is express. The rest of the sale, including when property passes and what the shop promises about the goods, is implied from conduct and from the statute that governs sales.

Statute is the other source. Sale of goods legislation implies terms about title, description, satisfactory quality and fitness where the seller sells in the course of a business. Those terms do not depend on what the parties happened to say.