Lecture 10: Implied Terms
Review: 4 principles- whether it is a term in a contract:
a) Special Knowledge- if unequal knowledge= no term (Oscar Chess v Williams)
b) Incorporation of a term (signature, reasonable notice, course of dealing)
c) Importance of term (Bannerman v White)
d) Whether party told to verify
Used to determine if terms in contract are breached; remedies
a) Special Knowledge Test
Oscar Chess v Williams, 1957
o Legal authority- special knowledge test replacing importance of a term test (if there
is special knowledge, it is not a term)
o (Contrast this with Dick v Bentley)
o Plaintiff was a car dealer, who bought a Morris car from def. Seller
o Pl discovered after purchase that log book was wrong and car was a 1939 and not
1948 model
o Def. had special knowledge and pl. did not hence court (denning) determined is was
not a term of contract
o It was an innocent misrepresentation (not intended)
o Remedy sought by plaintiff: recission
o Morris dissented Denning’s approach of special knowledge
Dick Bentley Productions v Harold Smith, 1965
o Plaintiff buyer sued for damages of breach as to a term of mileage
o Since car dealer claimed car had less miles, but in fact it had more
o Denning: seller should have known, clear misrepresentations from def. side since he
should have known that miles were important as a term to the plaintiff
Implied Terms (ch. 13)
Not all terms are expressly mentioned by the parties since they are so obvious
Test of necessity- court gives effect to what is needed to make contract work
Under Sale of Goods Act
3 types of implied terms:
1) Terms implied by courts (fact and law)
two issues-
why can court imply a term?
What terms can be implied?
Test of necessity applied (objective test): expressed that an officious bystander would
have either known/replied ‘of course’ to the term or not (if yes, then it’s a necessary
term)
reasonableness is not a test!
Terms implied in fact:
relevant, since it’s a commercial relationship that has been negotiated by the parties
judge then looks at facts of those negotiations
Review: 4 principles- whether it is a term in a contract:
a) Special Knowledge- if unequal knowledge= no term (Oscar Chess v Williams)
b) Incorporation of a term (signature, reasonable notice, course of dealing)
c) Importance of term (Bannerman v White)
d) Whether party told to verify
Used to determine if terms in contract are breached; remedies
a) Special Knowledge Test
Oscar Chess v Williams, 1957
o Legal authority- special knowledge test replacing importance of a term test (if there
is special knowledge, it is not a term)
o (Contrast this with Dick v Bentley)
o Plaintiff was a car dealer, who bought a Morris car from def. Seller
o Pl discovered after purchase that log book was wrong and car was a 1939 and not
1948 model
o Def. had special knowledge and pl. did not hence court (denning) determined is was
not a term of contract
o It was an innocent misrepresentation (not intended)
o Remedy sought by plaintiff: recission
o Morris dissented Denning’s approach of special knowledge
Dick Bentley Productions v Harold Smith, 1965
o Plaintiff buyer sued for damages of breach as to a term of mileage
o Since car dealer claimed car had less miles, but in fact it had more
o Denning: seller should have known, clear misrepresentations from def. side since he
should have known that miles were important as a term to the plaintiff
Implied Terms (ch. 13)
Not all terms are expressly mentioned by the parties since they are so obvious
Test of necessity- court gives effect to what is needed to make contract work
Under Sale of Goods Act
3 types of implied terms:
1) Terms implied by courts (fact and law)
two issues-
why can court imply a term?
What terms can be implied?
Test of necessity applied (objective test): expressed that an officious bystander would
have either known/replied ‘of course’ to the term or not (if yes, then it’s a necessary
term)
reasonableness is not a test!
Terms implied in fact:
relevant, since it’s a commercial relationship that has been negotiated by the parties
judge then looks at facts of those negotiations
