Implied terms; what is not written might also be valid

One of the iffy things about writing your own contracts, is that you’re not sure if the terms you wrote are complete. What if there was something important that you overlooked, but forgot to put in?

Fret not, there are such things as “implied terms”. What this means, is that the law will assume that parties to the contract have agreed to general practices, legislation and normal conduct of business people. This makes perfect sense, because no contract will be able to include every possible detail in any transaction. For example, if you buy a pair of headphones, it will be an implied term that you expect the headphones to function and work normally. There is no need to say that specifically in a contract.

To determine whether or not a term would be implied, here’s a simple test:

a.) Is the term a fact?

b.) Would the contract make business sense without the term?

c.) Would a third party would find it obvious such a term should be included?

For example:

  • If you buy a car, you’d expect it to be able to move.
  • If you buy a web development service, you’d expect that it would be made for public access.
  • If you hire a photographer, you’d expect that he comes with a camera.

There are also terms implied by custom. When there is a practice prevalent in a trade, the courts could imply a term that is customary to that trade.

For example, in the graphic design or web development industries, it is customary to pay by tranches. To first accept a downpayment, or a first tranche payment before work can proceed. It is also commonly understood that this deposit is not refundable, because the funds are used to pay for services to start the project. In the event of a breach by the client, it may be interpreted that the deposit is not refundable and because it is common for contracts belonging to this trade to include such a term.

Then there are also terms implied by statutory law. It is understood that all businesses and persons will comply with the law. Statutory law is also superior to your contract, so it takes precedence if there are conflicting terms.

For example, the Employment Act prohibits the employment of minors. It is not necessary to have a clause that asks your vendor to ensure his staff meets age requirements. It is understood and implied. The Sale of Goods Act demands that a seller “has title” to his goods. This means that the goods must not be stolen, and that he has authority to sell. There is no need to have a clause that specifically says the goods must not be stolen.

But please remember that these are legal principals. Don’t use your own imagination or layman’s knowledge to stretch the limits of implied terms. You cannot say, for example, that a video production for television must come with a social media version, because it is the custom these days. It is not for private and subjective interpretation.

What you can do with this information, is that you can write contracts with a certain degree of confidence. A one page contract is better than none at all. Template contracts are fine too, but it doesn’t mean that it is “safe” because it might not suit your particular needs.

Oh by the way, if you want to know about how the law works for employees and freelancers, drop by this excellent resource: The NTUC uPME centre. They’ve got great downloadable content for all varieties of employees and even self-employed persons. They also organise regular legal clinics, so go click and read more!

Categories: Labour Law

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