4.5.3 Terms implied in fact

The approach here is based on the attempt to determine the true intention of the parties. The courts will imply a term if they consider that it represents the true intention of the parties on a particular issue. In other words, the term is implied not as a matter of law, but on the basis that as a matter of fact, this is what the parties had agreed, though the agreement was implicit rather than explicit. The courts will not easily, however, be convinced that such implication should take place. It is certainly not sufficient that a particular clause would appear to be «reasonable». Nor will a term be implied to deal with an eventuality which the parties had not anticipated. If they had not expected a particular circumstance to happen, they cannot be said to have intended that a particular term would apply to the situation. This was the view of the Court of Appeal in Crest Homes (South West) Ltd v Gloucestershire County Council, where in a construction contract the local planning authority unexpectedly imposed conditions which entailed additional expense and a loss of profit for the builder. The court was not prepared to imply a term that the defendant (which had performed its side of the bargain in accordance with the original contract) should bear any liability for these costs. This shows the court being unwilling to use the concept of the implied term to deal with «relational» aspect of contracts – which may require the modification of obligations to deal with changed circumstances.

4.5.4 The Moorcock test

The starting point for the law in this area is the case of The Moorcock. This concerned a contract which involved the plaintiff’s ship mooring at the defendant’s wharf in the Thames. The Thames being a tidal river, at low tide the ship, as both parties knew would be the case, settled on the river bed. Unfortunately, the ship was damaged because of a ridge of hard ground beneath the mud of the river bed. There was no express term in the contract as to the suitability of the river bed for mooring a ship there. Nevertheless, it was held by the Court of Appeal that such a term could, and should, be implied. The reason for this was that without such a provision, the contract would have effectively been unworkable. It was implicit in the contract for the mooring of the ship that it would have to rest on the bottom of the river. Both parties must have contracted on the basis that it was safe to do so. On this basis, the court felt that it must have been the parties’ intention that the owners of the wharf should warrant that the river bed was suitable for the purpose of the contract. Bowen LJ explained this reasoning as follows:

Both parties knew that the jetty was let for the purpose of profit, and knew that it could only be used by the ship taking the ground and lying on the ground. They must have known, both of them, that unless the ground was safe the ship would be simply buying an opportunity of danger and buying no convenience at all, and that all consideration would fail unless the ground was safe. In fact, the business of the jetty could not be carried on unless, I do not say the ground was safe, it was supposed to be safe.

Note that the test being applied here is a stringent one. It is not based on the reasonable expectation of the owner of the ship, but rather on what is necessary in order to make the contract work at all. The fact that a contract might work better with a particular term implied would not be sufficient. The Moorcock can thus be characterised as having established a test of «necessity» in relation to the implication of terms.