The UK Supreme Court has clarified when a court will imply terms into commercial contracts. The clarification was given by the Supreme Court in its ruling in the case of Marks and Spencer plc v BNP Paribas.
Until 2009, the legal position on implied terms was clear. A term would be implied where this was necessary for business efficacy or where implication of the term was so obvious it went without saying. However, a Privy Council ruling in 2009 cast doubt on whether these were the correct tests. This was the case of Attorney General of Belize v Belize Telecom. The judgment in the Belize case was interpreted as saying that a term could be implied into a contract where it was merely reasonable to do so. In Marks and Spencer plc v BNP Paribas, the Supreme Court has said that this was a misinterpretation of the Belize ruling and that, in light of this, Belize should not be regarded as an authority on the law of implied terms.
The Supreme Court reinstated the pre-Belize position and confirmed that the traditional tests for implying a term into a commercial contract (necessary for business efficacy or so obvious it goes without saying) are the right ones. The Supreme Court also reiterated the pre-Belize position that the Court must also be satisfied that it is reasonable and equitable to imply the term, that the implied term is capable of clear expression and that the implied term will not contradict any express term of the contract. This is an important ruling and one which lawyers involved in the drafting or implementation of commercial contracts, or contract disputes, should be aware.