In any written contract there can be two types of terms – those you can see and those you can’t. And while the parties and courts can agonise over what the terms written down might mean, implied terms can be at least as troublesome. So where do they come from and how do you know if you have them?
In Estafnous v LLBCL, an estate agent introduced a prospective buyer to a company property owner, and the agent and owner entered into an agreement which said that commission was payable on the sale of the property. The transaction that finally went through, however, was structured as a sale of shares in the owner’s ultimate holding company. The express terms of the commission agreement did not cover the share sale but could a term be implied to save the agent’s commission? No, said the Court of Appeal. An implied term is not an addition to the contract; it only spells out what it means. The question is whether such a term would spell out what the contract, read against the relevant background, would reasonably be understood to mean. The parties had not thought about what should happen if the property sale was restructured as a share sale, so there was no implied term and no commission.
Estafnous v London & Leeds Business Centres Ltd [2011] EWCA Civ 1157
