Incorporating Terms into a Commercial Agreement

The recent case of Wilfried Guemiand Bony v Gilbert Francis Kacou and others [2017] EWHC 2146 (Ch) provides a useful reminder of when a court will imply a term into a contract.

The case arises as part of the Claimant's, "Bony's" (a premiership footballer), claim to recover over £8million of alleged secret commissions received by his former agents (the first and third Defendant) ("the Agents") and their corporate vehicles (the second and fourth Defendant) during contract negotiations with Swansea City Football Club (the fifth Defendant).

In the course of the proceedings, the Agents applied (unsuccessfully) to stay the court proceedings to allow the dispute to be determined by Arbitration (an alternative, confidential forum for resolving disputes out of court) on the basis that the Football Association Rules ("FA Rules"), which included an arbitration clause, applied to disputes between "members of the football family". The application was dismissed with the District Judge finding that none of the agreements between the Claimant and the Agents expressly incorporated the FA Rules or a valid arbitration clause.

On appeal, the first to fourth Defendants attempted to argue that although there was no express reference to the FA Rules, an agreement should be implied between participants in a sport based on the rules of that sport (even if the participants are unaware of the terms).

The Appeal Court re-affirmed that such an agreement should only be implied into the contract if it was "necessary" and that what is "necessary" should be decided by reference to all of the relevant facts and circumstances of the case.

The Appeal Court took account of the fact that none of the agreements (both written and oral) between the parties included a valid arbitration clause. It was therefore not "necessary" to imply such an agreement between the parties and so no stay of the proceedings was appropriate.

Comment

There are a number of ways that a term may be implied into a contract. For example, by usage or custom (i.e. based on common assumptions that are customary to a particular industry), the parties' previous course of dealing, the common intention of the parties, common law or statute.

The starting point will often be what the parties expressly agreed in the contract itself. The Court is reluctant to imply terms into an agreement when a written contract exists. Accordingly, arguments based on an implied term can be difficult to run. Careful drafting can avoid unintended consequences which might therefore arise and avoid expensive disputes over its interpretation further down the line. Use of a specialist commercial lawyer in drafting your agreements will certainly assist you in this regard.