If you've been to Camden Market, London, recently, you'll know that these days it's a great place to go for semi-amusing novelty t-shirts and a complicated coffee. What you might not have realised is that one of the main developers of Camden Market, Camden Market Group ("CMG"), has recently been involved in a major piece of litigation that has re-affirmed a "cardinal rule" of the English law of contract in respect of implied terms.

Under English law, contractual terms are either "express" or "implied." Express terms are actually set out in writing (or, in the case of oral contracts, are specifically stated); implied terms reflect the intention of the parties and are implied as a matter of fact, law or custom.

In complex commercial contractual arrangements, parties are keen to ensure that there is as much certainty as possible and lawyers in practice draft commercial contracts so that the intentions of the parties are expressly set out in the contract, leaving little to be implied. However, situations do nevertheless arise in complex commercial deals where implied terms do come to the fore. One such situation arose when CMG claimed that its lender, the Irish Bank Resolution Company (IBRC), was in breach of an implied term.

The background

IBRC was formed in 2011 by the court-mandated merger of the state-owned banking institutions Anglo Irish Bank and Irish Nationwide Building Society. Two years later in 2013, IBRC began marketing its portfolio of loans after it was placed into special liquidation. The portfolio included a combination of "distressed" and "non-distressed" loans. The CMG loan fell within the latter category. IBRC's marketing efforts unfortunately took place at the same time that CMG was marketing the properties they were developing in Camden Market.

CMG's view was that this "packaged" sale approach of distressed and non-distressed loans gave rise to market uncertainty and rumour, leading to a widespread view that the CMG debt was itself distressed. Accordingly, CMG took legal action seeking to enforce what it saw as an implied term of its loan agreement with IBRC ‒ that it should not do anything to hinder CMG's ability to achieve the best price possible for the properties they were developing. IBRC in turn directed the court to express terms in its loan agreement with CMG which permitted IBRC to market the loans for sale and to provide information about them to any potential buyer.

The case made its way to the Court of Appeal, which ruled that whilst IBRC was not given an unrestricted power to market the loans, it did have an express power to disclose information to potential counterparties without a requirement to obtain CMG's consent (or even to inform CMG) and that express right was "substantively inconsistent" with the implied term CMG was trying to establish. IBRC were relying on what they saw as the established principle of English law that no implied term can be inconsistent with the express terms of the contract in question.

The judgment

In its judgment, the Court of Appeal:

  1. made reference to the "cardinal rule" that "an implied term must not contradict any express term of the contract";
  2. noted that "an express and unrestricted power cannot in the ordinary way be circumscribed by an implied qualification"; and
  3. made reference to the principle that "where parties have entered into a lengthy and carefully drafted contract but have omitted to make provision for the matter in issue, it is difficult to infer with confidence what the parties must have intended."

The Court of Appeal unanimously agreed that CMG's case was bad in law, and entered summary judgement for IBRC.

What does this mean for you?

This case acts as a useful reminder of the courts' limited power to imply a term into a contract, particularly commercial contracts that have been the subject of lengthy and careful negotiation. It is worth keeping this in mind at the drafting stage, so that the parties to the contract, with their lawyers, strive to document all the terms of the transaction and leave nothing to chance.