Implied Terms — What the Contract Did Not Say
No construction contract is complete. However carefully drafted, every contract will encounter situations it did not specifically address. When that happens, the parties frequently disagree about what their obligations are — and courts are asked to resolve the gap. The mechanism for doing so is the implied term.
The Problem
Construction disputes often arise not from what the contract says, but from what it does not say. Common examples include: the contract does not specify when the employer must give possession of the site; it does not address who is responsible for co-ordinating utilities when unforeseen services are encountered; it does not specify what happens if the employer’s design changes the scope so significantly that the original programme is no longer achievable. Each of these gaps can generate a dispute, and the resolution frequently depends on whether the court will imply a term to fill it.
The Legal Principle
The modern test for implying a term, confirmed by the UK Supreme Court in Marks & Spencer plc v BNP Paribas Securities Services Trust [2015] UKSC 72, requires that the term:
- Be reasonable and equitable
- Be necessary to give the contract business efficacy (i.e. without it the contract would be ineffective or absurd)
- Be so obvious that it goes without saying
- Be capable of clear expression
- Not contradict any express term of the contract
The test is conjunctive, not disjunctive — a term will not be implied merely because it is reasonable. It must be necessary or obvious. This is a high hurdle, and courts are reluctant to rewrite bargains for the parties.
That said, certain terms are so well-established in construction contracts that courts imply them almost automatically: the employer’s obligation to give timely possession of the site; the employer’s obligation not to prevent the contractor from completing the works; the obligation of both parties to co-operate to enable performance; and the obligation to provide necessary information within a reasonable time.
Practical Application
The implication of a term is an imprecise remedy — courts are imposing their own view of what was obviously intended, which may not match either party’s actual intention. The most reliable approach is to address every foreseeable obligation expressly in the contract. Where a gap is identified during contract review, it should be closed by express agreement before works commence.
In claims situations, where a contractor is seeking to invoke an implied term, the claim must be framed carefully: it is not enough to say that an implied term would be fair or reasonable. The contractor must demonstrate necessity or obvious intent. Evidence of pre-contract negotiations, industry practice, and the commercial context of the contract will all be relevant.
Risks
The primary risk of relying on implied terms is uncertainty. Courts may not imply the term you need, or may imply it in a narrower form than you expected. The cost of litigation to establish an implied term may exceed the value of the claim. Additionally, an employer who relies on the absence of an express obligation may find that an implied obligation is nonetheless found — particularly in relation to co-operation and non-prevention.
Mitigation
Conduct a thorough contract review at the outset, identifying gaps and ambiguities. Address all identified gaps by express provision before execution. During the project, where a situation arises that the contract does not expressly cover, seek written agreement from the employer on how it will be handled, rather than assuming an implied term will protect you.
Conclusion
Implied terms are a last resort, not a planning tool. The best strategy is an express term. Courts will fill gaps when they must, but the uncertainty of the outcome — and the cost of reaching it — makes express provision far preferable in every case.