Reading between the lines: it's not getting any easier

Published Date
Oct 6, 2016

Recent decisions show that the courts will require compelling arguments before accepting that terms should be implied. This is particularly true where the parties to the contract are sophisticated and where they employ expert and diligent lawyers.

This is well illustrated by the Supreme Court's remarks in Marks & Spencer plc v BNP Paribas. In this case, Marks & Spencer had paid rent until 24 March 2012, but terminated its lease on 24 January 2012. It failed to show that there was an implied term allowing it to recover rent for the period from termination until 24 March.

Lord Sumption outlined some of the conditions which anyone arguing for an implied term had to satisfy. The term:

  1. had to be "necessary... to give efficacy to the contract", or rather the term had to be such that "the contract would lack commercial or practical coherence" without it
  2. had to be "so obvious that it goes without saying"
  3. had to "be capable of clear expression"
  4. must not contradict any express term in the contract.

Further, a term cannot be implied just because it appears fair, or "merely because one considers that the parties would have agreed it if had been suggested to them".

In addition, he approved Bingham MR's remarks in Philips Electronique v British Sky Broadcasting that it had to be shown "either... there was only one contractual solution or that one of several possible solutions would without doubt have been preferred".

Lord Sumption also noted that "construing the words used and implying additional words are different processes governed by different rules."

The message from this, and other recent cases, such as Myers v Kestrel, is that anyone arguing for an implied term faces an uphill struggle. This seems to be following a parallel trend in focussing on the actual wording of clauses, rather than the parties' alleged intentions, as seen in Arnold v Britton.


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This content was originally published by Allen & Overy before the A&O Shearman merger