UK: Express Or Implied? Clarification On Implied Terms In Construction Contracts

Last Updated: 14 November 2011
Article by John Starr

Insufficient thought is often given to implied terms when parties enter into construction contracts.  So much time and effort is put into ensuring that all the necessary express terms are incorporated that parties often neglect the fact that many terms are implied anyway and that some of those implied terms can't be contracted out of.

Generally speaking, there are two ways in which terms can be implied into a contract: either by statute or by common law.

Terms implied by statute

The following terms are implied by statute:

1. The Local Democracy, Economic Development and Construction Act 2009 implies into a construction contract the payment provisions from the Scheme for Construction Contracts unless it already contains an "adequate mechanism" for determining what payments become due and when.  Likewise the right to refer a dispute arising under the contract to adjudication.

2. The Late Payment of Commercial Debts (Interest) Act 1998 implies into a contract the right to interest on late payments at the rate of 8% over base unless it already contains a "substantial contractual remedy for late payment".

3. The Contracts (Rights of Third Parties) Act 1999 implies into a contract a right for a third party to enforce a contractual term provided that the contract expressly provides for it.

4. The Supply of Goods and Services Act 1982 implies into a contract terms that goods supplied will be of satisfactory quality, and that services will be provided with reasonable skill and care and within a reasonable time.  Similar terms are also implied by common law.

5. The Defective Premises Act 1972 implies into a contract for the provision of a new dwelling a term that the dwelling, when completed, will be reasonably fit for human habitation.

Terms implied by common law

The following terms have been found to be implied by common law:

1. That a supplier of professional services will use the care and skill to be expected of an ordinarily competent and experienced member of his profession.

2. That goods and materials supplied will be of good quality and reasonably fit for their purpose.

3. That the employer will give the contractor possession of the site within a reasonable time.

4. That the employer will cooperate so as to enable the contractor to carry out the works in a regular and orderly manner and not hinder or prevent him from so doing.

5. That the contractor will carry out the works in a good and workmanlike manner.

Interestingly, however, the following terms have been found not to be implied:

1. That a sub-contractor will execute his works with such diligence and expedition as is reasonably required to meet the programme dates.

2. That the employer will ensure that the site is reasonably free from rubbish and other debris to enable the works to proceed.

3. That the site will comply with basic health and safety requirements.

4. That the contractor will proceed regularly and diligently.

5. That the employer warrants the practicability of the design.

6. That the contractor has the right to an extension of time for later phases of work where earlier phases have been delayed and extensions granted.

7. That the works will be fit for purpose on completion.

8. That the contractor will have uninterrupted possession of, and access to, the site.

Terms implied ad hoc to specific contracts

In addition to implied terms of general application, the courts can also imply terms into specific contracts if it's necessary to give them "business efficacy", in other words to make them work.  In general, the courts will assume that the parties to a contract have expressed every material term which they intended to express.  They won't imply additional terms simply because the contract would be better if they did, or because it would be reasonable to do so.  Any implied term has to be necessary to make the contract work, it must be so obviously missing that "it goes without saying", it must be capable of clear expression and it must not contradict any existing express term of the contract.

The leading case on this point was called The Moorcock.  In that case, the owners of The Moorcock, a cargo boat, contracted with the owners of a jetty on the Thames to moor there for the purpose of unloading.  When the tide went out, The Moorcock struck a stone ridge on the river bottom and was damaged.  The contract made no mention of the state of the river bottom.  Nevertheless, the Court of Appeal found in favour of the owners of The Moorcock.  They decided that it was an implied term of the contract that the jetty owners would take reasonable care to ensure that the mooring was safe and would warn boat owners if it was not.

In the subsequent case of Irwin –v- Liverpool City Council, however, the House of Lords refused to imply a term into the tenancy agreement of a ninth floor flat in a tower block that the landlord would keep the common parts in good repair, merely implying a term that he would take reasonable steps to ensure that the lifts worked and the staircases were lit.  Although it might have been reasonable to have gone further, it wasn't "necessary".

It's important to bear in mind, therefore, when negotiating the terms of a construction contract, that the law implies a number of terms into the contract anyway, many of which can't be contracted out of, that some of the terms you might expect won't be implied, and that it's difficult to get the court to imply additional terms on an ad hoc basis unless they're absolutely necessary and so obvious that it goes without saying.

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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