Newsletter – Belize v Belize Telecom Ltd clarified

Implying terms into contracts: the old rules revived

In Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd [2015] UKSC 72, almost the same panel of Supreme Court judges as the one in Arnold v Britton clarified the law on when the courts can imply a term which the parties have not expressly included in their contract.

The Court unanimously endorsed the traditional, “officious bystander” approach that an implied term must either be so obvious as to go without saying or be necessary to give “business efficacy” to the contract to make it work properly.

Lord Neuberger commented that a term should not be implied into a detailed commercial contract merely because it appears fair, or because the court considers that the parties would have agreed it if it had been suggested to them.

A majority of the Court said that academics and judges had wrongly understood the decision in Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10 as meaning that a term may be implied just because it is reasonable to do so. This is not the case.

In addition, the Court found that some comments in Belize were misleading, because they suggested that implying terms is part of the process of interpreting a contract. The position to be adopted is that only once the express terms of the contract have been construed can the subsequent process of implying terms (which is subject to stricter controls) begin.

Belize should now be viewed as providing a helpful discussion, but not authoritative guidance, on the law of implied terms.