What is an Implied Term? Everything You Need to Know
What is an implied term? Well, it is a term that is not expressly stated, but is assumed to be in a contract nonetheless.3 min read
Implied Term Overview
What is an implied term? Well, it is a term that is not expressly stated, but is assumed to be in a contract nonetheless. A good contract will be worded so as to eliminate as many implied terms as possible, but it is not possible to cover every possible scenario that could affect the outcome of a contract, and in such cases a lawyer will argue that the language of a contract implied what was not covered so as to give the contract force of intent. Essentially, without implied terms, contracts would have to expressly cover every possible scenario, which would be an unreasonable expectation of a contract.
Important Implied Terms
Some of the most common and important implied terms for contract law are as follows:
- The duty of mutual confidence and trust. This refers to the notion that both parties should act in a manner that will not erode trust in one another. This means they should not partake in deceptive practices, abusive behavior, or impose unfair conditions.
- The duty of fidelity. This is a term common in employment contracts that assumes that an employee will not act against the interests of their employer. Examples could include working with an employer’s competitor or misusing company assets. Post-employment restrictions are not covered by the duty of fidelity.
- The duty of pay. This is an implied term that may also be an expressed term. That a worker will be paid does not need to be expressly stated since legislation demands it, but most contracts will state the amount that a worker is to be paid, making it expressed.
- The duty of reasonable care. This assumes that an employer will provide safe working conditions for their workers during employment.
- The duty of reasonable care for references. Employers do not have to give references, but it is assumed that if they do, it will be done with care and in such a manner as to be beneficial to the employee.
Legal Tests for Implied Terms
Because implied terms, by their very nature, are not written or expressed in any way, other methods, or tests, must be applied to a contract to discover if implied terms were present. These tests include:
- The Business Efficacy Test. This is a term that is necessary for the contract itself to function, such as the implied trust between the two parties entering into the contract.
- The Officious Bystander Test. This is a term that is so obvious that it is deemed unreasonable for it to need to be stated. For instance, that an employee should not steal from their own company would be an implied term by officious bystander standards.
- The Custom and Practice Test. Certain terms can be implied if the customs or practices of the industry or workplace would make such a term standard and assumable. For some industries, such a term might be that a business would not operate on a major holiday.
- The Terms Implied by Statute Test. Some terms are dictated by law, so there is no need to cover them in a contract. Equal pay clauses and a statutory minimum notice period would both be examples of this.
While implied terms are usually part of an expressed contract, they may make up an entire contract, as well, in which case an implied contract will exist. Implied contracts can take on two forms: implied-in-fact contracts and implied-in-law contracts.
Implied-in-fact contracts are those that are made by mutual understanding through the actions of two parties, rather than through expressed terms. For example, if you bring your pet to a vet, there is an implied contract that he or she will work to secure the pet’s health to the best of their abilities.
Implied-in-law contracts, on the other hand, are those that exist because laws already cover the issues at hand. For example, if a vet saved a pet’s life outside of their office, without be asked to, the vet could choose to send the pet owner a bill for their services and the owner would be obliged to pay it, and this is because receiving unjust benefits at the expense of another party is not permitted by law.
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