Contracts form the backbone of business and commercial relationships, but not everything agreed upon is always explicitly written down. Contract terms generally fall into two categories: express terms and implied terms. Understanding the distinction between these is essential for anyone entering into agreements, as both types can significantly impact your rights and obligations.
Express terms are provisions explicitly agreed upon and stated by the parties, either verbally or in writing. These terms are deliberately included in the contract and represent the clear intentions of the contracting parties.
Express terms typically appear in:
The primary advantage of express terms is clarity – they leave little room for interpretation as they reflect what the parties have actively discussed and agreed upon. However, their effectiveness depends entirely on how well they’ve been drafted. Ambiguous or poorly worded express terms can lead to disputes despite the parties’ intentions to create certainty.
For express terms to be legally binding, they must be properly incorporated into the contract. This happens through several mechanisms:
“Clear, comprehensive express terms are your first line of defence in any contractual relationship. They provide certainty and reduce the risk of disputes about what was actually agreed.”
Satish Jakhu, Director and Head of Litigation Department
Implied terms are provisions that haven’t been explicitly stated but are nevertheless incorporated into the contract. These terms fill gaps in the express agreement and can come from various sources.
Implied terms generally fall into three categories:
These are terms that legislation or common law automatically insert into certain types of contracts. For example:
These terms exist regardless of whether the parties are aware of them and typically cannot be contracted out of in consumer contracts.
These are terms that are so standard within a particular industry or trade that they’re assumed to apply unless expressly excluded. For example, in certain industries, there might be established payment terms or delivery practices that are understood to apply without needing explicit mention.
These are terms that courts may add to give the contract “business efficacy” or because they’re so obvious they go without saying. Courts apply tests such as:
For a term to be implied by fact, it must be reasonable, equitable, necessary for the contract’s effectiveness, obvious, and capable of clear expression.
While English law has traditionally not recognised a universal implied duty of good faith in contracts (unlike some other jurisdictions), this position has evolved in recent years. In certain types of contracts, particularly:
Courts have become more willing to imply terms requiring parties to act in good faith in limited circumstances. This remains a developing area of law, but it’s increasingly important to consider how good faith obligations might affect contractual performance, especially in long-term commercial arrangements.
Beyond the express/implied distinction, terms are also classified according to their importance, which determines remedies available for breach:
These are terms so fundamental to the contract that their breach entitles the innocent party to terminate the contract and claim damages. Examples include:
These are less important terms whose breach only entitles the innocent party to damages, not termination. Examples include:
These are terms whose classification depends on the consequences of the breach in the specific circumstances. If the breach substantially deprives the innocent party of the whole benefit of the contract, it can be treated as a condition; otherwise, it’s treated as a warranty. This flexible approach allows courts to reach fair outcomes based on the actual impact of a breach.
Understanding this classification is crucial when drafting contracts (to designate important terms as conditions) and when responding to breaches (to determine available remedies).
The relationship between express and implied terms follows several key principles:
Express terms generally take precedence over implied terms. If the parties have explicitly agreed to something, courts will not typically imply contradictory terms. However, certain implied terms (particularly those implied by statute in consumer contracts) cannot be excluded and will override conflicting express terms.
Implied terms serve to fill gaps left by express terms. The more comprehensive and detailed your express terms, the less room there is for terms to be implied. However, it’s virtually impossible to expressly address every possible scenario, so implied terms often play a crucial role even in detailed contracts.
Implied terms can provide context for interpreting ambiguous express terms. Courts may look to industry standards or business common sense to determine how particular express provisions should be understood.
The parol evidence rule affects how courts interpret written contracts. In essence, once parties have reduced their agreement to a complete written document, evidence of prior negotiations or verbal agreements cannot be admitted to contradict, vary, or add to the written terms.
However, this rule has many exceptions, including:
While sometimes described as a rule about excluding evidence, it’s better understood as a principle of contractual interpretation that gives primacy to the final written agreement.
Implied terms frequently arise in these contexts:
Employment contracts contain numerous implied terms, including:
These terms exist regardless of whether they’ve been written into the employment contract.
Leases and property agreements often involve implied terms regarding:
Consumer protection legislation implies various terms into business-to-consumer contracts, including:
These terms apply even if the written contract doesn’t mention them and typically cannot be excluded.
Contracts often include clauses attempting to exclude or limit liability for breach of express or implied terms. However, these clauses face significant legal restrictions:
These controls are particularly strict for terms implied by statute in consumer contracts, which generally cannot be excluded at all.
Whether you’re drafting or reviewing a contract, consider these practical suggestions:
“A common mistake is assuming that if something isn’t written down, it doesn’t apply. The reality is that contracts operate within a framework of laws, regulations, and established principles that can imply significant obligations beyond what’s expressly stated.”
Satish Jakhu, Director and Head of Litigation Department
Disputes about contract terms typically involve:
When such disputes arise, courts in England and Wales generally:
The interplay between express and implied terms can be complex, and the consequences of misunderstanding your contractual obligations can be significant. Professional legal advice is particularly valuable when:
If you’re dealing with contract matters and need expert guidance on express or implied terms, contact RLK Solicitors today. Our experienced commercial team will help you understand your rights and obligations under English contract law. Call us on 0121 450 7800 or email enquiries@rlksolicitors.com to discuss your situation.
Satish is the Managing Director of RLK Solicitors and one of the firm’s founding members, Satish also Heads up the Dispute Resolution & Litigation Departments. With nearly three decades of experience, he specialises in high-value and complex commercial cases. Clients frequently request him by name, and he is highly recommended for cases that require creative thinking, determination, and a fast-paced approach.
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