Contracts form the cornerstone of commercial deals between businesses, establishing the rights and responsibilities of each involved party and ensuring seamless alignment to minimise disputes.
From a contract law perspective, we can categorise terms into two types: express terms and implied terms. A clear understanding of the difference between these two types of terms is crucial for businesses to sidestep potential legal pitfalls.
What are the express and implied terms of a contract?
While both express and implied terms are integral components of a written contract, their differences lie in their origin and incorporation. Express terms are openly discussed and documented during negotiations, leaving little room for ambiguity. Implied terms, on the other hand, are born out of context, industry practices and statutes, making them more nuanced and requiring a careful consideration of the circumstances.
Express terms are the explicit and overt stipulations the parties lay out in writing or orally during negotiations that form part of the final contract. Express terms can cover a wide range of topics, including the scope of work, payment terms, delivery schedules and any specific warranties or guarantees provided. They form the backbone of the contractual obligations and are designed to leave no doubt about the parties' intentions.
Express terms of a contract examples
- Scope of work – a contract for the construction of a commercial building may expressly state the structural specifications required
- Payment terms – an agreement between a supplier and a retailer may specify that payment will be made within 30 days of receipt of goods
- Delivery schedule – a manufacturing contract might detail the exact dates and specific quantities of products which are to be delivered
Breach of express terms of a contract
If one party fails to fulfil its obligations as outlined in the express terms of the contract, it’s considered a breach of contract. This breach can lead to legal consequences, including potential claims for damages, an injunction, specific performance or other remedies, as the case may be. The clear-cut nature of express terms makes it easier to establish whether a breach has occurred and what remedies are appropriate.
Unlike express terms, implied terms aren’t explicitly stated in the contract but are nonetheless deemed part of the agreement. These terms are inferred based on factors such as the nature of the transaction, industry customs, statutes and regulations and the parties' intention. Implied terms can be crucial for maintaining fairness in contractual relationships, even when certain details aren’t expressly documented.
Implied terms of a contract examples
- Duty of fidelity – in an employment contract, there’s an implied term that employees will act in the best interests of the company and avoid conflicts of interest
- Minimum wage – in an employment relationship, there’s an implied term that the employer will pay the employee at least the statutory minimum wage.
- Terms implied by statutes – various laws, such as consumer protection regulations, can impose implied terms on contracts to safeguard the rights of certain groups
Breach of implied terms of a contract
A breach of an implied term can be more complex to establish than a breach of an express term because the relevant term may not be immediately obvious, and it may be necessary to interpret the context and intentions of the parties. However, when it can be demonstrated that an implied term was breached, legal remedies can still be pursued in a similar way as for breach of an express term.
Navigating the nuances
Understanding whether a term is express or implied is crucial. However, this distinction isn’t always straightforward, as implied terms can vary depending on factors such as industry customs, the nature of the relationship and the specific circumstances of the deal.
Sometimes, you may wish to exclude all implied terms, which may be possible in certain business-to-business contracts depending on the circumstances. Therefore, seeking legal advice when drafting, interpreting or enforcing contractual terms and conditions is a highly important step.
Get legal assistance from LawBite
As a small business navigating the intricacies of contracts, the distinction between express and implied terms holds great importance. Express terms serve as the foundational pillars of your agreements, while implied terms can sometimes weave an additional contractual layer depending on context and industry norms, etc.
By understanding both types of terms, you can establish contracts that are comprehensive, fair, and aligned with legal requirements. At LawBite, we're here to be your partners in navigating the legal landscape, ensuring that your business thrives.