Being clear about the terms of your contract might seem like an obvious starting point when you’re embarking on a fresh commercial relationship. However, the law of contract will sometimes imply certain obligations into a commercial agreement. And in our experience, these implied terms can sometimes come as a surprise to the parties when, down the line, there is a contractual dispute, and the agreement falls to be scrutinised by lawyers or the courts.
Here we look at how terms can be implied into a contract because of the way the parties behaved toward each and communicated before entering the contract (when terms are said to be implied by ‘reference or course of dealing’). With appropriate legal advice it is possible to avoid the uncertainty that implied terms can lead to. It’s always preferable to clarify the terms you wish to include and the terms you are unwilling to agree to. As we’ve said before it’s wise to expect the unexpected when negotiating and agreeing any kind of commercial agreement.
Dunelm Geotechnical (2023): Were Standard Terms Implied Because of A Course of Dealing?
In the case of Dunelm Geotechnical & Environmental Ltd v Bray Cranes Ltd [2023], the claimant Dunelm hired a crane from the defendant, Bray Cranes. Damage arose because of the defendant crane driver’s negligence. The defendant argued that, because of various pre contract emails mentioning the “Constructions Plant-Hire Association” (CPA) standard terms, these had been incorporated into the contract. One particular clause stated that:
‘…The Company shall not be liable or responsible for any of the following, however arising:
7.2.1 Loss or damage of whatever nature due to or arising through any cause beyond the Company’s reasonable control…’
and the defendant argued this meant its liability for the crane driver’s negligence was excluded.
The Decision: Insufficient Dealings To Imply Standard Terms
In the event the judge rejected the defendant’s submission that the CPA’s standard terms had been incorporated into the parties’ contract. He found that:
- The defendant had not done enough to clarify that the specific term they intended to rely on should be incorporated into the contract
- Despite the standard terms and limitation of liability being mentioned during contract discussions, it was not clear which specific terms parties would have intended to incorporate
- The defendant could have copied the relevant terms in an email when providing their quotation, however they did not
- The parties had not dealt with each other frequently enough to enable a presumption that terms should be incorporated through a course of dealing
- When the parties had dealt with each other previously, evidence showed that they had applied different terms
In conclusion, if proper care is not taken to ensure that terms are included into a contract, there will be a risk that they will not be incorporated, even if a party believes that the terms have been incorporated through reference or course of dealing. Parties should not assume that some terms will be incorporated into a contract even if they may be an industry norm and should attempt to clearly set out what terms they wish to contract on. Attempting to incorporate terms based on a course of dealing can lead to uncertainty so you should always be specific about the terms you want to include.
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At Nath Solicitors, we specialise in providing expert legal counsel on all aspects of contract law, If you need advice contact us on 0203 983 8278 or get in touch with the firm online.