Implied terms are once again in the spotlight after the Supreme Court has granted permission to appeal the Court of Appeal's decision in Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Limited and another.
The case revolves around the lease between the parties which was terminated early under a break provision. Marks & Spencer argued that a term should be implied to entitle it to a refund of the rent, car parking fee and insurance charges for the period after termination that it had paid in advance in accordance with the terms of the lease. The Court of Appeal ruled that it was not appropriate to imply such a term into the lease.
The Court of Appeal had to decide whether a term should be implied on the basis of the intention of the parties. It applied the test that, in order to be implied, a term must be necessary to achieve the parties' express agreement when read against the admissible background (following Attorney General of Belize and others v Belize Telecom Ltd). This was found not to have been satisfied despite Marks & Spencer's arguments that there was inconsistency in relation to the interpretation of the word “necessary” and that the meaning of the word itself was imprecise.
So why has the Supreme Court now granted permission to appeal?
It is expected that the Supreme Court will re-visit the decision in order to provide further guidance on the apparent conflict of legal opinions on the importance of the concept of 'necessity' when implying terms into a contract. We will update you further when the Supreme Court publishes its decision.
The lessons to be learnt from this case are not new
As far as possible, parties should expressly state their commercial intentions in their written agreement instead of relying on assistance from the court to find implied terms further down the line. Of course it is not always practical to cover every eventuality, however parties would be wise to consider the consequences of key trigger events which have been expressly catered for in their agreement.
The author Richard Hughes works with Mark Paterson in our commercial team.