W6 TUTO Implied Terms PDF

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LAW486 CONTRACTS TUTO WEEK 6December 2018Part A, Question 3 (20m)The issue in discussion is whether there is a breachof contract between Ingrid and Putra Construction under implied terms.Implied terms can be defined as a term that is read into the contract by the Court and Legislators as an integral...

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LAW486 CONTRACTS TUTO WEEK 6

December 2018 Part A, Question 3 (20m)

The issue in discussion is whether there is a breach of contract between Ingrid and Putra Construction under implied terms. Implied terms can be defined as a term that is read into the contract by the Court and Legislators as an integral part of the contract although expressly provided. There are three ways that a term can be implied into a contract which are by custom, courts and by law. There are also three tests that the courts use to imply terms onto a contract. The first test is the business efficacy test where the implied term must be present to achieve the desired result of business in question. Implied term should be a kind that will enable the transaction between parties to be efficient or produce the intended effect. An example would be in the case of The Moorcock. In this case, the contract between parties had no mention of reasonable care on part of the defendant to take care of the plaintiff's ship but the court held that the reasonable care was implied to achieve the desired result of the safety of the ship. The second test the officious bystander test or the "oh, of course". To carry out this test, the court creates a hypothetical situation where the officious bystander during the parties' formation of contract to establish something so obvious that it goes without saying. The test was developed by MacKinnon LJ in the case of Shirlaw v Southern Foundries. Shirlaw was removed from his position of managing director before his contracted 10 years was complete. He contended that there is an implied term that regardless of the publication of new articles, the position would remain his. If while the parties were making their contract, an officious bystander were to suggest some express provision, they would both reply, "oh, of course", then the implied term would be accepted, which it was in this case. The third test, and the one applicable in local Malaysian courts is the combined test, which is a merging of both the business efficacy test and the officious bystander test. In the case of Sababumi v Datuk Yap Pak Leong, both tests must be satisfied before the court could effectively infer them. In this case, it was established that an implied term existed where the 1995 license was within the scope of agreement to grant an exclusive right to the appellant to conduct better or gaming activities on a long-term basis.

The case in the present situation occured in Johor, Malaysia so the test that would be applicable would be the combined test. Hence, the first test to be satisfied by the parties is the business efficacy test. In this case, it is essential that Ingrid evict the squatters and demolish their family business factory buildings and workshops on said land before Putra Construction can even begin to develop the said land into a housing project. Ingrid needs to carry out her duties of clearing the land before the desired result which is the development of the land can be achieved. The second test to be satisfied is the officious bystander test. The eviction of squatters and demolishing of their family business factory buildings and workshops are so obviously a requirement before any work can be commenced in the area. If an officious bystander were to suggest the need of the requirement both Putra Construction and Ethan or Ingrid would agree and say, "oh of course." There is no way for Putra Construction to start their work with the lands still being inhabited by civillians and their sources of income. The requirement is obvious. In conclusion, there exists an implied term which requires Ingrid to evict the squatters and demolish their family business factory buildings and workshops. Thus Ingrid had breached her contract with Putra Construction....