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For better, for worse: further reflections on implied terms

21 October 2016

A number of the A&O team this week attended a seminar by Brick Court addressing the recent Supreme Court focus on various contractual issues. In the course of the afternoon Lord Hoffmann, one of the panellists, made some observations about Marks & Spencer v BNP Paribas and, in particular, its discussion of his own judgment in AG of Belize v Belize Telecom. He suggested that he had obviously not expressed himself clearly in Belize because the point he sought to make there was a simple and uncontroversial one: it is generally accepted that the role of the court is not to add to or improve the parties’ bargain (see, for example, Charter Re v Fagan [1997] A.C. 313 at 387), such that the question of implication must involve what is already there. Put another way, as with marriage the court takes the bargain for better, for worse – it does not seek to improve it, just to understand it.

The argument was an attractively logical one, but does it mean that we now have competing authorities on the right approach to implication? And could a party seeking implication rely on that conflict to found an argument for a broader, Belize based approach? That raises three issues:

1. Do the cases on not improving or adding to the bargain impact implication at all? That would be a forensic exercise to determine, but certainly many (and Charter Re is a leading example) relate to interpretation. If you accept that the two are separate processes, and the weight of authority says that they are, then there is no conflict.
2. Assuming those cases do apply, is the bargain the same thing as the contract? Arguably, the bargain is the commercial deal reached by the parties and the contract is the legal mechanism that gives it operative force. The contract therefore embodies the bargain but is wider than it. In which case, there is no necessary conflict.
3. If a distinction is to be drawn between the bargain and the wider contract, does that mean that implication is limited to the “non-bargain” terms (and if so, how do you identify them)?

Where you come out on those issues (which may be driven by the case in which you are involved, your views on the relative merits of Belize and Marks & Spencer or both) will influence what you think about the chance of successfully arguing for a wider approach. Certainly, it is something worth considering.

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