Introduction:

Contracts are the basis of every commercial relationship as they specify and outline the rights and obligations of parties. Generally, contracts must be explicitly agreed upon. In contemporary Nigeria, many people erroneously believe that only terms expressly written in black and white are legally binding. However, under the Nigerian contract law, an agreement may not be expressly agreed upon but can be implied to ensure the effective functionality of the contract.1

These terms may not be explicitly stated but are imputed by law, facts, or custom. They are usually inferred where there are lacunae or gaps on crucial issues in the contract.

This paper provides a general overview of implied terms, the legal principles guiding their application, and their importance in contract law.

Overview of Implied Terms

Implied terms are terms which parties to a contract are silent on, but the Court considers the terms reasonable for the parties to have in their contract to ensure fairness and practicality.2 These terms ensure that unforeseen omissions do not render the contract futile.3

The Courts recognize that implying certain terms is essential because it helps maintain standards and quality, making the contract document precise and effective in achieving its intended purpose. It helps in eliminating unnecessary clutter from contract agreements and fills in gaps where the parties have omitted important provisions.

Types of Implied Terms

Implied terms may arise from different sources such as facts, law, and trade custom.4

  1. Terms Implied by Facts

Terms are implied by fact if they involve ascertaining the presumed intention of the parties from the words of the agreement and the surrounding circumstances.5 Here, the Court usually applies two key tests to determine whether a term should be implied in any contract.

a. The Business Efficacy Test

The Court of Appeal in the case of Multichoice (Nig) Ltd v. Azeez6 stated that a term will be implied by fact if the term is necessary to give business efficacy to the contract, noting that the term though tacit is part of the contract the parties agreed for themselves. For instance, in a case where the plaintiffs were contracted to clear bushes along a road for the defendant, and the plaintiffs contended that their duties did not include felling trees, the court implied a term that bush clearing encompassed tree felling, as it was necessary for the installation of electric poles and cables. The court found that the implied term was essential to give the contract business efficacy.7

b. The Officious Bystander Test

In Multichoice (Nig) Ltd v. Azeez,8 the court dismissed the appellant’s case, emphasizing that a term will be implied into a contract if it is so self-evident that, had an officious bystander proposed its inclusion at the time parties are negotiating the terms of their the agreement, both parties would have readily agreed to it. This test finds further relevance in modern online transactions, where it is naturally assumed that, upon placing an order, the seller bears the implied responsibility of delivering the goods to the specified address. Such an obligation is considered integral to fulfilling the very purpose of the contract.

2. Terms Implied by Law

These are terms usually imposed on contracts regardless of the parties’ intentions to ensure fairness and compliance with legal standards.9 It is mostly implied in employment contracts, sale of goods contracts,10 and consumer contracts.

In Olufunke v. Union Bank of Nigeria Ltd,11 the court affirmed the existence of an implied duty imposed on employers to ensure that their employees work in an environment free from hazards and that they take all reasonable precautions to safeguard the well-being of their workers.

Also, in a contract for the sale of goods, it would be implied that the seller has the right to sell the goods and that the goods must be of merchantable quality and fit for purpose.12  In consumer contracts, obligations are imposed on businesses to ensure that consumers receive fair treatment.

3. Terms Implied by Custom or Trade Usage

In certain industries and professions, some terms have become so widely accepted that they are automatically incorporated into contracts, even if not expressly stated. For a term to be implied by custom or trade usage, it must be well-established and widely acknowledged within the particular trade or profession, and it must satisfy the requirement of reasonableness, ensuring that it does not conflict with any express provisions of the contract.

LIMITATIONS AND CHALLENGES

Despite the significance of implying terms to ensure the effective operation of contract agreement, the courts encounter several challenges in this regard. The court must exercise judicial restraint to avoid rewriting the contractual agreements.13  In addition, the Courts struggle with the subjectivity of determining parties’ intentions, which can often lead to uncertainty and inconsistent outcomes.  The risk of judicial overreach is also present, as the implication of terms may blur the distinction between interpretation and legislation.

Courts will likely not imply terms that contradict express provisions, and statutory limitations impose additional constraints, all of which complicate the courts’ role in the enforcement of contractual obligations.

CONCLUSION

Implied terms play a critical role in Nigerian contract law by ensuring that agreements are workable and reflect the presumed intentions of the parties. However, the Court would cautiously imply terms into a contract to preserve freedom of contract while ensuring fairness. Judicial intervention is therefore limited, and the court would imply terms only when necessary. To avoid disputes over implied terms, it is advisable for parties to clearly outline their rights and obligations in written agreements. Proper and careful drafting would reduce uncertainty and reliance on court intervention.

Authors:

Stella C. Nwanne (Mrs.) L.L.M, ACIS, Managing Counsel at Patreli Partners, Legal Practitioners and Arbitrators.

Joy K. Augustine L.L.B, Associate at Patreli Partners, Legal Practitioners and Arbitrators.

  1. E.O. Akanki (2007) Commercial Law in Nigeria (University of Lagos Press) p. 101. ↩︎
  2. Access Bank Plc v. ZATECO Construction Co. Ltd & Anor (2022) LPELR-58938(CA). ↩︎
  3. Tawo v. Inyang (2017)LPELR-42642(CA) ↩︎
  4. GTB v. Site Mode Engineering Ltd (2020) LPELR-51348(CA) ↩︎
  5. MULTICHOICE (NIG) LTD v. AZEEZ (2010) LPELR-4558(CA) ↩︎
  6. (2010) LPELR-4558(CA) ↩︎
  7. Okotete v Electricity Corporation of Nigeria (Unreported) ↩︎
  8. (2010) LPELR-4558(CA) ↩︎
  9. E.O. Akanki (2007) Commercial Law in Nigeria (University of Lagos Press) p.128 ↩︎
  10. Sections 10, 12,13, 14 & 15 Sales of Goods Act 1893. ↩︎
  11. [2016] LPELR-41350(CA) ↩︎
  12. E.O. Akanki (2007) Commercial Law in Nigeria (University of Lagos Press) p.126 ↩︎
  13. Shayi v. Baba (2017) LPELR-43147(CA)- “A Court cannot read into a contract what is not contained therein ↩︎