Define: Implied Term By Fact

An implied term by fact, also known as an implied term by necessity, is a legal principle in contract law that refers to a term or condition that is not expressly stated in a contract but is deemed necessary to give effect to the parties’ intentions and to make the contract workable. This type of term is inferred from the circumstances surrounding the contract, the parties’ conduct, and the presumed intentions of the parties at the time of contracting. Implied terms by fact are considered to be part of the agreement as if they were expressly written into the contract, and they are enforceable in the same manner as express terms. These terms are typically implied to fill gaps in the contract or to address matters that the parties did not specifically address but would have been presumed to agree upon based on the nature of the transaction.

An Implied term in a contract that arises because the contract simply would not work otherwise. The leading case is The moorcock (1889) which formulated the ‘business efficacy’ test: a term will be implied if the contract would have no value without it.

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This glossary post was last updated: 29th March 2024.