(b) In some cases the courts will read a term into a contract because it was obviously intended by the parties:
The plaintiff contracted with a mining company to remove certain waste rock, provided it was not more than 50,000 tons. The company agreed in the contract to supply a crusher and did so, but supplied one capable of crushing only 3 tons an hour.
Held: A term was to be implied in the contract that the crusher would be adequate. Since the plaintiff would have had to work the machine supplied for almost 24 hours a day for the whole period of the contract to do the job, there was a breach of this term. v
This doctrine is not very adventurous—a term will only be implied if it is not inconsistent with the express terms of the contract and is quite obviously necessary to give reasonable business efficacy to the contract:
A contract for a hospital was set out in three sets of R.I.B.A. standard conditions, each relating to one phase of the hospital. The contractors agreed to complete Phase I by April 30th, 1969. Phase III was to commence “six months after the Date of Issue of the Certificate of Practical Completion of Phase I” and to be completed by April 30th, 1972.
There was a delay of 59 weeks in completion of Phase I, and the architect granted an extension of time of 47 weeks. As a result the certificate of practical completion of that phase was not issued until June 22nd, 1970. This delay had the effect of postponing the commencement date for Phase III until December 22nd and leaving 16 months only instead of the original 30 months for completion of that phase by the specified date of April 30th, 1972.
The contractors alleged that they were prepared to complete Phase III in 16 months and, since the employers were not able to nominate sub-contractors who could complete in that time, the contractors claimed extra payment for having to carry out the phase over a longer period. The employers contended that the contract time for completion of Phase III should be extended by adding a period equal to the extension of time properly allowable for completion of Phase I. In this way there was the unusual situation that it was the employer who was seeking the extension of time, in order to prevent a disruption claim by the contractor.
Held: As the contract clearly and unambiguously fixed the completion date for Phase III as April 30th, 1972, and did not specifically give the architect any power to extend that date for delay in completion of Phase I as it might so easily have done if that was intended, there was no room for implication of any term extending the date for completion of Phase III. w
When a term is implied it is as binding as if it were written out in the contract—a point of which it is sometimes difficult to persuade engineers and others who have the misconception that everything they need to know about contract law is to be found between the covers of the printed contract form. x
(c) It may be proved that the written documents do not set out the whole agreement—see pp. 58–60.
(d) The courts will take notice of any reasonable trade, market or local usage or custom that can be proved satisfactorily, even if it gives an unusual meaning to the words used. y
(e) Some leeway is given by the basic rule (to which the first sentence of this clause refers) that a contract is to be interpreted as a whole, so that the literal meaning of a word or sentence may be controlled by the rest of the contract:
Contract to build a factory for £3,500,000. The conditions of contract included a wide variation clause (p. 173, footnote (uu)), and there was a note in the bill of quantities that it was probable that further work to the value of approximately £500,000 would be ordered on a measured basis.
As a result of delay by the employers the parties entered into a Deed of Variation by which the contractors agreed to adopt uneconomic working to complete by the original contract date. The Deed specified that the contract payments would be the actual cost to the contractors plus a net remuneration of not less than £150,000 or more than £300,000. The Deed confirmed all the other terms of the original contract.
The employers ordered extra works so that the total cost of the works to the contractors was £6,683,056. The arbitrator found that the extra work was not different in character than that anticipated at the time of the Deed of Variation, but that at the time the Deed was made the contractors contemplated that the actual cost of the finished work would not exceed £5,000,000—made up of the original contract work, the probable extras mentioned of £500,000 and £1,000,000 for uneconomic working.
There was evidence that the contractors’ minimum and maximum remuneration was based on that estimated cost of the work.
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