UK Court Of Appeal Confirms Test For Implied Terms

A recent case highlights the courts' continued reluctance to imply terms into effective and coherent contracts and reaffirms the position established in Marks & Spencer PLC v BNP Paribas that an implied term must not contradict an express term as a 'cardinal rule'.

The UK Court of Appeal has reaffirmed the criteria to be applied in determining whether a term should be implied into a contract:

In determining whether a term should be implied, it is necessary to first interpret the express terms; An implied term must not contradict any express term of the contract as "a cardinal rule"; and Where the contract is lengthy and carefully drafted, the courts will be very reluctant to imply a further term even if it does not actually conflict with the express terms. Background

In February 2013, Irish Bank Resolution Corporation Limited ("IBRC") was placed into special liquidation and KPMG, acting as special liquidators, began marketing its loan book.

Included in IBRC's book was a loan for £195 million to Camden Market Holdings Corporation ("Camden") for the redevelopment of Camden Market, London.

According to the Camden loan agreement, IBRC could assign its rights to another lender, with the consent of Camden, and was permitted to disclose any information which it considered appropriate in order to market the loan. Camden's consent was not required in relation to IBRC's right to disclose information.

Camden was marketing the properties related to the Camden loan at the same time that IBRC was marketing the Camden loan.

Camden argued that the marketing by IBRC of the Camden loan as part of a portfolio which contained distressed debt suggested that the Camden loan was also distressed. It argued that this hindered its own efforts to sell the underlying property as some potential purchasers implied that they would acquire the loan from IBRC instead of acquiring the underlying properties from Camden in order to indirectly acquire the properties for less than their market value.

Camden commenced proceedings against IBRC, claiming that the loan contained an implied term that IBRC would not do anything which would hinder Camden's ability to market the properties. IBRC applied to the High Court to have the claim struck out on the grounds that...