MISSING TERMS CANNOT BE IMPLIED

A report on the Court of Appeal’s decision in Wells v Devani [2016] EWCA Civ 1106 that an implied term cannot be used to fill a gap in an incomplete contract. 

The Court of Appeal has held that, where a contract would otherwise be unenforceable because of failure to agree an essential term, the missing term cannot be implied. The issue arose when an estate agent did not mention what event would trigger payment of his commission until after a sale he introduced had been agreed.

At first instance the judge implied a term that commission would be payable on completion of the sale. However, the Court of Appeal held that terms may only be implied into a concluded contract and for an estate agency contract, the trigger event for payment of commission was an essential term which had to be agreed to make the contract enforceable. An argument that the trigger event could be identified by interpretation of the parties’ oral contract was rejected on the facts.

The case is of interest for the clarification that a lack of certainty cannot be remedied by implying the missing terms. It also stresses the importance of agreeing what will trigger payment of commission in an estate agency contract. It may be that the courts would also view agreement on the trigger event for commission as essential in a broader category of contracts, for example those under which new clients are introduced to a business.

The Appeal Court overturned the High Court decision and one of the Appeal Court judges dissented; this shows how subjective contract formation cases can be. (Wells v Devani [2016] EWCA Civ 1106)

PLC Practical Law 29.11.16