From: Stephen Smith, Prof. <>
Date: 24/03/2009 14:05:57 UTC
Subject: RE: [ODG] Implied terms

Although I am sympathetic to Jason' view that mutual mistake cases can be explained (usually) on the basis of an implied (but genuinely intended) condition precedent, I don't see that the Privy Council's statement (which basically restates the law) proves that this is how they should be explained.. Whatever interpretative approach is used, we can't conclude that a particular decision to set aside a contract for mistake is based on an implied-in-fact term without looking at the facts of the case and determining, on the basis of the words used, the context, etc.., that the contract in fact included the relevant implied term.  At most, the adoption of this or that test can make it more or less likely that such a conclusion is possible. The PC's statement is consistent with concluding that all mistake cases can be so explained, but it is also consistent with the opposite.


But against Kevin (and in support of Jason), I don't see how the PC's statement, or any reasonable description of what is involved in interpretation, could possibly require that the meaning of a statement is equivalent to what was actually before the minds of the parties.  If I order some furniture to be delivered 'next friday', it goes without saying that delivery should occur during working hours (unless there is something special about the industry or this particular arrangement). I could, and would, refuse delivery at 3:00 am.  Yet it is quite likely that neither I nor the store were thinking, when we made the delivery, that 'friday' meant 'friday between 9 and 5': we simply did not give any thought to this matter..  Wittgenstein is the classic reference for the idea that many things go without saying (or even thinking) (he gives the example of instructing the babysitter to play a game with the children - can 'game' mean poker?), but the point has also been extensively developed in legal literature; e.g. Langille and Ripstein 'Strictly Speaking it Went Without Saying' (1996) 2 Legal Theory 63.


The PC's test is perfectly consistent, as it must be, with the view that contracts that are ostensibly set aside for mistake (or 'frustration') are in reality set aside because they contain an implied term to this effect, even if that term was not only not expressed by the parties but not before their minds when they made the contract. (But, to repeat, the pc's test does not prove that in fact the cases can be so explained.)


Steve Smith


From: Kelvin F.K. Low []
Sent: March-24-09 8:38 AM
Subject: Re: [ODG] Implied terms


There are indeed many cases of mutual mistake whereby an implied condition precedent analysis would apply. Cases of res sua would certainly fall within this category. Provided there is no contrary intention, cases of res extincta probably would too. However, since Solle v Butcher at the earliest and Associated Japanese Bank at the latest, mutual mistake cases are cases falling beyond this analysis.


If frustration and mutual mistake are related doctrines, differentiated only on the basis of when the common assumption is falsified, then it seems sensible that mutual mistake cannot be explained on the basis of the parties' intentions. After all, it is a requirement for frustration to apply that the frustrating event be unforeseeable. This, of course, raises the question of what we mean by the parties' intentions. If, by the parties intention, we mean what they actually thought but failed to express, then it is difficult to understand how they can intend a particular result to follow an unforeseeable event. If that is true for frustration, that must equally be true of mutual mistake.


It is, of course, plausible that by the parties' intention, we do not mean their actual intention (given that the event was unforeseeable), but what they would have intended had their attention been drawn to that unforeseeable event at the time of contracting. The two types of implied intention are quite different. Until Stack v Dowden, the courts seemed to consider the latter type of implied intentio irrelevant. This seems to have been the case in contract, trusts, and statutory interpretation.


Such "implied" intention is regarded as fictitious because the parties never actually had the intention. It is, I suppose, unfortunate that the descriptions "fictitious" and "artificial" are regarded as carrying a perjorative overtone. I am hesitant to dismiss such fictitious "implied" intentions as inherently without value. There must be cases, perhaps many cases even, where it is not difficult to determine what the parties would have agreed at the time of contracting if they had indeed been forewarned of the unforeseen event. However, it is equally true that occasionally, the conclusion reached by the courts on the basis of such fictitious reasoning is conclusive and circular - where the assertion that, if the parties had been forewarned, they would have agreed on such and such a result, is nothing more than an assertion.


Certainly, if such fictitious implied intentions were a plausible device in divining the parties intentions, I don't see why the courts should limit themselves to implied conditions precedent (for mutual mistake) or implied conditions subsequent (for frustration). The parties could (theoretically) agree to an implied price escalation clause or any number of potential variations to the contract. But perhaps it would be unworkable to introduce an infinite variety of possible agreements?


But I digress. I think that the Privy Council's decision remains well within the orthodox and conservative view of real implied intentions and does not justify fictional implied intentions. This is not to say the device of real implied intentions may not be manipulated by the courts. It is easy enough to conclude that, on the evidence, this is what the parties really intended but did not express when the reason why the court really reaches its conclusion is because it feels that this ought to be the bargain between the parties.



Kelvin Low

2009/3/24 Jason Neyers <>

If this is right, I can't see why so many people think that the implied condition precedent view of mutual mistake is artificial and fictitious and is better explained by the rule of law route.



---- Original Message -----
From: David Lascelles <>
Date: Tuesday, March 24, 2009 3:50 am
Subject: [ODG] Implied terms

Dear All,


In the recent Privy Council decision in Attorney General of Belize & Oths v Belize Telecom Limited (available from, the Judicial Committee (Lords Hoffmann, Rodger, Carswell and Brown and Baroness Hale) reviewed the various ways of expressing the test for an implication of a term into an instrument (in this case Articles of Association).


The Board held that there is only one question that needs to be answered to determine whether a term should be implied:


21.       It follows that in every case in which it is said that some provision ought to be implied in an instrument, the question for the court is whether such a provision would spell out in express words what the instrument, read against the relevant background, would reasonably be understood to mean.  It will be noticed from Lord Pearson’s speech [in Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601] that this question can be reformulated in various ways which a court may find helpful in providing an answer – the implied term must “go without saying”, it must be “necessary to give business efficacy to the contract” and so on – but these are not in the Board’s opinion to be treated as different or additional tests.  There is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?


The Board referred to the oft-cited speech of Lord Simon of Glaisdale giving the advice of the majority of the Board in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977)  180 CLR 266 at 282-283 where he stated that it was “not … necessary to review exhaustively the authorities on the implication of a term in a contract” but that the following conditions (“which may overlap”) must be satisfied: “(1)        it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’ (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract”.


The Board outlined what it saw as the “dangers in treating these alternative formulations of the question as if they had a life of their own” (at [22] – [27]) and stated [27] that the list in Lord Simon’s speech “is best regarded, not as series of independent tests which must each be surmounted, but rather as a collection of different ways in which judges have tried to express the central idea that the proposed implied term must spell out what the contract actually means, or in which they have explained why they did not think that it did so.  


There is also a brief discussion about extent of the background which is admissible in construing articles of association– see [35] – [37].


Best wishes,




David Lascelles



Littleton Chambers






Jason Neyers
Associate Professor of Law & 
Cassels Brock LLP Faculty Fellow in Contract Law
Faculty of Law
University of Western Ontario
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