• In the case of Liverpool City Council v Irwin [1977] AC 239, it was reaffirmed by the House of Lords that implied terms can apply in fact and in law. The latter is where the courts deem it necessary to the contract type, it does not consider the parties’ objective intentions. Implied terms cannot be applied to anything the courts see fit and reasonable, the law must be met; implied terms can be expressly excluded.

Facts of Liverpool City Council v Irwin [1977] AC 239

  • D tenants stopped paying rent in protest of the conditions of the council-owned flats
  • There was not a written contract in place, but a ‘conditions of tenancy’ document that the Ds, not C council, had signed
  • This meant the Ds accepted the obligations their tenancies were conditional upon but there was nothing in respect of Cs obligations as the landlord
  • Cs sued for repossession of the flats due to the Ds withholding rent
  • Ds countersued stating that there was a breach of maintenance and repair, as well as the breach of a quiet enjoyment covenant from the vandalism the area was subjected to
  • Ds argued these were implied terms to the conditions document they agreed to

Issues in Liverpool City Council v Irwin [1977] AC 239

  • Did the contract contain the implied terms the tenants contended?

Held by the House of Lords

Appeal allowed, the council were not in breach of the implied terms as the tenants were unable to show the council was negligent. Rejected Lord Denning’s test of reasonableness, a term should be implied due to the necessity to the type of contract.

Lord Wilberforce

“implication means the supplying of what is not expressed” [253]

A test on the basis of necessity is required, rather than one based upon the reasonableness for a term to be implied [254]

Citing Viscount Simonds in Lister v Romford Ice [1957], Lord Wilberforce states that there was “a clear distinction” between this necessity test, and that of the ‘business efficacy’ one. This one is wider, and less stringent. [255]

He disagreed with Lord Denning who, at the Court of Appeal, believed courts should imply a term where it is reasonable, “he suggests that the courts have power to introduce into contracts any terms they think reasonable or to anticipate legislative recommendations of the Law Commission. A just result can be reached, if I am right, by a less dangerous route.” [257]

In the present case [254]:

  • “There must first be implied a letting, that is, a grant of the right of exclusive possession to the tenants. With this there must … be implied a covenant for quiet enjoyment, as a necessary incident of the letting”
  • “The question to be answered – and it is the only question in this case – is what is to be the legal relationship between landlord and tenant as regards these matters.”
  • The landlord should have obligations, to leave them “free of contractual obligation as regards these matters, and subject only to administrative or political pressure, is, in my opinion, inconsistent totally with the nature of this relationship.”
  • “The dominant owner must spend the necessary money” however what is deemed necessary is decided on each individual case
  • What can be said is there is not an “an absolute obligation to repair”, this goes “beyond what is a necessary legal incident and would indeed be unreasonable”

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