2.4 Terms implied as a result of previous dealings

Where contractual parties have been dealing with each other over a sufficiently long period of time and have consistently incorporated certain terms into their dealings, a court may conclude that those terms are to be implied.

Henry Kendall & Sons v William Lillico & Sons Ltd^[1] involved an ongoing oral contract for continuous shipments of Brazil nuts. Each shipment was confirmed in “sold notes” sent from the seller to the buyer, and these notes contained an exclusion clause. Although the buyer had never read these notes, the exclusion clause was upheld as forming part of the contract due to the fact that the buyer had accepted them over an extended period of time:

In the present case, SAPPA [the buyer] had regularly received more than a hundred similar contract notes from Grimsdale [the seller] in the course of dealing over three years. They knew of the existence of the conditions on the back of the contract note. They never raised any query or objection […]. The court’s task is to decide what each party to an alleged contract would reasonably conclude from the utterances, writings or conduct of the other. The question, therefore, is not what SAPPA themselves thought or knew about the matter but what they should be taken as representing to Grimsdale about it or leading Grimsdale to believe. The only reasonable inference from the regular course of dealing over so long a period is that SAPPA were evincing an acceptance of, and a readiness to be bound by, the printed conditions of whose existence they were well aware although they had not troubled to read them. Thus the general conditions became part of the oral contract.^[2]

This quote makes clear that whether terms will be implied based on previous dealings is largely a question of reasonableness; is the nature of the previous dealings such that it is reasonable to imply the relevant term? In assessing whether it is reasonable to imply terms based on previous dealings a court ought to consider: (1) the nature (including the number and frequency) of the previous dealings, (2) the similarity between the contractual arrangement in question and the previous contractual arrangements, (3) whether the contractual arrangement in question contains express terms that are conflicting with the terms sought to be implied, and (4) whether the terms in the past dealings were clearly identifiable.