An Implied Contractual Term can’t override an expressed Contractual Term agreed by the Parties

In a recent judgment of the English Court of Appeal, the Court reconfirmed that express terms in a contract take priority in the interpretation of any agreement when considering the existence of any implied terms. Although the recent ruling confirms that implied terms may be used to clarify inconsistencies between two expressed terms it also approves the proposition that an implied term cannot be used to restrict the application of any expressed term negotiated and agreed by well-informed and experienced parties as part of a lengthy agreement.

The factual background relates to an agreement reached between Irish Bank Resolution Corp Ltd (“IBRC”) and Camden Market Holdings (“Camden”). IRBC agreed to provide loans for Camden to purchase and develop properties in Stables Market, Camden, and land at Camden Lock Village located on the canal opposite Stables Market in North London. As part of the Agreement IBRC provided a loan of some £195 million to members of the Camden Group for this purpose. The maturity date of the Agreement was originally 14 July 2010. The process of obtaining the relevant planning permission took longer than expected and the parties agreed to various amendments including among other things an extension of 12 months and a very final maturity date on 28 February 2014 (“Extension”). The Agreement included a clause allowing IBRC to assign any of its rights to another bank or financial institution with Camden’s consent and the right to disclose the information about Camden and the loans without the need to obtain express consent from Camden.

IBRC was placed in special liquidation in February 2013 and the liquidators started marketing the loans including the above, among other loans, some of which were distressed. Camden issued a claim seeking damages on the ground that there was an implied term as per the agreed Extension that IBRC would not do anything to hinder the marketing of the properties to achieve the best price. It was IBRC’s position that the Extension was only to provide IBRC with more time to complete the procedural steps of obtaining planning permission and market the properties.

In reaching a decision for IBRC the Court has reconfirmed the established practice of honouring and interpreting the expressed words agreed by the parties, rather than implying terms reflecting parties’ intention at the time of entering into an agreement. The recent judgment emphasises the need to obtain sufficient legal advice prior to entering into any agreement bearing in mind the commercial concerns of the parties while ensuring commercial interests and subsequent consequences are effectively reflected and dealt with in any addendum to an agreement.