The Doctrine of Implication of Unexpressed Terms

By: Brian Taylor

The safest way to ensure a contract most closely matches the desired intentions of the parties is through memorializing the terms expressly, but just how specific does a contract have to be?  What happens if certain terms or obligations aren’t clearly specified in the contract?  While not to be relied upon, the doctrine of implication of unexpressed terms may provide some protection for contracting parties.

The doctrine of implication of unexpressed terms provides that a contract encompasses not only its express provisions but also all such implied provisions as are necessary to effect the intention of the parties, unless express terms prevent such inclusion.  The doctrine of implication of unexpressed terms may apply to any written contract if there arises from the language of the contract itself, and the circumstances under which it is entered into, an inference that the parties must have intended to stipulation in question.

In Lane v. Scarborough, 284 N.C. 407, 200 S.E.2d 622 (1973), the doctrine of implication of unexpressed terms was applied to determine whether a surviving spouse would share in the estate of her deceased husband.  Prior to the death of the decedent, the couple entered into a separation agreement in which each spouse agreed to hold, acquire, and dispose of property as if free and unmarried.  The separation agreement did not address each spouse’s right to intestate succession.  Even though the separation agreement did not contain any language regarding intestacy, the Court ultimately prevented the surviving spouse from sharing in the decedent’s estate.  The Court applied the doctrine of implication of unexpressed terms to best effect the intention of the parties.

The doctrine of implication of unexpressed terms was also applied in Cleveland Const., Inc. v. Ellis-Don Const. Inc., to determine whether a subcontractor was required to share in the litigation costs incurred by a general contractor.  210 N.C. App. 522, 709 S.E.2d 512 (2011).  In Cleveland Construction, the general contractor argued that a “cost sharing” provision should be incorporated into the subcontract by implication because it is “standard construction industry practice” that the costs incurred by a general contractor in pursuing third party claims that benefit a subcontractor are passed through to the subcontractor.  The Court ultimately deferred on the general contractor’s argument in order to hear more evidence on the industry custom of cost sharing. 

These cases teach us that while courts may stretch the terms of a contract to enforce obligations that are obviously intended by the parties, additional evidence may be required before extending the doctrine to obligations that are claimed to be “customary.”  Ultimately, the doctrine of implication of unexpressed terms can serve to prevent the omission of an obvious term from derailing the intended purpose of a contract; however, it should not and cannot be relied upon to compensate for incomplete drafting.