B. Previous course of dealings

Where two parties have consistently conducted business on certain terms in their previous course of dealings, the court may imply a term relating to that course of dealings. It will do this if it can be shown that the reasonable expectation of the parties is that the term will apply to the transaction in question, and the current contract does not contain an express term to the contrary.

The party seeking to establish the course of dealing must show that:

• There has been regular trading between the parties. Several transactions every month over a period of years would be sufficient for these purposes, but three or four transactions over a period of several years are unlikely to be enough (see Hollier v Rambler Motors (A.M.C.) Ltd. [1971] EWCA Civ 12 ).

• The trading has been consistent: previous trading must have been on the same terms and a consistent procedure must have been followed. See McCutcheon v David MacBrayne Ltd [1964] UKHL 7, in which conditions set out on a risk note, which was only sometimes signed were not incorporated into the parties' contract.

A useful summary of the case law in this area can be found in Circle Freight International Ltd v Medeast Gulf Exports Ltd [1988] 2 Lloyd's Rep. 427. Given the stringent and somewhat uncertain tests that must be satisfied before a court will hold that terms have been incorporated by a course of dealing, it is clear that it is inadvisable to rely on terms being implied by this method.

C. Terms implied in fact

A court may imply a term into a specific contract to fill a gap in the contract's drafting. The rationale for implying a term in this way is to reflect the parties' intentions when the contract was entered into. However, the test is an objective one, the court will consider what a reasonable person would have understood the parties' intentions to be, given the background knowledge reasonably available to the parties at the time they entered the contract. The courts will not imply a term into a contract simply because they think it would have been reasonable for the parties to have done so (Liverpool City Council v Irwin [1976] UKHL 1).

The correct test for implying terms into a contract in fact, to reflect the parties' intentions, has been developed in a long line of case law. Following Lord Hoffman's decision in Attorney General of Belize and others v Belize Telecom Ltd [2009] UKPC 10 there were suggestions that the rules on implying terms had been relaxed. However in 2015 the Supreme Court held that Belize should no longer be treated as authoritative guidance, see Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd & Anor [2015] UKSC 72 (2 December 2015).

In Marks and Spencer the Supreme Court stated that the approach established in pre-Belize cases still applies. The Supreme Court declined to reformulate the test but suggested that it could be found in BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] UKPC 13, as extended in Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] E.M.L.R. 472. However the Supreme Court did add six additional comments which modify the test as set out in BP Refinery and Philips.