The Implied Terms of Contracts: Of ‘Default Rules’ and ‘Situation-Sense’<sup>1</sup>

Todd D Rakoff

in Good Faith and Fault in Contract Law

Published in print August 1997 | ISBN: 9780198265788
Published online March 2012 | e-ISBN: 9780191682964 | DOI:
The Implied Terms of Contracts: Of ‘Default Rules’ and ‘Situation-Sense’1

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This chapter addresses the question of how courts should deal with the process of gap filling by what are variously called ‘background terms’, ‘default rules’, or ‘implied terms’. The issue may arise in standard situations such as landlord and tenant, seller and buyer, or employer and employee, or in more individual or ‘one-off’ contracts in which there is a gap in the terms. The chapter is concerned with the first of these and discusses the difficulties and abstractness of a number of approaches, including ‘fairness’, ‘a common sense notion of implied consent’, a ‘hypothetical bargain’ test, and an efficient risk-allocation test. It proposes a ‘situation sense’ approach, which depends on a considerably more explicit, tight, and structured model of the transactional situation at issue in its societal context.

Keywords: contract law; gap filling; background terms; default rules; fairness; implied consent

Chapter.  19556 words. 

Subjects: Civil Law

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