[1967] 3 All ER 1064
Chancery
In July 1948 in return for a payment of 10s Jekyll granted Lawson an option to purchase a freehold property known as Munstead Hut if, during his lifetime, he desired to sell the property. In January 1963 Jekyll gave Munstead Hut to his sister. Gardner, Lawson's successor in title, claimed that it was an implied term of the agreement that Jekyll should not during his lifetime make a gift of the property without first giving to Lawson, or her successor in title, the option of purchasing Munstead Hut.
The issue before the court was whether such a term could be implied into the option.
Cross J
The agreement does not provide expressly for the event of Mr. Jekyll giving away Munstead Hut in him lifetime. The whole question is whether there ought to be implied in the agreement a provision to [that] effect...
When one hears the words 'implied term' one thinks at once of MacKinnon, LJ, and his officious bystander. It appears, however, that that individual, though not yet so characterised, first made his appearance as long ago as 1918 in a judgment of Scrutton, LJ I shall read a passage from that judgment and then the well-known passage from the judgment of MacKinnon, LJ, in a later case. In Reigate v Union Manufacturing Co. (Ramsbottom), Ltd, Scrutton, LJ, said:
'The first thing is to see what the parties have expressed in the contract; and then an implied term is not to be added because the court thinks it would have been reasonable to have inserted it in the contract. A term can only be implied if it is necessary in the business sense to give efficacy to the contract; that is, if it is such a term that it can confidently be said that if at the time the contract was being negotiated someone had said to the parties, 'What will happen in such a case', they would both have replied, 'Of course, so and so will happen; we did not trouble to say that; it is too clear'. Unless the court comes to some such conclusion as that, it ought not to imply a term which the parties themselves have not expressed.'
In the case of Shirlaw v Southern Foundries (1926), Ltd. and Federated Foundries, Ltd, MacKinnon, LJ, said:
'I recognise that the right or duty of a court to find the existence of an implied term or implied terms in a written contract is a matter to be exercised with care, and a court is too often invited to do so upon vague and uncertain grounds. Too often, also, such an invitation is backed by the citation of a sentence or two from the judgment of Bowen, LJ, in The Moorcock. They are sentences from an extempore judgment as sound and sensible as are all the utterances of that great judge, but I fancy that he would have been rather surprised if he could have foreseen that these general remarks of his would come to be a favourite citation of a supposed principle of law, and I even think that he might sympathise with the occasional impatience of his successors when The Moorcock is so often flashed before them in that guise. For my part, I think that there is a test that may be at least as useful as such generalities. If I may quote from an essay which I wrote some years ago, I then said: 'Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying'. Thus, if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common: 'Oh, of course!' At least it is true, I think, that, if a term were never implied by a judge unless it could pass that test, he could not be held to be wrong.'
I agree wholeheartedly that a judge ought to be very cautious over implying terms in contracts. It is so easy to say to oneself' That is an eminently reasonable provision. If the parties had thought of it they would certainly have put it in, and so I ought to imply it'. That sort of approach is, of course, quite wrong. If Mr. Jekyll's reaction to the question 'What if you want to give the property away?' would have been 'Well, that is a new point; and I do not suppose that in fact I will ever want to give it away, but as you have raised this point I am prepared to agree to offer it to Mrs. Lawson for £3,000 if I do want to give it away. So put that in too', then as I see it the plaintiff must fail. For him to succeed I must be reasonably confident that on the question being raised Mr. Jekyll would have agreed with Mrs. Lawson in saying 'Oh, but of course that event is included too. What goes for a projected sale goes also for a projected gift'.
... Nevertheless, viewing this matter apart from authority, I think that it is implicit in a grant of first refusal that the person who has to offer the property to the other party, should not be entitled to give it away without offering it and so to defeat the first refusal. That being the way that I view the matter, if I apply the test laid down by Scrutton, LJ, and MacKinnon, LJ, I am confident that at the time, whatever views Mr. Jekyll may have formed later, if somebody had said to him 'You have not expressly catered for the possibility of your wanting to give away the property', he would have said, as undoubtedly Mrs. Lawson would have said, 'Oh, of course that is implied. What goes for a contemplated sale must go for a contemplated gift'...