Contracts – Implied Terms – Breach of Agreement – Employment Contract – Business Efficacy – Necessity – Custom – Written and Oral Agreements – Precedence of Written Contract.

 

Supreme Court of the Democratic Socialist Republic of Sri Lanka

 

Case Title: D. A. J. Ranwala v. Ceywater Consultants (Pvt) Ltd. 

Citation: SC Appeal No. 19/2017 

Judges: Hon. P. Padman Surasena, J; Hon. Janak De Silva, J; Hon. Arjuna Obeyesekere, J 

Date of Judgment: 8th August 2024 

Headnote [by the Gallelawblogger] 

Contracts – Implied Terms – Breach of Agreement – Employment Contract – Business Efficacy – Necessity – Custom – Written and Oral Agreements – Precedence of Written Contract. 

In an appeal concerning an employment contract, the Supreme Court examined whether an implied term could be enforced against the express terms of a written contract. The case revolved around the alleged breach of an agreement to employ the Plaintiff-Appellant-Respondent (Respondent) for the full duration of a project. The Court scrutinized the terms of the written contract and the circumstances under which implied terms may be incorporated.

Background:

The Respondent, a Chartered Civil Engineer/Hydrologist with over 23 years of experience, initiated an action against the Defendant-Respondent-Appellant (Appellant) claiming Rs. 2,500,000/- as damages for breach of an agreement. The dispute arose from the "Lunawa Environmental Improvement and Community Development Project," for which the Appellant was selected as the consultant. The Respondent alleged that he was promised employment for the full duration of the project, encompassing both the Design and Construction Phases. 

Facts: 

The Appellant invited the Respondent to submit his Curriculum Vitae, promising employment as a Design Engineer for the project.

The Respondent received a letter of appointment for the Design Phase effective from 01.10.2003, with subsequent extensions.

The Respondent claimed that he was waiting to be called for the Construction Phase but was not, allegedly violating the terms of the agreement. 

Legal Issues:

1.  Whether the High Court erred in upholding the contention that the Respondent proved that the Appellant dishonoured the promise of employing the Respondent in the 2^nd Stage of the project.

2.  Whether the High Court erred in holding that the Appellant had not upheld the promise of employing the Respondent as per document marked "P9".

3.  The applicability of implied terms in the context of the express terms of the written contract.

4.  The precedence of written contract terms over alleged implied terms. 

Precedents Discussed:

Duke of Westminster andOthers v. Guild (1985) Q.B. 688 at 700: Discussed the conditions under which terms can be implied into a contract to give it business efficacy or out of necessity.

Johnstone v. Bloomsbury H.A. (1992) 1 Q.B. 333: Addressed the need for implied terms to be consistent with the express terms of the contract.

Weeramantry, Law of Contracts: Emphasized that contracts may be express or implied, and the intention of the parties must be determined objectively.

Chitty on Contracts, General Principles: Stated that an agreement may be partly oral and partly written, but written terms take precedence over implied terms. 

Conclusion:

The Supreme Court held that the written contract between the parties, dated 22.09.2003, clearly specified the terms of the Respondent's employment. The contract included provisions for termination and did not guarantee employment for the full duration of the project. The Court found that the "Schedule V for Professional Personnel" (P9) did not form part of the agreement, as it was not shown to the Respondent before entering into the contract. 

The Court concluded that while certain terms can be implied to give effect to the parties' intentions, such terms must not be inconsistent with the express terms of the contract. Since the written contract negated the alleged implied agreement to employ the Respondent for the full term of the project, the written terms prevailed. 

The Supreme Court answered the two questions of law in the affirmative, set aside the judgment of the High Court, and affirmed the judgment of the District Court. The Appellant was entitled to costs in both the High Court and the Supreme Court.

Appeal allowed with costs.

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