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Implied terms, claim fails on two counts

Written by Michael Coyle on 28 June 2014

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For some ten years or so the Defendant’s provided advertising and marketing services to Orvec as well as being responsible for the design and maintenance of Orvec's website and advertising. It also made photographs of products which Orvec offered to the airlines and these were featured on Orvec's website and in its printed advertising.

The parties ended their business dealings in 2011. In the discussions which led to the parties going their separate ways the use of the photographs were discussed. A hird party known as Intex started to compete with Orvec in the supply of textile products to airlines. They had previously supplied products to Orvec and had employed two of Orvec’s employees.  

Intex then contacted Linfoot and supplied various photographs some of which appeared on Intex's website. Among them were images about which Orvec filed a claim. The images on Intex's website included photographs created for Orvec and that they had been supplied by Linfoots in breach of contract. Orvec argued that the Advertising Agreement contained an implied term. Essentially Orvec submits that the implied term gave it a perpetual and exclusive licence under the copyright in the Photographs and that Linfoots acted in breach of Orvec's exclusive right.

The second complaint is that the appearance of the relevant images on Intex's website gave rise to passing off on the part of Intex. The problem was that Intex was not a defendant but Orvec alleged that by supplying Intex with the images Linfoots (a) equipped Intex with the means to pass off and (b) procured the passing off. The images were used by Intex on its website from November 2012 until May 2013. So the alleged passing off by Intex falls to be assessed as of November 2012.

The law

In Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10; [2009] 1 WLR 1988 Lord Hoffmann, who gave the judgment of the Board of the Privy Council, stated that the assessment of whether a term is to be implied into an instrument goes no further than being part of the objective investigation into what the instrument was intended to mean. Generally where a term is not expressly stated, the objective inference will be that no such term was intended. He said this:

[17] The question of implication arises when the instrument does not expressly provide for what is to happen when some event occurs. The most usual inference in such a case is that nothing is to happen. If the parties had intended something to happen, the instrument would have said so. Otherwise, the express provisions of the instrument are to continue to operate undisturbed. If the event has caused loss to one or other of the parties, the loss lies where it falls."

In BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 282–283 Lord Simon of Glaisdale, giving the advice of the majority of the Board, said that it was "[not] necessary to review exhaustively the authorities on the implication of a term in a contract" but that the following conditions ("which may overlap") must be satisfied:

"(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying' (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract."

Any starting point is the express terms of the contract into which Orvec seeks to introduce an implied term. By common consent they are Linfoots' standard terms and conditions. They were presented by Linfoots when a quotation was given for a piece of work.

"Terms and Conditions

1. All prices are subject to VAT where applicable.

2. Any outside services or expenses over and above those estimated will be charged extra.

3. Prices are based on current costs of labour and materials and may be subject to alteration.

4. Any alterations to the design may adjust the price.

5. The use of the design is limited to the items in the estimate,

6. Copyright remains the property of the company unless otherwise assigned.

7. This quotation is valid for a period of 30 days.

8. After the first presentation, accounts will be submitted by Linfoots Limited at the end of each calendar month for work carried out during that month, or at set stages in the work.

9. Payment is due 28 days following the issue of an invoice."

It was self-evident that there must contain the implied term that Orvec had a licence under Linfoots' copyright to use the advertising material supplied by Linfoots. The issue between the parties concerns the nature of the licence granted.

Orvec advanced two alternative implied terms. It was either that

(a) Linfoots had granted Orvec a worldwide, perpetual, non-terminable and exclusive licence to use the images in the Photographs,

or that

(b) Orvec can use the images for all marketing purposes, without limitation and the images would not be supplied to a third party without the permission of Orvec.

The Judge agreed that one could imply a simple implied term but nothing more... "I agree that where a designer creates a work of a nature such as the logo of a client, at the time of the agreement between the parties it must have been understood between designer and client that (a) no one other than the client could have a legitimate reason to copy the work and (b) the client would expect to be able to prevent others from copying it. The reasonable person considering the agreement would conclude that copyright must pass to the client and that a term in the agreement between the parties should be implied to that effect".

Both claims were dismissed. See Giggs case on implied terms and ownership of logos.

If you'd like to know more about this article please send an email to Michael Coyle quoting the article title and any questions you might have, alternatively call the office number on 02380 235 979 or send an enquiry through our contact form.

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