Contracts of employment: legal and factual implied terms – what you need to know

If a contract is silent on a particular issue, the law can step in to fill the gap. This happens in two main ways:

• Some terms are implied based on what the parties must have intended;

• Other terms are imposed automatically by law.

Understanding the difference helps HR teams know what can be managed and what cannot.

Terms implied by fact

These are unwritten provisions that tribunals read into a contract because they’re necessary or obvious. The key point is that they must be essential to making the contract work, not just because they seem fair.

For example, if someone is hired into a role that clearly involves driving, it is likely to be implied that they must hold a valid driving licence, even if the contract does not say so. Similarly, certain basic expectations about how a role is carried out may be implied if they are fundamental to the job.

Terms implied by law

These apply to every employment relationship, whether you include them in the contract or not and you can’t opt out of them.

The most important of these is the duty of mutual trust and confidence. This means both employer and employee must not behave in a way that seriously damages the working relationship without good reason.

For example, even if a contract gives wide discretion, using it in an unreasonable or heavy-handed way could still breach the duty of trust and confidence.  Other examples include the employee’s duty to act in the employer’s best interests, and the employer’s obligation to provide a safe working environment and comply with minimum legal standards such as pay and working time rules.

4 takeaways for HR to avoid disputes:

1. Legal duties apply in every case, even if they are not written down.
2. You cannot rely on the contract alone to define the relationship.
3. Not everything needs to be written down to be enforceable.
4. Some gaps in contracts will be filled, but only where necessary.

Further reading:

• Implied terms in employment contracts – Hunter Law
• Collective agreements and employee contracts – Hunter Law
• Employment contracts and conditions – Gov.uk
• Employment Contracts and the Law – ACAS