Shirlaw v Southern Foundries (1926) Ltd
A term is implied in fact if it is so obvious that it goes without saying, the officious bystander test.
Facts
Mr Shirlaw was appointed managing director of Southern Foundries for ten years under a written contract. The company was later taken over by a group of companies, which altered the company's articles of association to give the group power to remove any director. The group then removed Mr Shirlaw as a director, which meant he could no longer be managing director. He sued for wrongful dismissal.
Legal principle
The Court of Appeal held, and the House of Lords later agreed in [1940] AC 701, that the company was liable in damages. There was an implied term that the company would not remove Mr Shirlaw from his directorship during the ten year term, because that would make it impossible for him to serve as managing director. MacKinnon LJ said that a term is implied if it is so obvious that it goes without saying, so that if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it, they would testily suppress him with a common Oh, of course. This is the officious bystander test.
Related cases on terms of the contract
- Arnold v Britton [2015] UKSC 36, [2015] AC 1619
- Barton v Morris [2023] UKSC 3, [2023] AC 684
- Bettini v Gye (1876) 1 QBD 183
- Braganza v BP Shipping Ltd [2015] UKSC 17, [2015] 1 WLR 1661
- Bunge Corp v Tradax Export SA [1981] 1 WLR 711
- Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101
- Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965] 1 WLR 623
- Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26
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