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Supreme court - ‘Five condition test’ for an implied condition to be read into the contract

In NABHA POWER LIMITED (NPL) vs PUNJAB STATE POWER CORPORATION LIMITED,  the Supreme Court, on Thursday, while cautioning Commercial Courts against looking into the implied terms of a contract and opining that a contract should be read as it is, as per its express terms,  took note of the ‘five condition test’ for an implied condition to be read into the contract. The test requires the following conditions to be satisfied: (1) reasonable and equitable; (2) necessary to give business efficacy to the contract; (3) it goes without saying, i.e., The Officious Bystander Test; (4) capable of clear expression; and (5) must not contradict any express term of the contract.

The Bench, however, noted that these principles “would not be to substitute this Court’s own view of the presumed understanding of commercial terms by the parties if the terms are explicit in their expression”. It opined that the explicit terms of a contract are always the final word with regard to the intention of the parties.


Article referred: http://www.livelaw.in/commercial-courts-normally-look-express-terms-contract-not-implied-terms-sc-read-judgment/

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