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IAI Actuarial Core Principles · Business Management · Implied terms, exclusion of liability, contractual remedies and damages

A written agreement between Arvind Reinsurance and Nilgiri Analytics states that Nilgiri will deliver a quarterly reserving report. Nilgiri claims that in the same industry it is an established and well-known practice that such reports include a peer-benchmark section, although the contract says nothing on it. Arvind disputes this. Which approach is most consistent with the law on implying terms by custom or usage?

A term may be implied by custom only if the custom is certain, reasonable, well established and consistent with the express terms. A written contract does not bar this, but a mere common practice does not automatically bind the parties.

  1. AThe term is implied automatically because any industry practice binds every contract
  2. BThe term can never be implied because the contract is written
  3. CThe term may be implied only if the custom is certain, reasonable and well established, and it does not contradict an express termCorrect
  4. DThe term is implied only if Arvind has previously complained about its absence in writing
  5. The term is implied only if a court first rewrites the whole contract

Explanation

A term can be implied from trade custom or usage only where the custom is notorious, certain, reasonable and not inconsistent with the express terms. A written contract does not exclude such terms. Not every practice qualifies, so the first option is too broad.

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