When is “reasonable” not implied in a contract?

Note: The question is related to UK law, but I’m also curious if there’s a “more general” rule here.

Somewhat related to my other question, the answer provided states that it’s implicit in every contract that parties should act reasonably (which, honestly, makes a lot of sense).

However, I was reading the Guidance on unfair terms in
tenancy agreements and this grabbed my attention (clause 4.6, page 49):

Where a precise amount cannot be stated, it should be clear how it
will be set. On occasion, it may be enough to say that it will be
reasonable
. This applies only where the basis of the charge is fairly
obvious to the tenant, for instance where there are identifiable and
verifiable costs that have to be covered, but they should not be
exceeded.

If I understand this correctly, there are cases where just stating that the amount will be reasonable is considered fair – this strikes me as odd since I’d assume “reasonable” would be implied anyway.

I understand explicit is always better than implicit, but I was just curious how would a clause that doesn’t imply the amount will be reasonable look like?

2 Answers
2

When the contract is prescriptive, that is, when there is no exercise of discretion available to the parties.

For example, in a contract I have on hand there is the following clause about pricing variations:

36.4 Pricing

The Subcontract Superintendent shall, as soon as possible, price each variation using the following order of precedence:

(a) prior agreement;

(b) where the Subcontract Superintendent has issued a notice pursuant to clause 36.5 in accordance with the procedure at clause 36.5(c);

(c) not used;

(d) the actual cost for the work (which is performed by a secondary subcontractor shall be the cost payable to that subcontractor under its subcontract) provided such cost is reasonable plus the Fixed Margin to such costs but not for overheads; and

(e) as daywork to be valued in accordance with clause 36.5,

and any deductions shall include the Fixed Margin applicable to the costs deducted.

Breaking this down:

  1. It must be done as soon as possible, even if that would be unreasonable.

  2. The order of precedence must be followed, even if the price so derived is unreasonable.

  3. If a value has been agreed it must be used even if the Subcontract Superintendent thinks its unreasonable.

  4. If a notice under clause 36.5 (an instruction for daywork) has been issued then the procedure in clause 36.5(c) must be used and if one hasn’t then it cannot be used under this subclause, however, see below.

  5. If (d) applies then the Fixed Margin must be applied to the costs even if that margin is unreasonable

  6. If the costs under (d) are deemed unreasonable by the Subcontract Superintendent, they cannot use reasonable rates – they must fall through to (e) and value the work using clause 36.5.

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