IMPLIED TERMS:
• A term that will be read into a contract that was never the subject of express agreement
between the parties.
• They will be part of a contract, even though the parties have not consciously included them
• *There are four ways in which terms can be implied into a contract:
- 1) Terms implied in fact
- 2) Terms implied in law;
- 3) Terms implied by custom; and
- 4) Terms or guarantees implied by statute.
• All implied terms, whether implied in fact or law, are imposed on the parties by the law.
*Circumstances where terms will be implied into a contract:
• Where there have been past dealings between the parties;
• Where there is a custom or trade usage concerning the subject matter of the contract;
• Where it is necessary to give business efficacy to the contract;
• Where a term is implied by the court into all such contracts or particular classes of contract;
• Where a term is implied by statute.
1) Terms implied in fact:
Terms implied in fact are traditionally based on the presumed intentions of the parties.-BP
Refinery.
The HCA approved the tests in BP Refinery Pty Ltd.
*For a term to be implied, ALL of the following conditions (which may overlap) must be
satisfied:
- (1) term must be reasonable and equitable
- (2) must be necessary to give business efficacy to the contract
- (3) so obvious that it goes “without saying”
- (4) must be capable of clear expression
- (5) must not contradict any express terms
Codelfa:
- Parol evidence rule – extrinsic evidence may be admitted to determine if term
should be implied (per Mason J at 354).
Term must be reasonable and equitable:
Reasonableness alone is not a sufficient reason for implying a term-Codelfa.
A term that, although beneficial to one party, imposes a significant detriment or burden on the
other party, is unlikely to be reasonable and equitable.
BP Refinery v Hastings :BP did not impose any detriment to the shire, it was reasonable to h
ave this implied term.
