Terms Implied into Contracts

In some cases the written or oral terms of a contract do not set out the whole arrangement. Depending upon the circumstances there may be terms implied into the contract by reason of the factual circumstances or perhaps due to the operation of the law. Before a term can be "implied in fact" certain requirements must be met. This can be contrasted with "terms implied common-law" which often come about because of the type of contract entered into and terms implied by operation of statute e.g. the consumer warranties previously implied by the trade practices legislation (now repealed).

Given that implied terms can have a significant impact on the meaning and operation of an agreement it is important to get legal advice early and upfront before a decision is made to escalate a dispute.


Potential Scenarios - Terms Implied Into Contracts

  • In contracts of employment there are various implied terms regarding loyalty and the like so that if an employee makes a secret profit they may be liable to account;
  • Professionals like lawyers, accountants and the like usually have an implied obligation to take due skill or care in a delivering a service even when there is no written term about it

Important Quotes in Cases on Implied Terms in Contract Law

The conditions necessary to ground the implication of a term were summarized by the majority in B.P. Refinery (Westernport) Pty. Ltd v Hastings Shire Council [10] : "(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that "it goes without saying"; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract." - Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24

Let Us Help You

  • understand who will bear the onus of alleging an implied term;
  • know what needs to be proved before a term will be "implied in fact";
  • see that some of the types of contracts will have terms implied into them by reason of the operation of the common law including contracts with respect to employment, provision of services, work and materials, bailment and potentially some commercial contracts;
  • gain the benefit of terms implied into contracts by reason of the operation of a statute such as terms about title under the Sale of Goods Legislation and terms about acceptable quality under the Australian Consumer Law.