← The hardest concepts in Australian law
In one breath
Where a contract is silent, a court may sometimes imply a term, either in fact, to give the particular contract the effect the parties must have intended, or in law, as a standard feature of a type of contract. Implication fills a gap out of necessity; it is never a way to improve a bargain or to rewrite what the parties said.
The picture
The keystone
In a stone arch, every stone but one is cut and placed by the mason according to the plan. The last stone, the keystone, goes in at the top, and without it the arch falls. A good mason does not invent stones to make the arch prettier or stronger. The arch is built of the stones the parties laid, and the keystone is added only if the structure could not stand as they built it without one.
Implication works the same way. A term implied in fact must be reasonable and equitable, necessary to give the contract business efficacy, so obvious that it goes without saying, capable of clear expression, and consistent with the express terms. All of these must be met; it is not enough that the term would be sensible. A term implied in law is different: it is a stone that regulations require in every arch of that type, such as a feature of every employment contract or every lease, imposed by courts as a matter of policy for the type of relationship, not from the parties’ own intention.
Where the picture stops working
Arches are alike, but contracts are not, so a term implied in one contract will not be implied in another. The picture also hides that the two kinds of implication ask different questions: one asks what these parties must have meant, the other what a type of relationship needs. Statutes also add terms and guarantees to many contracts regardless of what the parties agreed.
How it really works
- 1Place the rule. It is general contract law and is the same across the country. Commonwealth and State statutes add terms and guarantees to particular kinds of contract, and they differ.
- 2Read the express terms first and identify the gap. An implied term cannot contradict them.
- 3Implication in fact. Apply the conditions: reasonable and equitable, necessary for business efficacy, so obvious that it goes without saying, capable of clear expression, and consistent with the express terms.
- 4Implication in law. Ask whether this class of contract, such as employment or lease, calls for a standard incident as a matter of necessity.
- 5Check the statutes for terms and guarantees that apply whatever the parties said. Consumer guarantees under the Australian Consumer Law, for example, generally cannot be excluded.
Why people get it wrong
- Treating reasonableness as enough. A sensible term is not implied unless it is also necessary.
- Implying whatever the parties would probably have agreed if asked. That is not the test.
- Confusing implication with interpretation. Interpretation reads the words that are there; implication adds words that are not.
- Thinking that terms implied in law depend on the parties’ intention. They rest on the nature of the relationship.
- Expecting a court to rescue a bad bargain by implying a term that favours the losing side.
A worked example
The facts are invented
Brindle and Company contracts to cater a wedding feast at a venue owned by Marsh Hall, for a fixed fee. The contract says nothing about kitchen access. On the day, Marsh Hall locks the kitchen. A term that the venue will give access to the kitchen is necessary for the contract to work, so obvious it needs no stating, and consistent with the express terms, so a court is likely to imply it.
Change the facts: Brindle asks the court to imply a term that Marsh Hall will not hire other caterers for events in the same month. That term is neither necessary for the contract to work nor so obvious that it goes without saying. A court would refuse, however attractive it might seem to Brindle.
Try it
A contract for the sale of a boat is silent on whether the seller will give the buyer access to the boat for a survey before completion. The buyer asks the court to imply a term requiring access, saying it is fair and sensible. Is that enough?
Landmark authorities
Read the sources themselves; this list is a starting point.
- BP Refinery (Westernport) Pty Ltd v Shire of Hastings, (1977) 180 CLR 266
- Liverpool City Council v Irwin, [1977] AC 239
- Codelfa Construction Pty Ltd v State Rail Authority of New South Wales, (1982) 149 CLR 337
- Byrne v Australian Airlines Ltd, (1995) 185 CLR 410
Where to go next
Courses
More hard concepts in Australia law
- The parol evidence rule and the reading of contracts (Contract law)
- Criminal responsibility: the Code states and the common law states (Criminal law)
This page is an educational overview. It is not legal advice and not a substitute for the sources: the statute, the rule, the case itself. Australia is a federation: the Commonwealth, the six States and the Territories each make law, and the High Court is the final court for all of it. The common law, by contrast, is one law across the country. Each page says whether the rule is constitutional, federal or common law shared by every jurisdiction, or State-by-State legislation that varies, and flags where the States and Territories differ. Each page states the usual formulation of the rule and names landmark decisions; check the primary sources of your own jurisdiction before relying on any rule.