Implied Terms Essay

This essay has a total of 1875 words and 13 pages.

Implied Terms


1) Introduction

2) Implied Terms

3) Custom / Usage

4) Court

5) Past Dealings

6) Statute

7) Goods Act

8) Trade Practices Act

9) Conclusion

10) Recommendations

11) Bibliography


Agreements are formed in almost every communication; electronic, written or oral; daily.
Once an agreement fulfills the components required of a contract, therein lies the
existence of terms of a contract.

These terms depict an obligation between parties involved in the form of Express terms or
Implied terms. Express terms are material terms stated by the parties involved, and can be
interpreted in 3 ways; Oral, Written, Oral and Written.

Implied terms are terms normally not stated or not known by the parties, and may be
derived from Custom/Usage, Court, or Statute. Custom terms are referenced to conventions
or usages in a particular industry or trade. Court terms are adopted when an oversight of
the parties occur, in order to give ‘business efficacy' to the contract based on prior
or past dealings. Statute terms are referred to the various states, territories and
Commonwealth Trade Practices Act when the contract is formed.

When a sale of goods involving consumer and corporations, Trade Practices Act and the
Goods Act ; statutes established by the Commonwealth and its State parliament; may be used
to protect consumers from the conduct of these contracts. Act s.4B of TPA defines a
‘consumer' as someone who acquires goods or services for less than $40,000. Act s.85(1)
of Goods Act applies if goods are worth less than $20,000.


The case of BROGDEN v METROPOLITAN RAILWAY illustrates one of the early cases of implied
terms; in which the conduct of a party is sufficient for the courts to hold an implied
terms judgement, despite a lack of an offer & acceptance. The unilaterally signed
agreement was actually a counter-offer, despite there was no mutual agreement to the
changes of terms by Brogden. But the courts held that the conduct of Metropolitan Railway
as valid.

A simple illustration to determine if a term should be implied into a contract is in the
case of SHIRLAW v SOUTHERN FOUNDRIES , where MacKinnon LJ quoted, "…in any contract is
left to be implied and need not be expressed is something so obvious that it goes without


In a particular industry, references as to what is ‘common practice' or ‘usages' of
the companies are dictated by themselves and not by the courts. When they act upon a
contract based on their trade understanding, certain standards exist. In the case of
BRITISH CRANE HIRE CORP LTD v IPSWICH PLANT HIRE LTD , a hire form sent to hirer was
merely to facilitate the formal procedures and understanding. Neither the terms were read,
nor signed by the hirer. An implied term, that hirer is liable for any damages once taking
hold of an equipment, exists as an industry standard term despite not signing the
contract. This act of negligence by the hirer may be costly in the future.

However, a failed attempt to use industry convention came in the case of SUMMERS v
COMMONWEALTH OF AUSTRALIA . Measurements of supplied goods could not be implied as an
industry convention because an express term has been set by the plaintiff; stating a given
measurement to follow. This follows that in a contract, an express term supercedes an
implied term.


Although certain terms are implied as industry convention, if the courts view them as
being unfair or nonsensical the courts shall imply its terms to give business efficacy, or
commercial realism, into the contract. In the case of ‘THE MOORCOCK' , the wharfinger's
expertise of allowing vessels to berth must have implied into the contract that they know
the jetty and its seabed well in order to provide sound advice and reasonable care during
a vessel's berthing. This obviously did not happen.

Where no term was submitted into the contract and a mistaken assumption occurred, the High
Court rejected the plaintiff's argument in the case of CODELFA CONSTRUCTION v BRISBANE
CITY COUNCIL . The plaintiff argued on the fact that a term should be implied to borne his

In the case of BP REFINERY v HASTINGS SHIRE COUNCIL , the Privy Council gave a description
of what implied terms must be. It must be:

(1) Reasonable and equitable
(2) Necessary to give business efficacy
(3) So obvious that it goes without saying
(4) Capable of clear expression
(5) Not contradicting any express term

The above conditions describe the simple definition of implied terms in providing business efficacy into a contract.

Past Dealings

When a term has been stated/shown many times before to the plaintiff, the courts held it
as acceptable evidence, despite the fact that the plaintiff had not seen or known of the
clause, as in the case of BALMAIN NEW FERRY CO LTD v ROBERTSON . Whether or not Balmain
has read the clause when he passed through the gates everyday, countless people have also
traveled through and seen the contract daily. Thereby giving it an instant validity due to
Balmain's past dealings.

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