Implied Terms in Australian Contract Law: A Reappraisal after University of Western Australia v Gray

Abstract

Implied terms are found in most, if not all, contracts. Parties do not, and cannot, expressly provide for all events that may arise in the course of their dealings with each other. There are gaps which courts are 'asked to fill by implying a term in favour of one or other of the parties'. In Anglo-Australian contract law, terms are said to be implied on two bases either as individual terms introduced on 'an ad-hoc (factual) basis to make a particular contract work' or as preestablished terms which have become more generalised 'incidents of particular classes of contract'. Whether a term is to be implied-in-fact or implied-in-law, the prior question that arises for judicial determination is what test should be applied to make the implication sought. Current orthodoxy proposes a test based generally on necessity, but says that the test of necessity required for implied-infact terms is grounded in notions of business efficacy, and that this differs from the type of necessity required for implied-in-law terms which is said, somewhat unhelpfully, to be based on 'wider considerations'.3 In our view, the distinction is a questionable one which simply leads to confusion.