Contract interpretation—terms implied by custom and usage
Contract interpretation—terms implied by custom and usage

The following Dispute Resolution practice note provides comprehensive and up to date legal information covering:

  • Contract interpretation—terms implied by custom and usage
  • Express and implied contractual terms distinguished
  • Contractual terms implied by custom
  • Evidence of a contrary intention negates the implication of a term by custom
  • What can amount to a custom or usage?
  • The custom or usage must be one which it is reasonable to impose
  • Do the parties have to have intended to be bound by a term implicit from custom and usage?
  • Implying terms by custom and usage versus entire agreement clauses
  • Specific course of dealings, rather than general custom or trade practice

Express and implied contractual terms distinguished

Contractual terms may be either express or implied:

  1. express terms—are terms which are actually recorded in a written contract or openly expressed in an oral contract at the time the contract is made. For further guidance, see Practice Note: Contract interpretation—express terms in contracts

  2. implied terms—are not stated in the contract but arise 'by implication' to reflect the intention of the parties at the time the contract was made. Terms may be implied by fact, law or custom

For guidance on terms implied by fact, see Practice Note: Contract interpretation—terms implied by fact.

For guidance on terms implied by law, see Practice Note: Contract interpretation—terms implied by law.

Contractual terms implied by custom

Where there is clear and sufficient factual evidence that a custom operates within an industry, the courts will imply a term giving effect to the custom (Mount v Oldham Corp).

It is irrelevant as to whether or not the parties knew of the custom (Sutton v Tatham).

However, no such term will be implied if the contract evidences a contrary intention of the parties, nor will the courts imply a term by custom if it is unreasonable.

In essence, the courts will only imply a term by custom if there is in the particular trade or industry concerned a ‘uniform…practice so well defined and recognised that contracting parties must be assumed to have

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