Contract interpretation—terms implied by law

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

  • Contract interpretation—terms implied by law
  • Express and implied contractual terms distinguished
  • Contractual terms implied by law
  • Terms implied by law—contracts ‘of a defined type’
  • Terms implied by law—term not addressed in the contract as formed
  • Terms implied by law—is there a necessity test?
  • Terms implied by law—specific contract examples
  • Is there an implied duty to act in good faith in commercial contracts?
  • ‘Relational contracts’

Contract interpretation—terms implied by law

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 custom and usage, see Practice Note: Contract interpretation—terms implied by custom and usage.

Contractual terms implied by law

Terms implied in law are not terms that the parties to an agreement would have agreed to, but rather terms that arise as a legal incident of a particular legal relationship (Liverpool CC v Irwin, Shell v Lostock Garage, Scally v Southern Health and Crossley v Faithful & Gould).

For terms to be implied by law, two conditions are required to be satisfied:

  1. the contract has to be of a common type such that it is possible to identify the usual terms found in such an agreement, and

  2. the parties must not have addressed the term in any way in the contract as

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