ACLN - Issue #60
Contracts ------------------+
Implied Terms In Building Contracts:
Inference Or Imputation?
The Honourable Mr Justice Byrne*
I am concerned with contracts, and much of what I
have to say will be applicable to all contracts.
Nevertheless, as the title indicates, I have been asked to
concentrate upon aspects of the topic which are relevant
to contracts of a particular type - those which are made in
a very hard, material, commercial environment, the
construction industry. This is an environment where
commercial power may be wielded without compunction
and with regard for no interest but one's own.! Commonly,
contractors and subcontractors are required to bid
competitively against a contractual background which is
unfriendly and, perhaps, largely immutable. The
contractual terms to which they are required to conform
may be biased against them by a cautious or autocratic
proprietor; they will very often be complex and, perhaps
by reason of departure from standard forms or otherwise,
obscure or even contradictory. This is no less true in the
public sector than it is in private industry. The
consequence has been that parties to construction contracts
have often made hard bargains, or at least that is the way
it turned out. They then approach the Court asking that it
supplement or modify the terms to mollify their bargain.
The classic technique that we see everyday in building
cases is by inviting the Court to imply terms in the contract.
This immediately creates a problem for a judge who has
been brought up on the robust 19th Century British fare
of non-interference in commercial bargains, but who is,
nonetheless, sympathetic to a claim by parties to a building
contract that they have been hard done by. The lawyer's
traditional response to this conflict between principle and
sympathy is to resort to fiction. Enter a bystander who is
endowed not only with the reasonableness of the "person
on the Bourke Street tram"/"person on the Bondi bus",
but with that most unreasonable characteristic,
officiousness. The Court turns back the clock, intrudes
this non-existent man2 into the negotiating arena who asks
a fictitious question devised retrospectively and obtains
the supposed testy answer "of course"3. In this way the
dilemma is solved in a stroke. The theme of this paper is
to analyse the technique employed by the Court in
implying terms and to observe how the fiction is giving
18
way to an acceptance that the law itself has a role to play
in the formation and content of commercial contracts. In
short, modem judges are tending to impute terms rather
than to infer them.
It is necessary at the outset that I clear the decks
somewhat. I am not concerned with a number of concepts
which, however related to implied terms, are nonetheless
distinct from them. I am not concerned with the question
whether the court can infer the existence of the contract
itself4 • I start from the position that a contract exists. I
am not concerned with questions of construction of express
terms and the extent to which it is possible to interpret
what is said or written in the light of the matrix of fact in
which the contract is made. 5 The circumstance which
interests me now is the case where the contract is silent
on a given point.
Nor am I concerned with rectification of a written
contract which remedy may be available where the parties,
having reached agreement on a term, have omitted to
include it in the document recording their bargain. 6
Finally, I am not concerned with the impact of the parol
evidence rule by which precontract negotiations may not
be resorted to for the purpose of adding or varying a
contract which has been reduced to writing. 7
THE PRESENT POSITION
A conventional classification 8 of implied terms
would be the following:
(a) terms implied by statute;
(b) terms implied by custom or usage;
(c) terms implied from fact;
(d) terms implied by law.
Terms implied by statute must be treated separately
from those implied at common law, although many of
them, such as the sale of goods warranties were first
formulated by the judges before they found their way into
the code of 1891. Terms implied by custom or usage may
be seen as a variation of terms implied from fact since
they depend upon proof of a factual basis, but they are
traditionally treated as separate. 9 The requirements for
ACLN - Issue #60 19

their implication are well established. 10 It is with the third contract or express warranty, really is in all cases
and fourth types of implied terms that I am interested. founded on the presumed intention of the parties,
The requirements for them, or at least for the third type, and upon reason. The implication which the law
are those set out in the leading case of BP Refinery draws from what must obviously have been the
(Westernport) Pty Ltd v Hastings Shire Council.!1 The intention ofthe parties, the law draws with the object
task which I have set myself is to examine how the ofgiving efficacy to the transaction and preventing
distinction between the third and the fourth types of such afailure ofconsideration as cannot have been
implied terms has been worked out with particular within the contemplation of either side; and I
reference to construction contracts and how the Court now, believe if one were to take all the cases, and they
and in the future, is likely to approach the task of implying are many, ofimplied warranties or covenants in law,
them. it will be found that in all ofthem the law is raising
an implication from the presumed intention of the
BP REFINERY (WESTERNPORT) PTY LTD V parties with the object of giving to the transaction
SHIRE OF HASTINGS such efficacy as both parties must have intended
that at all events it should have. In business
The Background
transactions such as this, what the law desires to
As with so many topics in the law, a proper
effect by the implication is to give such business
understanding of the modem position requires us to turn
efficacy to the transaction as must have been
the clock back to see how it came about. It was not until
intended at all events by both parties who are
its 18th edition in 1930 that Chitty on Contracts contained
business men; not to impose on one side all the
any real treatment of the topic. There, the law is given as
perils ofthe transaction, or to emancipate one side
stated by Bowen LJ in The Moorcock 12 to which I shall
from all the chances offailure, but to make each
return. In the 21 st edition of Anson's Treatise on the Law
party promise in law as much, at all events, as it
of Contract (1959) the topic makes its appearance in that
must have been in the contemplation ofboth parties
work under two headings - terms implied under the
that he should be responsible for in respect ofthose
Moorcock Rule and those implied by custom and by
perils or chances."
statute.
I focus now upon The Moorcock which is of interest,
His Lordship came back late to the presumed
not only because it is the leading case in the area, but also
intention of the parties. In order to determine this, it is
because the term in question will strike a responsive chord
necessary to see what each of them knew. It is implicit in
in the ear of construction lawyers. It is necessary to remind
the transaction that the ground was safe and, further, that
ourselves at the outset that this case was decided by a
this was a matter of which the jetty owners, not the
well-regarded court and in February 1889. The contract
shipowner, would have knowledge. His Lordship then
was one for the use of a wharf and a jetty for the purpose
put the test in words familiar to the ears of modern
of discharging cargo. It was obvious to all parties that the
construction lawyers - the allocation of risk: 15
plaintiff's ship must moor at the jetty and that a vessel so
"Now the question is how much of the peril of the
moored was subject to the tide and must ground at low
safety of this berth is it necessary to assume that
water. The ground under the ship turned out to have a
the shipowner and the jetty owner intended
hard ridge so that the ship suffered damage when it settled
respectively to bear - in order that such a minimum
on it. The question was whether the court should imply a
of efficacy should be secured for the transaction,
term that the place was safe for a vessel to lie in.
as both parties must have intended it to bear?"
The trial judge and all three members of the Court
ofAppeal were prepared to imply such a term. The method
Fry LJ, in a short concurring judgment, added that
adopted by them is interesting. Lord Esher MR put it this
the consideration which affected him in concluding for
way: 13
the existence of the implied term was that the jetty owner
"What, then, is the reasonable implication in such
who had the means of examining the river bottom
a contract?
neglected to do so: 16
In my opinion honest business could not be carried "A number of comments may be made about this
on between such a person as the respondent and case by the modern observer with an eye on the
such people as the appellants, unless the latter had construction industry. The observer might be
impliedly undertaken some duty towards the forgiven for wondering how the term here came to
respondent with regard to the bottom ofthe river at be implied whereas, only three years later, the same
this place. If that is so, what is the least onerous courti7 rejected a claim by a contractorfor payment
duty which can be implied?" for extra expense incurred as a result ofbad ground
without considering the possibility that the contract
Bowen LJ, whose judgment is that which is always contained an implied term that the ground was fit
quoted in this area, said this: 14 for the structure. i8 Second, our observer might
"Now, an implied warranty, or, as it is called, a wonder whether this case is an example of a term
covenant in law, as distinguished from an express implied from fact or a term implied by law, but of
ACLN - Issue #60
course the distinction would not in 1889 have been
in the forefront of the judges' minds. On its face, it
seems likely that a term that the mooring was fit for
the purpose contemplated by both parties would
now fall into the basket of implication by law.
Finally, our observer might have been puzzled by
the use of the expression "efficacy of the
transaction" in the classic statement of principle
by Bowen Li. It cannot be correct to say that the
contract would be unworkable without the supposed
term. It may be harsh to put the risk on the
shipowner, but it is, after all, only a risk. There is
no inevitability that the commercial purpose of the
agreement must be defeated without the term. It is
however, clear that the Court was not looking at
the question in such a severe way. The requirement
of efficacy must be determined in a business-like
way, having regard to the reasonable expectations
of the contracting parties. "19
We now jump ahead half a century to 1939. Bear in
mind that, for most of this period, anxious readers of the
successive editions of Chitty would not, by reading that
text have been aware of the Moorcock decision. Shirlaw
v Southern Foundries (1926) Ltd 20 concerned an
agreement between a company and its managing director
whereby he was to hold that office for 10 years. The
question was whether, in those circumstances, the
company might exercise the power conferred by its articles
of association to remove Mr Shirlaw from the office of
director, so that he would be managing director, but not a
director with a vote on the board. He argued that there
was an implied term in the articles of the company that
this power be not exercised so long as he remained
managing director under his service contract. The trial
judge21 and two members of the Court ofAppeal 22 agreed.
In the course of his judgment, MacKinnon LJ propounded
the law in terms which have become famous:
"I recognise that the right or duty ofa Court to find
the existence ofan implied term or implied terms in
a written contract is a matter to be exercised with
care; and a Court is too often invited to do so upon
vague and uncertain grounds. Too often also such
an invitation is backed by the citation ofa sentence
or two from the judgment of Bowen Li in The
Moorcock. They are sentences from an extempore
judgment as sound and sensible as all the utterances
of that great judge; but Ifancy that he would have'
been rather surprised ifhe could have foreseen that
these general remarks of his would come to a
favourite citation of a supposed principle of law,
and I even think that he might sympathise with the
occasional impatience of his successors when The
Moorcock is so oftenflushedfor them in that guise.
For my part, I think that there is a test that may be
at least as useful as such generalities. IfI may quote
from an essay which I wrote some years ago, I then
said:
20
'Prima facie that which in any contract is left
to be implied and need not be expressed is
something so obvious that it goes without
saying, so that, if, while the parties were making
their bargain, an officious bystander were to
suggest some express provision for it in their
agreement, they would testily suppress him with
a common 'Oh, ofcourse!'
At least it is true, I think, that, ifa term were never
implied by a judge unless it could pass that test, he
could not be held to be wrong."23
So things stood for nearly another half century -
until 1975. It is, however, necessary to pause to note an
important decision in 1956. 24 The case arose out of a motor
accident. A truck driven by an employee of Romford Ice
struck and injured the plaintiff (the father of the driver)
who sued the employer. So far, nothing remarkable. The
employer was insured and the insurer conducting the
defence joined as third party the driver whose negligence
lay behind the claim. The interest of this case lies in an
argument put by the driver that there was an implied term
of the contract of employment that, if the employer was
insured, no claim would be made against the employee.
Denning, LJ alone in the Court of Appeal 25 was prepared
to imply such a term, invoking the officious bystander
test.26 The significance of this case for my purposes lies
in the treatment of this point by the House of Lords. 27 It
is of no interest that the Lords by a majority rejected the
supposed implied term. Three of them, however, drew a
distinction which has assumed importance in this area of
the law. This is the distinction between terms which are
implied by general rules of law - those implied from the
legal relationship28 between contracting parties and which
should be implied in all contracts of that type;29 and those
which are implied from the particular circumstances of
the case. 30
The next milestone is 1977. Liverpool CC v Irwin
was a landlord and tenant case. The council tenants
withheld rent in protest against the poor condition of the
15 storey residential town block in which they lived. The
trial judge found that lifts were out of order, staircases
unlit and the condition of the building generally was
appalling. It was accepted that the law compelled the
conclusion that there was no implied term in a lease of
unfurnished premises that the landlord would maintain
the flats themselves in repair. 31 The tenants relied upon
an implied term that the landlord would keep the common
areas which were not part of the rented premises in repair
and properly lighted. The scene was a textbook one for
that champion of the underdog and inspiration of idealistic
law students, by now, Lord Denning MR. His Lordship
found for the tenants. He, unlike the other members of
the Court of Appeal,32 was prepared to find the term
suggested. In so concluding, His Lordship ventured to
question the approach to implied terms established in the
two cases to which I have last referred. These cases, he
said, do not represent the way in which courts act.33 He
ACLN - Issue #60
then referred to a number of terms which have been
implied in cases such as contracts for the hire of goods,
those for the supply of goods and materials and contracts
to purchase a house in the course of construction. 34 The
test, His Lordship said, disclosed by these cases is not the
officious bystander test, not the test whether it was
"necessary to give business efficacy to the contract", but
whether the term was reasonable in all the circumstances. 35
The House of Lords 36 acted quickly to extirpate this new
heresy.37 Lord Denning's proposition that the Court will
imply a term where it is reasonable was firmly rejected
and the requirement of necessity confirmed. 38 So far as
the distinction between the two categories of implication
- implications by law and implications of fact is concerned,
only Lord Cross confirmed its existence in clear terms. 39
Lord Wilberforce, speaking with the concurrence of Lord
Fraser preferred the language, not of categories, but of
shades along a continuous spectrum. 40 In such a spectrum
we might find at one end, that where lurk terms at law, an
uncertainty whether the principle is, in truth, a term implied
by law or simply a principle oflaw. 41 Then, moving across
the spectrum, we pass by terms established by commercial
usage and arrive at the other end, where the existence of
the implied term depends upon a legal relationship arising
from the particular contractual circumstances, terms
implied from fact. Indeed, it may be possible to move
one shade further, beyond the range of contract into the
dark hue of tort, for where a special relationship is
established by contract or otherwise this may give rise to
a duty of care. 42 Insofar as their Lordships were thinking
of categories in the Lister v Romford Ice terminology, the
language they used suggests that three of them analysed
the case as an implication by law43 and two as one of
implication from fact,44 and of these five Lords, Lord
Wilberforce alone was a member 45 of the Judicial
Committee of the Privy Council who, sixteen months later,
delivered their celebrated advice in BP Refinery
(Westernport) Pty Ltd v Hastings Shire Council, the case
to which we must now tum.
The Case
The case concerned a favourable rating agreement
made between BP Refinery (Westernport) Pty Ltd and the
Shire in 1963. This was part of a trade-off made under an
agreement with the Victorian Bolte Government for the
construction of the refinery at Hastings. In 1969 following
an internal reorganisation within BP, BP Refinery
(Westernport) Pty Ltd transferred its shares to BP Australia
Ltd which then took possession of the refinery. The rating
agreement contained no provision for assignment and the
Shire assessed the new occupier at the ordinary rate. This
assessment was upheld by the Full Court46 on the basis
that the relevant provision of the Local Government Act
did not permit the granting of a preferential rate to the
new occupier so that BP Australia Ltd was not entitled to
the benefit of the rating agreement. BP Australia Ltd then
transferred the property back to BP Refinery (Westernport)
Pty Ltd. The Shire countered this move by contending
that the rating agreement contained an implied term that
21
it should continue only so long as BP Refinery
(Westernport) Pty Ltd was the rateable occupier of the
land and that the agreement had determined by the
operation of that term upon the transfer to BP Australia
Ltd. The Full Court upheld that submission. The basis
for this implication seems to have been to a large extent
dependent upon its previous decision as to the impact of
the legislation upon the agreement. If it was not competent
for the Shire to give preferential rate to a company which
was at the time of the agreement not a rate-payer, the
agreement could have no effect after the contracting rate-
payer ceased to be the rateable occupier. BP Refinery
(Westernport) Pty Ltd appealed from the Full Court direct
to the Privy Council. Surprisingly, their Lordships
departed from their usual practice of offering to Her
Majesty a unanimous advice. The majority47 were not
prepared to imply the term suggested by the Shire. In the
course of their advice they set out the conditions for the
implication of a term:
"Their Lordships do not think it necessary to review
exhaustively the authorities on the implication ofa
term in a contract which the parties have not thought
fit to express. In their view, for a term to be implied,
the following conditions (which may overlap) must
be satisfied:
(1) it must be reasonable and equitable;
(2) it must be necessary to give business efficacy
to the contract so that no term will be implied
if the contract is effective without it;
(3) it must be so obvious that "it goes without
saying";
(4) it must be capable of clear expression;
(5) it must not contradict any express term ofthe
contract. 48
The dissentients 49 put the test this way:
'If, in order to make an agreement work, or,
conversely, in order to avoid an unworkable
situation, it is necessary to imply a term; if
moreover implication ofthat term corresponds with
the evident intention of the parties underlying the
agreement, the law not only can but must imply the
term '."50
It is interesting to note that the majority, having
found that the term proposed by the Shire did not meet
the requirements which they set out, concluded that,
nonetheless, a term had to be implied in the rating
agreement to give it business efficacy. The term which
they inserted in the agreement was that the benefit of the
agreement extended to a company to which the rights of
BP Refinery (Westernport) Pty Ltd were assigned provided
that the BP Company of Australia Pty Ltd held 30% or
more of its issued capital. 51 It will be readily noted that in
terms of the two categories of implied terms referred to in
Lister v Romford Ice this would be a term implied from
fact and the five preconditions to the implication of a term
set out in this case have been consistently applied for terms
of that category. 52
ACLN - Issue #60
Implication at Law or of Fact
The High Court53 has endorsed the distinction
between terms implied as a matter of law, terms which
are "a legal incident of a particular class of contract"
and those implied from fact where this is necessary to
give business efficacy to the particular contract, and this
may be taken to represent current orthodoxy.54 Lord
Bridge, speaking of the distinction, and with the
concurrence of all of the members of the House of Lords
has said that previous decisions had indicated that it was
"a clear one". 55 It is a distinction which has an interest
for all lawyers in the construction industry, not merely
for those with a leaning to taxonomy; it bears upon the
way the term is pleaded, the way it is established, and of
course, the way the court approaches its task.
Pleading and proving an implied term
The Rules of Court oblige a party to plead facts, not
evidence, nor law.56 If the term is to be implied as a matter
of law, it would seem, therefore, that it is not only
sufficient, but obligatory for the pleader merely to identify
the category of contract it is including, where this is
necessary the features of the contract which attract the
operation of the legal principle. Where the term is of the
other category, the pleading must contain each of the facts
from which the implication is to be drawn. As will be
seen, these will include the terms of the contract relied on
and the relevant factual background against which the
contract is to be analysed.
Proof of an implied term must also reflect this
distinction. So far as an implication of law is concerned,
the evidence required should be minimal. I leave to one
side evidence which might show that the parties intended
to exclude the supposed term. Take for example the term
as to co-operation - that each party will do all that is
reasonably necessary to secure performance of the
contract.57 The proof of the facts necessary to establish
such a term will normally present no problem; in many
cases the term will be admitted. The real area of contest
is likely to be in the proof of breach. This will mean that,
in cases where this category of term is in issue, the question
may often be appropriate for determination as a
preliminary issue. 58
It will be seen from an examination of the cases
where terms of this category have been implied that they
are formulated with considerable generality.59 In addition
to the examples to which I have referred, the following
well-recognised illustrations come readily to mind:
contractor will perform the work in a proper
and workmanlike manner;60
contractor will complete the work within a
reasonable time;61
proprietor will pay a reasonable price;62
proprietor will indemnify the contractor
against claims resulting from proper
performance of the work;63
proprietor will provide access sufficient to
enable performance of the work;64
designer will perform design work with
reasonable skill and care. 65
22
Although all of these terms would satisfy the
officious bystander test, it is not necessary that they do so
for it is the law, not the parties, which imputes the term in
a contract for the performance of work.
Let us now tum to the second category of implied
term - those implied from fact. The attention of the pleader
and, ultimately that of the advocate, here is fastened upon
the particular case. The starting point is to muster all the
circumstances which collectively require that the inference
be drawn for the contract before the court. These facts
will commonly rise from the terms of the contract itself
and from the factual matrix against which it was made.
I interrupt myself at this stage to mention a matter
which has often troubled· me on this topic. This is the
practice of pleading as part of the facts from which the
term, presumably one of fact, is to be implied, that the
parties performed the contract on a particular basis. This
is particularly a feature of pleading in building cases. It
often happens that the parties to a building project, having
signed their contract at the commencement of the work,
ignore its terms thereafter, or adjust claims made under it
on a basis which they consider fair and reasonable rather
than under the contractual terms. An example of this is
the case where the contractor is delayed by late instructions
and seeks compensation. Although the contract may
contain no provision for prolongation costs, the proprietor
not infrequently adjusts the price as if it did or gives some
indication that this will be done. A moment's reflection
will indicate that such a situation may give rise to a
variation of the contract, to an inference of waiver, to some
estoppel or to an entitlement based on restitution, or even
to a new contract.66 Subsequent performance may also
assist an inference that the parties in fact agreed upon a
particular express term which escaped the document
containing the contract, which might, therefore, be
rectified. It may, for present purposes, provide a basis for
supposing what response might have been given to the
officious bystander's question. But, even allowing for
this, I have always had the greatest difficulty understanding
how an event occurring after contract can, as a matter of
logic, amount to a fact from which a term can be implied
in the contract.
I return to the matters which should be pleaded and
proved to establish a term implied from fact. The pleader
should spell out what the supposed term is and how it is
that its absence renders the contract inefficacious. It is
clear that the primary source of the implication is the terms
of the contract themselves whether they be written or oral.
Where it would be appropriate for the purpose of constru-
ing the contract to have· regard to the factual matrix, the
objective framework of facts which the contract came into
existence,67 these should be pleaded and proved. Evidence
of the actual intention of the parties is, of course, inad-
missible, except where this demonstrates that the parties
were both agreed that the supposed term should not be
included. 68
ACLN - Issue #60
The task of the Court
Authority directs the Court in the case of each
category of terms to approach the task of implication in a
different way. Where the task is that of looking for
implication of fact, it must focus on the particular contract,
its terms and its factual background; where it is seeking
to draw an implication of law it starts by looking for a
contract of a definable type. 69 In the case of a term implied
by law the Court must look at the contractual relationship
between the parties to determine whether it falls within a
definable category. If it does, and existing authority
indicates that the law will attach the term in question to a
contract of that category, it will be done. In such a case,
however, where authority gives no guide, the court must
proceed by the application of principle. In so doing, it
proceeds, as it does in any uncharted area of common law,
with caution, mindful of existing commercial practice,70
using existing authority as analogy and bearing in mind
that its determination will establish a precedent for future
contracts of that category. Second, it is not concerned
with the intention of the parties. Where the question is as
to a term to be implied as of fact, attention is directed via
the officious bystander to the question what such a person
would suppose the negotiating parties would have
intended. Next, as already mentioned, a term to be implied
as a matter of law is likely to be expressed in terms of
much greater generality than terms implied as of fact.
Finally, but this may be somewhat contentious, the Court
is likely to insist that a term to be implied from fact satisfy
a more severe reading of the requirement that the
implication be necessary for the efficacy of the contract.
I would now like to consider briefly these differences and
then to examine two terms frequently inserted by the courts
into building contracts - that the work and materials be
reasonably fit for the purpose; and that the parties must
co-operate where this is required for the performance of
the contract.
The Distinction between Terms at Law and Terms
of Fact
The first step in the process of implication as a matter
of law is said to be that of classifying the contract or the
relationship which it establishes. 71 But even this is not
always required, for the supposed term, such as that of
co-operation, may apply to all contracts.7 2 At the other
extreme is the relationship created by the contract with
very specific terms. In Scully v Southern Health and Social
Service Board73 the contractual relationship was defined
as follows:
"The relationship ofemployer and employee where
the following circumstances obtain:
(1) the terms ofthe contract ofemployment have
not been negotiated with the individual
employee but result from negotiation with a
representative body or are otherwise
incorporated by reference;
(2) a particular term of the contract makes
available to the employee a valuable right
contingent upon action being taken by him
to avail himse if of its benefit;
23
(3) the employee cannot, in all the
circumstances, reasonably be expected to be
aware of the term unless it is drawn to his
attention. "
In such a contract it is now the law that there is an
"obligation on the employer to take reasonable steps to
bring the term ofthe contract in question to the employee's
attention, so that he may be in a position to enjoy its
benefit". How frequently might one encounter a contract
of this definable type? Could such a term be incorporated
in a sub-contract in a building project where the terms of
the head contract which have been incorporated by
reference confer upon the subcontractor a valuable right,
but one which requires action by the sub-contractor to
avail itself of its benefit?
In my view Scully's case obscures an important
distinction between the class of contract and the
preconditions for the existence of the term. To take the
example of a sale of goods, it is legitimate to say that,
first, in every contract for the sale of goods the law will
imply a term as to fitness, and, second that this term
operates only in a specified situation, namely, where the
purpose is disclosed and that this is done in circumstances
which indicate a reliance on the seller's skill and judgment.
To my mind it is not legitimate to include in the definition
of the class of contract, not only the fact that it is a contract
for the sale of goods, but also that it is one where the
specified situation obtains. The distinction is of more than
theoretical importance; as the class of contract is defined
more narrowly, so is it more difficult for the courts to
develop a cohesive jurisprudence spelling out the rights
of parties in a given contractual relationship. This is
particularly important in building contracts which, despite
a superficial uniformity, contain significant differences.
If the preconditions for the existence of a term at law are
written into the definition of the contract, the unfortunate
trial judge or arbitrator will have to contend with a
wilderness of unique contracts from which to select the
most appropriate. In this way the value of the term implied
by law will be largely lost.
The second and fundamental difference between the
two types of implied term lies in the presence or not in the
judicial process of an inquiry into the intention of the
parties to the contract74 This must be taken as a reference
to their intention objectively determined, not to their actual
intention. 75 In the case of implication by law intention is
not the determining factor; the implication must rest on
broader considerations,76 although what these
considerations are has never been completely worked out.
In Castlemaine Tooheys Ltd v Carlton & United Breweries
Ltd, Hope JA77 discussed the cases on this point and
concluded that the supposed term will not be implied,
absent existing authority to that effect, unless it is both
reasonable and necessary in the sense that the contract
itself impliedly requires the insertion of the unexpressed
term.
ACLN - Issue #60
Necessity
If anything is clear in this area of the law it is that
no term will be implied, whether by law or from fact,
unless it is necessary for the efficacy of the contract in a
commercial sense. 78 It is not sufficient that the term be
advantageous to one party.79 Yet, even here it is possible
to discern a difference in approach between the two types
of term, and even in the much-used expression "necessary
to give efficacy [or business efficacy] to the contract" there
is uncertainty. Despite some hints to the contrary,80 the
requirement of necessity does not attach to the process of
implication, but to the performance of the contract. It
does not mean simply that the term was so obviously
intended by the parties the court is necessarily driven to
make the implication.81 It is, of course, correct to say that
the court will be slow to imply a term, especially a term
from fact,82 but we are not here concerned with this aspect
of the topic. Necessity attaches to the performance of the
contract. But, even here, the concept is an elusive one.
The frequent reminder that the efficacy must be
commercial efficacy exposes this. In a given case, this
requirement will be more or less difficult to satisfy
depending upon whether attention is focussed on the
"efficacy" or "commercial" components of this expression.
Consider, for example, some well-known cases
where the implied term as to co-operation has been in
question. It is implied in a conventional building contract
that the proprietor will provide to the contractor access to
the site as is required of the performance of the work83 in
accordance with the contract.84 The use of the word
"requirecf' highlights the aspect under discussion, for the
term is implied only so far as is necessary, not so far as is
desirable,85 to enable the contractor to carry out its
fundamental obligation - to construct the works in
accordance with the contract. Nevertheless, the
requirement that the term be necessary for the business
efficacy of the contract has been applied in a flexible way.86
In Hawkins v Clayton, Deane J87 adopted the expression
"the implication ofthe term is necessaryfor the reasonable
or effective operation of a contract of that nature in the
circumstances of the case ."88
The Implied Term as to Fitness
By the middle of the nineteenth century it was
established that a contract for the sale of goods contained
an implied term that the goods would be reasonably fit
for the purpose for which, as the parties knew, they were
required.89 No such term was included in contracts for
work and labour or for the sale of materials to be affixed
in the building work. 90 This led to some surprising cases
on each side of the line dividing the two types of contract91 .
By 1930 there was authority that in a contract to sell an
incomplete house and to complete it, there is a term that it
be on completion, reasonably fit for habitation. 92 The
judgments speak in terms of the law implying a term as to
fitness in contracts of this kind where it was in the
contemplation of the parties that the house, when
completed, was for the purchaser to live in. Nevertheless,
the reference by Swift J to The Moorcock suggests that
24
the process of implication involved a consideration of the
supposed intention of the parties - an implication as of
fact. The extension of the term to building contracts
generally had to wait another 30 years. In McKone v
Johnson 93 it was accepted that, where the purpose for
which the building was required was disclosed to the
contractor and it appeared that the proprietor relied, to
the contractor's knowledge, on the contractor's skill and
judgment, a term as to reasonable fitness would be implied
in an ordinary building contract. It is clear from this case
and the cases which have followed that the term is inserted,
not as an implication of fact, but as an incident of the
relationship between the parties. 94 It is not relevant for
my purpose to trace the interesting history of the gradual
enlargement of this term to the present situation where it
is readily available where the preconditions are satisfied.
It is sufficient to note that the term which first appeared
shyly as an implication from fact has now achieved
respectability as befits an implication at law where the
court would not for a moment speculate upon the intention
of the parties or think to consider whether the five
conditions laid down in the BP Refinery case were
satisfied. 95 The question which such a development raises
is precisely how it can be that a term of one category can
be transformed into one of an altogether different
category? And, on a more practical level, at what point
along this development does the pleader, the advocate and
the judge move from the principles applicable to one to
those applicable to the other?
The Implied Term as to Co-operation
This is the implied term which is most resorted to
in building cases. It assumes various manifestations
depending upon the circumstances which bring the parties
into conflict. At its most basic, it supposes that the
proprietor will give to the contractor access to the site as
is required to carry out the work and that the proprietor
will provide sufficient instructions and details as are
necessary for the same purpose. I do not propose to dwell
on these implied terms except to ask a question which is
fundamental to the analysis in this paper. It is a question
to which no easy answer is provided by authority. The
question is this: Is the supposed term one to be implied
by law or one to be implied from fact? For reasons which
I have endeavoured to expound, this question is not an
idle one.
Expressed as particular manifestations of the implied
term asto co-operation, one is drawn immediately towards
the conclusion that these terms should be implied by law.
From a practical point of view it is not so easy. Few
contractors would see their case much advanced by the
implication of a term expressed so generally. The task is
made more complicated by the intrusion into this
theoretical debate of all the other terms of a typical building
contract, such as an obligation to accelerate to make up
lost time or the traditionally obscure status of the
construction programme and the effect of a right or a duty
to update it. 96 What happens in the real world is that the
supposed term in question is massaged into greater
ACLN - Issue #60
particularity by both parties: by the contractor who wants
it to fit the facts which are hoped to constitute the breach;
and by the proprietor who wants to show that it is
inconsistent with some express term. The end result upon
the particular contract and in the particular facts is that all
concerned, for very good reason, treat the exercise as one
of implication from fact. Only a purist would complain
about such an approach to the task of implication of terms
of this kind, and I do not number myself among them.
But the situation raises the theoretical question: on what
side of Lord Bridge's line of "clear distinction" does such
an term fall? Nor is the problem dismissed by an appeal
to the analogy of the spectrum, given the different
processes involved in the task of implication in each case.
A distinction without a difference?
At this point I throwaway my trial judge's gown to
peer into the future of this area of law. My impression is
that the distinction between terms implied by law and those
implied by fact is much less clear than it might at first
appear. I have mentioned Lord Wilberforce's image of a
spectrum on which the two categories of contract can be
seen at either end. The closer one gets to the point of
departure for each of these extremities, the more attractive
is this image. But it is, in my view, not possible to embrace
it without abandoning the fundamental conceptual and
practical distinctions that lie between the categories. When
the contract falls in this uncertain part of the spectrum
how is the pleader to formulate it; how is the advocate to
present it and how is the Court to determine it?
The present High Court has in many areas been
prepared to treat specific causes of action, not as discrete
rights, but as manifestations of a broader underlying
principle. Nowhere is this better illustrated than in the
area of tort. No longer do we treat a claim as one arising
from the law relating to occupier's liability,97 or from that
in Rylands v Fletcher98 or as economic/non-economic
loss.99 These have gone the way of the old medieval causes
of action; they are now subsumed under a principle based
on proximity. The same has been the experience in other
areas of law that construction lawyers know and love so
well, for example restitution,lOo equities arising out of
unconscionability101 and estoppels. 102 There are signs that
the law relating to implied terms is already beginning to
enjoy the same fate. Indeed, a close examination of the
logical processes involved in the implication of terms by
law and from fact suggests to me that it is possible, as in
the law of negligence, to identify frequently encountered
contracts where the relationship between the parties and
the requirements of commercial reality are such that it is
not difficult for the law to insert and the parties to accept
the insertion into their contract of appropriate terms. In
other cases, as in the law of negligence, it will be necessary
to examine the relationship more closely, and from this to
determine whether the insertion is required. In each case,
the critical factor is the requirement the contract be given
commercial efficacy; in the case of frequently encountered
contracts and frequently inserted terms, this will go
without saying, as is the case with the duty of care between
25
motorist and passenger, so that it will be scarcely necessary
to ask whether the contract is efficacious without it. I
venture to predict that the BP Refinery case, at least as it
is now understood and applied, will be lucky to see out
the centenary of Federation. Although it was not reported
in any of the English reports, it has been applied in that
country103 as well as in Australia, New Zealand 104 and
Hong Kong,105 but in a far from rigid way, at least insofar
as it concerns terms implied as a question of fact. In
Australia it has been said, first, that the five conditions
need not all be met where the contract into which the term
is to be inserted is not complete on its face or where it is
oral or partly oral and the parties have never sought to
reduce it to complete written form. 106 On the other hand,
there are certain contracts where it is said that the courts
should be slow to insert terms. These are contracts in
standard form, particularly where the form is that
stipulated for by a government department 107 or where it
is apparent that the parties have set out their bargain in a
detailed and comprehensive document. 108 Moreover, in
Hawkins v Clayton Deane J109 warned against the
temptation to formulate a precise mechanical test for
defining the terms, if any, which should be implied in a
case where the parties have not sought to spell them out.
Recently, in the English Court of Appeal, Steyn J110 put
the task of the Court as being that of determining "whether
the proposed implication is strictly necessary if the
reasonable expectations of the parties are not to be
defeated".lll
The fundamental problem to my mind lies in the
distinction which is said to originate in Lister v Romford
Ice between terms implied by law and those implied from
fact. As we have seen, that distinction is, at best, arbitrary,
at worst, illusory and, in any event, not helpful. Building
and construction lawyers do not need to be told of the
risks of erecting upon such an insubstantial footing the
edifice which I have sought to describe. Furthermore,
the exercise of looking for the supposed intention of the
parties is futile. By the time they are embroiled in litigation
it is unlikely that the Court will be able to identify what
they actually had in mind on the contentious point and, in
any event, this is irrelevant. Nor is it helpful to introduce
the officious bystander. The supposed question is in truth
posed112 and answered by the judge, not by some fictitious
creature, nor even less by the parties themselves. The
probabilities are that neither party foresaw the
circumstance which brings them to litigation. In such a
case it is not sensible to speak of inferring their intention,
objective or otherwise. What the Court is asked to do is
to insert against the will of one party a term to make the
contract work. Whether this is a term which the law or
custom imposes willy nilly, or whether it is a term that
commercial common sense dictates, the court is
legislating. The implied term is in fact imputed, not
inferred. Why should we not stand back and acknowledge
this? It will be apparent that this position in some respects
resembles the heresy propounded by Lord Denning MR
in Liverpool City Council v Irwin to which I have referred.
The point of difference between that view and the position
ACLN - Issue #60
which I argue for lies in the distinction between the
criterion of reasonableness which his Lordship supported,
and the more severe one of necessity which I accept.
The traditional reaction of the common law where
theoretical analysis gets in the way of common sense is to
jettison the former. It is not difficult to suppose a system
where the Court would ignore altogether the distinction
between terms implied by law and terms implied from
fact. When a plaintiff asks a Court to imply a term in a
commercial contract, it would look at the contract as it
stands, in the context in which it had been made and was
expected to operate; it would be told how it would operate
without the supposed term or whether it would not operate
at all; and how the insertion of the supposed term would
affect the position. Where the supposed term is one which
the cases have in the past readily implied in contracts of
the type, it would be implied unless the parties had
expressly or impliedly excluded it. 113 In other cases the
term would not be implied unless the plaintiff
demonstrated that, without it, the commercial intent of
the contract would be defeated. 114 In such a case the
question whether a term should be inserted, and the terms
of that term would be a matter for the judge having regard
to the intention of the parties objectively determined from
the contract or from other circumstances known to them
at the time of contract and, where necessary, to any relevant
policy requirements. 115 Such an approach would not
involve any attempt to speculate what might have been
the actual, or supposedly actual, intention of the parties.
This task, in any case, probably amounts to no more than
the Court asking itself what it might have agreed to if it
had been in the shoes of the negotiators. To dress up the
task in terms of an answer to the officious bystander's
inquiry is merely to emphasise the obvious - that the Court
will not without good cause intrude into a voluntary
contract - at risk of distracting attention from its real
objective which is to enable the commercial arrangement
to fulfil the expectation of the parties. Let us by all means
erect in honour of the officious bystander a statue in his
image, but let us not thereby delude ourselves that he is
other than a character in a striking and colourful fable.
Let us ask him whether he wants to continue to groan
under the burden that he has borne for the past fifty-five
years? I feel confident that his answer would be a testy
"Of course not". 0 "The Parol Evidence Rule and Implied Terms: the
26
Footnotes
1. See: Cole, "The Concept of Reasonableness in
Construction Contract" (1994) 1 BCL 7.
2. I endow this person with masculinity, even in 1994,
because it seems to me inherently improbable that
officiousness could be considered a female
characteristic.
3. Shirlaw v Southern Foundries Ltd (1926) Ltd (1939)
2 KB 206 at 227, per MacKinnon, LJ.
4. See for example ANZ Banking Group Ltd v Frost
Holdings Pty Ltd [1989] VR 695 which may stand
at the point of contact between the implied existence
of a contract and its implied terms. See also
Aotearoa International Ltd v Scan Carriers AlS
[1985] 1 NZLR 513 at 556; [1985] 2 Lloyd's Rep
419 at 442, per Lord Roskill. This case is discussed
in Coote, "Contract Formation and the Implication
of Terms" (1993) 6 Jo of Contract Law 51.
5. See for example DTR Nominees v Mona Homes
(1978) 138 CLR 423; Secured Income Real Estate
(Australia) Ltd v St Martins Investments Pty Ltd
(1979) 144 CLR 596. In Vickery v Waitaki
International Ltd [1992] 2 NZLR 58 at 64, Cooke P
postulated as a type of implied term that deduced
"by implication or interpretation from the express
terms of the contract". See too Paul v Mobil Oil
NZ Ltd [1992] 2 NZLR 194 at 202. Also, there is
frequently a point of contact here for an argument
based on interpretation is often put as an alternative
to the implication of a term and, as we shall see, the
implication is made against the matrix of the
contract.
6. See for example Codelfa Construction Pty Ltd v
State Rail Authority of NSW (1982) 149 CLR 337
at 346, per Mason J. The point of contact here is
that one of the circumstances in which a term is
implied is where the parties did not turn their minds
to the term but would have agreed the term had they
done so.
7. Here, too, there may be a point of contact since the
term which one party seeks to introduce into the
written contract may have been discussed before
contract and expressly omitted: Codelfa
Construction Pty Ltd v State Rail Authority ofNSW
(1982) 149 CLR 337 at 352-4, per Mason J. See
the interesting discussion of this in Hadjiyannakis,
Sounds ofSilence" (1985) 54 Fordham Law Review
35.
8. Although convenient, the cases admit nothing like
a rigidly discreet classification of implied terms:
Vickery v Waitaki International Ltd [1992] 2 NZLR
58 at 64, per Cooke P.
9. See, for example, Hawkins v Clayton (1988) 164
CLR 539 at 573, per Deane J.
10. Con-Stan Industries ofAustralia Pty Ltd v Norwich
Winterthur Insurance (Australia) Ltd (1986) 160
CLR 226 at 236-7. See also London Export Corp
Ltd v Jubilee Coffee Roasting Co Ltd [1958] 2 All
ER 411 at 420, per Jenkins, LJ.
11. (1977) 16ALR363.
12. (1889) 14 PD 64 at 68.
ACLN - Issue #60 27

13. At 67. damages clauses. See SMK Cabinets v Hili Modern

14. At 68. Electrics Pty Ltd [1984] VR 391 at 394-5, per
15. At 69. Brooking J.
16. At 71. It is difficult to see what that consideration 42. As, for example, the duty owed by an employer to
had to do with the task undertaken by the two other an employee to provide a safe system of work:
judges and for which the case is authority. Wright v TNT Management Pty Ltd (1989) 15
17. Bottoms v York Corporation (1892) Hudson's BC NSWLR 679 at 685, per McHugh JA.
(3rd ed) 220, CA (comprising Lord Esher MR, 43. Lords Wilberforce, Salmon, Fraser.
Bowen, Kay LJJ). 44. Lords Cross, Edmund-Davies.
18. In 1931 it was held that, in a contract between a 45. But a dissentient.
builder and a purchaser, there is an implied term 46. BP Australia Ltd v Hastings Shire Council [1973]
that the building be fit for habitation: Miller v VR 194.
Cameron Estates Ltd [1931] 2 KB 113. 47. Viscount Dilhome, Lords Simon of Glaisdale and
19. "A term can only be implied if it is necessary in Keith of Kinkel.
their business sense to give efficacy to the contract": 48. 16 ALR at 376.
Reigate v Union Manufacturing Co (Ramsbottom) 49. Lords Wilberforce and Morris of Borth-y-Gest.
Ltd [1918] 1 KB 592 at 605, per Scrutton LJ. 50. At 384.
20. [1939] 2 KB 206. 51. This requirement meant that the assignee met the
21. Sir Travers Humphreys, a common law judge with requirements of the agreement made with the State
considerable experience in the criminal law. of Victoria for the construction of the refinery, this
22. MacKinnon LJ and Goddard LJ (another criminal agreement being part of the matrix against which
lawyer). the rating agreement was entered into.
23. At 227. His Lordship has acquired a considerable 52. Secured Income Real Estate Australia Ltd v St
reputation for the felicitous phrase, as is Martins Investments Ltd (1979) 144 CLR 596:
demonstrated by an examination of the index to RE Codelfa Construction Pty Ltd v State Rail Authority
Megarry, Miscellany at Law Stevens, London 1955 of NSW (1982) 149 CLR 337: Hospital Products
p400. Ltd v United States Surgical Corporation( 1984) 156
24. Lister v Romford Ice & Cold Storage Co Ltd [1957] CLR41.
AC 555. 53. Con-Stan Industries of Australia v Norwich
25. Denning, Birkett, Romer LJJ. Winterthur Insurance (Australia) Ltd (1986) 160
26. [1956] 2 QB 180 at 192. CLR 226 at 237; Codelfa Construction Pty Ltd v
27. [1957] AC 555. State Rail Authority of NSW (1982) 149 CLR 337
28. At 576 ("status"), per Viscount Simonds. at 345, per Mason J.
29. At 586, per Lord Morton who then referred to the 54. Vroon v Foster's Brewing Ltd (unreported, SC (Vic),
Moorcock test. Ormiston J, 2097/1991, 11 March 1993);
30. Lord Radcliffe and Lord Somervell held that such a Castlemaine Tooheys Ltd v Carlton & United
term should be implied by the application of the Breweries Ltd (1987) 10 NSWLR 468; Renard
officious bystander test. Constructions (ME) Pty Ltd v Minister for Public
31. Woodfall on Landlord and Tenant, 27th ed, 1968 Works (1993) 26 NSWLR 234 at 255-6; 9 BCL 40
par 1491. at 55-6, per Priestley JA (where terms implied from
32. [1976] 1 QB 334, Denning MR, Roskill, Ormrod fact are referred to as terms "implied ad hoc").
LJJ. 55. Scully v Southern Health and Social Services Board
33. [1976] 1 QB at 329. [1991] 4 All ER 563 at 571.
34. At 330. 56. VIC: RSC RI3.02; NSW: RSC Pt 15 r 7.
35. As to this, see Bonython v The Commonwealth 57. Mackay v Dick (1881) 6 App Cas 251 at 263, per
(1948) 75 CLR 589 at 625, per Dixon J. Lord Blackburn; Secured Income Real Estate
36. [1977] AC 239. Incidentally, they allowed the Australia Ltd v St Martins Investments Pty Ltd
tenants' appeal on another point. (1979) 144 CLR 596 at 607, per Mason J.
37. It is so described by JP Swanton, "Implied 58. Pursuant to VIC: RSC R47.04; NSW: RSC Pt 31 r 2.
Contractual Terms: Further Implications of 59. London Borough of Merton v Stanley Hugh Leach
Hawkins v Clayton" (1992) 5 Jo of Contract Law Ltd (1985) 32 BLR 51 at 76, per Vinelott J.
127 at 130. 60. Riverside Motors Pty Ltd v Abrahams [1945] VLR
38. At 254, Lord Wilberforce (Lord Fraser concurring 45; Foster v AT Brine & Sons Pty Ltd [1972] WAR
at 270); at 258, per Lord Cross; at 262, per Lord 157.
Salmon; at 266, per Lord Edmund-Davies. 61. Charnock v Liverpool Corporation [1968] 3 All ER
39. At 258. 473 at 477, per Salmon LJ.
40. At 253-4. 62. Horton v Jones (No.2) (1939) 39 SR (NSW) 305 at
41. For example, it is by no means certain that the term 319, per Jordan CJ.
whereby the proprietor loses the benefit of a 63. R v Henrickson (1911) 13 CLR 473 at 480, per
liquidated damages clause by acts of prevention is Griffith CJ.
properly to be seen as an implied term at all; rather 64. Commonwealth v Austin Australia (1986) 5 Aust
than a positive rule of law applicable to liquidated Const LR (Pt 2) 19, SC(NSW).
ACLN - Issue #60
65. Voli v Inglewood Shire Council (1963) 110 CLR 74
at 84, per Windeyer J.
66. Roxburgh v Crosby & Co [1918] VLR 118 at 140,
per Cussen J.
67. Codelfa Construction Pty Ltd v State Rail Authority
ofNSW (1982) 149 CLR 337 at 353, per Mason J.
But compare the more restrictive view of Brennan
J at 403. To the extent of conflict, I believe that the
judgment of Mason J more accurately states the law.
68. Codelfa Construction Pty Ltd v State Rail Authority
of NSW (1982) 149 CLR 337 at 352-3, per Mason
J. Such an intention may be indicated by the deletion
of a term from a standard form agreement (Mottram
Consultants Ltd v Bernard Sunley & Sons Ltd (1974)
2 BLR 31 at 47, per Lord Cross); from the omission
of a term from a contract which is modelled on a
standard form agreement (NZI Capital Corporation
Pty Ltd v Child (1991) 23 NSWLR 481); or,
possibly, from the deletion of a term from a draft
(Timber Shipping Co SA v London & Overseas
Freighters Ltd [1972] AC 1 at 15-6, per Lord Reid).
69. In National Bank of Greece SA v Pinios Shipping
Co No 1 [1990] 1 AC at 637 at 645-6, Lloyd LJ
makes mention in this context of "one off' contracts
as being inappropriate for an implication of law, a
mention which evokes memories of The Nema in a
very different context.
70. Where the implication of a term as a matter of fact
in contracts of the definable type has become a
commonplace, the court will import it into all
contracts of that type as a matter of course:
Castlemaine Tooheys Ltd v Carlton & United
Breweries Ltd (1987) NSWLR 468 at 487, per Hope
JA; Diveji v Mateffy Pearl Nagy Pty Ltd (1993)
113 ALR 225 at 240, per Northrop, Gummow, Hill
JJ; Service Station Association Ltd v Berg Bennett
& Associates Ltd (1993) 117 ALR 393 at 402, per
Gummow J; 179 Elizabeth Street Pty Ltd v Austcorp
Hotels Pty Ltd (1993) Aust Contract Reports 90-040.
71. Con-Stan Industries of Australia v Norwich
Winterthur Insurance (Australia) Ltd (1986) 160
CLR 226 at 237, per Deane J.
72. Butt v McDonald (1896) 7 QLJ 68 at 70-1, per
Griffith CJ.
73. [1991] 4 All ER at 571-2.
74. I emphasise here that I am concerned with the
existence of the implied term of each type, not with
the associated question whether the term has been
excluded by the parties expressly or impliedly.
75. References to "actual intention" in the judgment of
Deane J in Hawkins v Clayton (1988) 164 CLR 539
at 570, must be understood in this light. See
Roxburgh v Crosby & Co [1918] VLR 118 at 137,
per Cussen J; Codelfa Construction Pty Ltd v State
Rail Authority ofNSW(1982) 149 CLR 335 at 353,
per Mason J; Adelaide Petroleum NL v Poseidon
Ltd (1990) 98 ALR 431 at 534, per French J.
76. Con-Stan Industries of Australia v Norwich
Winterthur Insurance (Australia) Ltd (1986) 160
CLR 226 at 237, per Gibbs CJ etc.
28
77. (1987) 10 NSWLR 468 at 488-9, speaking with the
concurrence of the other members of the Court of
Appeal.
78. Hospital Products Ltd v United States Surgical
Corporation (1984) 156 CLR41 at 139, per Dawson
J; at 118, per Wilson J; at 66, per Gibbs CJ; Codelfa
Construction Pty Ltd v State Rail Authority ofNSW
(1982) 149 CLR 337 at 346, per Mason J; Renard
Constructions (ME) Pty Ltd v Minister for Public
Works (1993) 26 NSWLR 234 at 257; 9 BCL 40 at
57, per Priestley JA.
79. Secured Income Real Estate Australia Ltd v St
Martins Investments Pty Ltd (1979) 144 CLR 596
at 605, per Mason J. See, for example, Neodex Ltd
v Borough of Swinton(1958) 5 BLR 34 at 51, per
Diplock J (access available, but not the most
economical access, nor that contemplated by the
tenderer at the time of tender).
80. Hamlyn v Wood (1891) 2 QB 488 at 494, per Kay J;
Peters American Delicacy Co Ltd v Champion
(1928) 41 CLR 316 at 322-3, per Knox CJ, Isaacs,
Gavan Duffy JJ; Heimann v The Commonwealth
(1938) 38 SR (NSW) 691 at 695, per Jordan CJ.
81. Roxburgh v Crosby & Co [1918] VLR 118 at 136-
7, per Cussen J.
82. In The Jardine Engineering Corporation Ltd v The
Shimizu Corporation (1992) 63 BLR 96 at 115 (SC
Hong Kong), Kaplan J refused to imply the supposed
terms on the basis that it cannot be necessary to
imply them where the plaintiff can succeed on
another basis. It is suggested, with respect, that this
is an incorrect application of the requirement of
necessity.
83. The performance of the work being a fundamental
obligation under the contract: Secured Income Real
Estate Australia Ltd v St Martins Investments Pty
Ltd (1979) 144 CLR 596 at 607, per Mason J.
84. Hence the obligation is not one to enable the
contractor to perform efficiently or economically:
Martin Grant & Co Ltd v Sir Lindsay Parkinson &
Co Ltd (1984) 29 BLR 31 at 40-1, per Lawton LJ;
nor more speedily than the contract requires:
Glenlion Construction Ltd v The Guinness Trust
(1987) 38 BLR 89, Official Referee: but the access
must, however, be sufficient in nature and sufficient
in time to enable the contractor to carry out the
contract work within the time frame imposed on it:
Freeman & Son v Hensler (1900) Hudson's BC (3rd
ed) 323, CA.
85. In any contract, particularly a building contract, co-
operation between proprietor and contractor is
desirable. The law, however, will step in to insert
an obligation to co-operate only where it is
necessary: Mona Oil Equipment Co v Rhodesia
Railways [1949] 2 All ER 1014 at 1018, per Devlin
J; London Borough of Merton v Stanley Hugh
Leach Ltd (1985) 32 BLR 51 at 80-1, perVinelott
J.
86. The difference between the majority and the
minority in the BP case illustrates this trend.
ACLN - Issue #60
87. 164 CLR 573. See too Heimann v The
Commonwealth (1938) 38 SR (NSW) 691 at 695,
per Jordan CJ ("necessary to imply the term in order
to make the contract operative according to the
intention of the parties as indicated by the express
terms").
88. His Honour's judgment on this topic, in many
respects, sits uncomfortably with orthodox
statements of the law. It may be considered,
depending on the point of view, as an aberration or,
as I would prefer, as a signpost to future
development. See JP Swanton, "Implied
Contractual Terms: Further Implications of
Hawkins v Clayton" (1992) 5 Jo of Contract Law
127.
89. See Benjamin on Sale (2nd ed) 1873 p525, The rule
was included in the codifying statutes in the 1890's
which came to be VIC: Goods Act 1958 s 19(a);
NSW: Sale of Goods Act 1923, s19(1).
90. Although building materials fall within the
definition of "goods", an agreement to supply them
in such circumstances is not a contract for the sale
of goods: Brooks Robinson Pty Ltd v Rothfield
[1951] VLR 405 at 408, per Dean J.
91. Contracts held to be for the sale of goods included
contracts for the supply of a meal in a restaurant
(Lockett v Charles [1938] 4 All ER 170); to make
and fit false teeth (Lee v Griffin (1861) 1 B & S
272; 121 ER 716; cf Samuels v Davis [1943] KB
526) or to supply and lay a carpet: Philip Head &
Sons Ltd v Showfronts Ltd [1970] 1 Lloyd's Rep
140; whereas the following have been held to be
contracts for work and materials: contracts to paint
a portrait (Robinson v Graves [1935] 1 KB 579; cf
Isaacs v Hardy (1884) Cab & EI 287), to repair a
car (GH Myers & Co v Brent Cross Service Co
[1934] 1 KB 46), to apply hair dye (Watson v
Buckley, Osborne, Garrett & Co Ltd [1940] 1 All
ER 174) or to roof a house (Young & Marten Ltd v
McManus Childs Ltd [1969] AC 454).
92. Lawrence v Cassel [1930] 2 KB 83; Miller Cannon
Hill Estates Ltd [1931] 2 KB 113. See too Hancock
v BW Brazier (Anerley) Ltd [1966] 2 All ER 901,
CA.
93. [1966] NSWR 471.
94. See, for example, Cable (1956) Ltd v Hutcherson
Bros Pty Ltd (1969) 123 CLR 143; BasildonDistrict
Council v JE Lesser (Properties) Ltd [1985] 1 All
ER 20 at 24-7, per Official Referee.
95. Although, with respect to this term, it is likely that
it would satisfy them in any event.
96. See Kitsons Sheet Metal Ltd v Matthew Hall
Mechanical & Electrical Engineers Ltd (1989) 47
BLR 82, Official Referee.
97. Australia Safeway Stores Pty Ltd v Zaluzna (1987)
162 CLR479.
98. Burnie Port Authority v General Jones Pty Ltd
(1994) 120 ALR 42, HCA.
99. Caltex Oil (Aust) Pty Ltd v The Dredge
"Willemstad" (1976) 136 CLR 529.
100. Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR
221.
29
101. Commercial Bank ofAustralia Ltd v Amadio (1983)
151 CLR 447.
102. Waltons Stores (Interstate) Ltd v Maher (1988) 164
CLR 387.
103. Colbart v Kumar (1992) 59 BLR 89 at 99, Official
Referee; Coreco Ltd v Foxboro Great Britain Ltd
(unreported, CA, 24 February 1992); Tatung (UK)
Ltd v British Satellite Broadcasters Ltd (unreported,
CA, 19 March 1992); J & J Fee Ltd v The Express
Lift Co Ltd (1993) 34 Con LR 147; Watts v
Aldington; Tolstoy-Miloslovaski v Welsby
(unreported, CA, Neill, Steyn, Simon Brown LJJ,
15 December 1993).
104. Paul v Mobil Oil NZ Ltd [1992] 2 NZLR 194.
105. The Jardine Engineering Corporation Ltd v The
Shimizu Co (1992) 63 BLR 96 at 107-15, per Kaplan
J.
106. Hospital Products Ltd v United States Surgical
Corporation (1984) 156 CLR 41 at 121, per Deane
J, where his Honour said that the term must
nevertheless still satisfy the "so obvious it goes
without saying" test. See also Hawkins v Clayton
(1988) 164 CLR 539 at 571; Khoury v Government
Insurance Office (NSW) (1984) 164 CLR 622 at 636.
107. Codelfa Construction Pty Ltd v State Rail Authority
ofNSW (1982) 149 CLR 337 at 374, per Aickin J.
See also Liverpool CC v Irwin [1977] AC 239 at
258, per Lord Cross.
108. Codelfa Construction Pty Ltd v State Rail Authority
ofNSW (1982) 149 CLR 337 at 346, per Mason J.
109 164 CLR at 572.
110. Watts v Aldington; Tolstoy-Miloslovaski v Welsby
(unreported, CA, Neill, Steyn, Simon Brown LJJ,
15 December 1993).
111. This fundamental task was said to be that lying under
the two traditional tests, officious bystander test and
the business efficacy test.
112. Codelfa Construction Pty Ltd v State Rail Authority
of NSW (1982) 149 CLR 337 at 374, Aickin J
demonstrated the fact that the supposed answer will
often depend more on the formulation of the
question than the disposition of the respondent.
113. As is the case with terms implied by custom or
usage.
114. " ...such term as the nature of the contract itself
implicitly requires, no more, no less": Liverpool
City Council v Irwin [1977] AC 239 at 254-5, per
Lord Wilberforce, quoted with approval in Hawkins
v Clayton (1988) 164 CLR 539 at 572, per Deane J.
115. It may be that all or some of the considerations listed
in the BP Refinery case, or at least the thinking
behind them, might in the circumstances, bear upon
this task.
* A paper presented by the Honourable Mr
Justice Byrne of the Victorian Supreme Court
to the Law Council of Australia - Business Law
Section and The Building Dispute Practitioners'
Society.
Reprinted with permission from Building
Dispute Practitioners' Society Newsletter.