Implied terms of contract important when recovering debts

Recovering debts depends on the contract – whether written or verbal

In a decision by Justice Barrett on 31 August 2010 in the Supreme Court of New South Wales, the Court gave a helpful re-statement of the law relating to the “normal conditions” pertaining to the implication of terms. (Nash v Stewart [2010] NSWSC 947). Justice Barrett quoted with authority, the case of BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 as setting out the test where a contract in writing is apparently complete.

For a term to be implied, the following conditions 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 of the contract

The Court also noted that the test is somewhat different where the contract is not written and the contract is informal. The Court then referred to the decision of Hawkins v Clayton [1988] HCA 15 as setting out the test as follows:

“If, but only, it can be seen that the implication of a particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case,” the judge said.

Written by Mark Streeter

The Director of Streeterlaw, Mark has been practicing Law since 1994. He has attained his Masters of Law in 1999 and in 2006 was awarded his Specialist Accreditation in Commercial Litigation. Mark is a member of ARITA, a graduate of the AICD and a member of AICM. A member of STEP, Mark enjoys working in the area of Wills and Estates. In 2020 Mark is the Chair of STEP NSW.

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