P ART XII–I MPLIED T ERMS
I I NTRODUCTION
A The Role of Implied Terms
Parties cannot possibly contemplate every contingency that may ari and alter the operation of the contract, so that gaps are inevitably left in the express contractual terms of an agreement. For this reason, the courts are prepared to imply terms into contracts. Several methods and justifications are applied to the implication of terms.
B Methods of Implication
There are three class of implied terms. The terms may be implied by law or by fact:
1 Terms implied by law are said to be impod on the parties regardless of their intention
(on the basis of policy); there are two types of terms implied by law:
a) Universal terms – implied by law into all contracts; and
b) Generic terms - implied by law into particular class of contract
i The relevant test is ‘necessity’
ii The exact scope of each class is usually unspecified
2 Terms implied in fact are said to be bad on the presumed intention of the parties (on
the hypothesis that the parties would have included them if they had thought of them);
specific terms are generally tailored to the particular contract under consideration
a) The relevant test is the BP Refinery test
II U NIVERSAL T ERMS
A Duty of Cooperation
1 The law in Australia
In Butt v McDonald, it was stated that
[i]t is a general rule applicable to every contract that each party agrees, by implication, to
do all such things as are necessary on his or her part to enable the other party to have
the benefit of the contract.
The duty to cooperate usually aris as a specific obligation that applies to the circumstances. Courts apply the universal duty to the facts of the ca, generating a more preci obligation. Terms will only be implied to the extent of consistency with the express terms of the contract. Express provisions prevail over implied terms, except (arguably) in relation to certain duties, such as the duty to act in good faith under UNIDROIT provisions.
In Australia, a duty to cooperate is implied into every contract (Secured Income v St Martins).
Secured Income v St Martins:
Facts
•SI sold a large office block to SM
•$170,000 remained owing after ttlement, which was made on 26 January 1973
•This was payable by 26 May 1973
•The contract provided for the reduction of this sum by a formula if aggregate rents had not reached a specified figure by that time
•It also provided that leas of the premis after execution of the agreement (but before completion) should be approved by SM – approval was not to be capriciously or
arbitrarily withheld
•The aggregate rents were far below the specified figure
•As a result, SI offered to lea so much of the vacant premis as would increa the aggregate rent to a level that the $170,000 would not be reduced
•SM rejected this offer and, as a result of applying the formula to the vacant offices, the amount owing to SI was reduced to zero
•SI sued for damages for breach of an implied term that SM would actively co-operate in efforts to cure tenants, alleging that this term had been breached by SM’s rejection of SI as a tenant
Issue
•Was there an implied term in the contract compelling SM to cooperate with SI by taking reasonable measures to carry out the contract?
Reasoning
•There was an express term that SM had to be reasonable in granting or rejecting approval of tenants
•There is also an implied contractual obligation to do only all reasonable things to act in cooperation
•However, SM would only be in breach if, without reasonable cau, theSM does not do all reasonable things to act in cooperation
o Thus, if SM’s refusal of SI was bad on a characteristic of the tenant that it would be reasonable for a lessor to take into account (eg, insolvency), then they
would not be in breach
o Trial judge: satisfied that SM’s motivation for rejecting SI was bad on concerns about their ability to pay the rent
• The Butt v McDonald formula should be qualified by the word ‘reasonable’ – the parties need only do all things which are reasonably necessary to ensure the other party derives their rights or benefits under the contract
o The benefit of the contract for SM was purcha of the office complex with guaranteed rental income
o The benefit of the contract for SI was sale of the office complex
o Here, the specific obligation placed upon SM is to act reasonably in deciding whether to accept a tenant
Decision
• A duty to cooperate is implicit in the contract, but it has not been breached by SM, who rejected SI as a tenant on reasonable grounds
2 Theoretical perspectives
实习总结及体会
Stoljar (1953) argues that the duty to cooperate may be en as both a negative duty – to refrain from hindrance of the other party – and a positive one – to ensure the full realisation of the bargain:
通过英语怎么说Since the fundamental and pervasive theory of the common law of contract is that of a
bargain between two parties, the natural – though by no means obvious – corollary is that the parties must mutually co-operate to enable and facilitate the fulfilment of their bargains; the corollary is, in other words, that the law must so control and direct performatory conduct
between the parties as to cure the full protection of their respective bargain-interests.
To be more particular and preci this basic requirement of co-operation must be stated in two parts:
•Reduced to its lowest terms, the general duty to co-operate becomes but a duty not to prevent or hinder
•On the other hand, the requirement of co-operation may turn into a distinctly positive duty to take all such necessary steps in the performance of the contract that will
either materially assist the other party or will generally contribute to the full realisation
of the bargain
3 Notes
It is not inherent in a contractual relationship that the parties must take measures to protect one another beyond performing their obligations under the contract.
Prima facie, there is no reason why parties should not always be free to exclude such an implied term. Contracting parties are, after all, the focus of any contractual agreement, and their intention – which is the very force that brings the powers of the state to bear upon a breaching party – ought to prevail over that of the law, whatever its objective.
However, this may have the effect of allowing stronger parties to exclude the term at the expen of the weaker party, by allowing them to u their greater resources to act to the detriment of (or simply fail to assist) the other party in furtherance of their own interests. Such an outcome would suggest that the term ought always to be implied as a positive duty to do all that is reasonably necessary to assist the other party. However, this is also an unacceptable burden.
The best balance between the two extremes is to imply the a duty to cooperate in its negative for
m as term into all contracts by default, but to allow its exclusion in contracts of (and only of) a commercial (and not consumer) context. This way, significantly weaker parties could still be protected by the term, without hindering the efficiency of business transactions or the freedom of the rational actors to contract on their terms. Implying only the minimum (negative) duty is to recogni that modern contractual arrangements do not necessarily entail an endeavour to assist the other party; more often, contract is invoked as a mechanism to protect or cure a right or benefit for onelf, at the expen of another. This is not to say that the rights and interests of contracting parties do not overlap – as where, for example, the promisor is performing a rvice for the promie in return for payment – just that it is overly interventionist to require that they always do.
B Duty to Act in Good Faith
1 Introduction
The purpo of implying a duty to act in good faith is to prevent certain types of opportunistic or unreasonable conduct during the cour of contract performance. The duty supplements the express terms of a contract to regulate the manner in which parties perform and enforce their contracts.
Traditionally, a general implied duty of good faith has not been recognid in Australian or English contract law. However, there is increasing interest in Australia in the possibility of such a duty.
2 Overas Approaches
United States:
• The Uniform Commercial Code (#1-203), which has been adopted by legislation in all states, and Restatement, Second, Contracts #205(which although it does not have
statutory force, has been adopted by the American Law Institute and is generally
applied by the courts as an authoritative statement of law) both contain provisions
imposing a duty of good faith upon contracting parties
• #205 states that
[e]very contract impos on each party a duty of good faith and fair dealing in its
enforcement.
performance
and
In common law jurisdictions, Canada and New Zealand are moving towards the recognition of an implied obligation of good faith.
European civil codes:
•All European civil codes recogni an obligation to act in good faith
•UNIDROIT has adopted an implied duty of good faith
3 History in Australia
Traditionally an obligation of good faith is only impod in two contexts:
•Parties to an insurance contract (statutorily implied); and
•On fiduciaries (a person occupying a position of trust vis-à-vis another person)
However, many doctrines are evolving in a manner that enforces standards of good faith (consider the doctrine of estoppel, the u of restitution in Trident, and judicial interpretations of the Trade Practices Act).
A duty to act in good faith was first recognid by Priestley JA in Renard Constructions (1992, NSWSC CA).
Renard Constructions v Minister for Public Works:
Facts
广延性•RC and the Minister were parties to a building contract
•Clau 44.1 gave the Minister the right to exerci certain powers (including the right to suspend payment and terminate the contract)
•This clau was invoked becau of what the Minister considered delay and poor
化作春泥更护花的上一句workmanship of the contractor. However, the delay was due, in large part, to the failure
of the Minister to supply the requisite materials on time
•In respon, RC delivered a letter saying it was willing and able to complete the contract and had employed additional staff and a more experienced foreman
•The officer who ultimately made the decision to terminate the contract was not aware of the Minister’s failure to supply the materials or of the improvements the contractor had
implemented (including tho outlined in the letter)
•RC treated the officer’s action as a wrongful repudiation of the contract which it accepted and on this basis RC rescinded the contract
•Arbitration proceedings were commenced and the arbitrator found that Minister (through his officer) had breached the contract by acting unreasonably in exercising the power in
clau 44.1
•The Minister successfully appealed to the Supreme Court on the basis that the arbitrator proceeded on the incorrect presumption that the contract contained an implied
requirement of reasonableness
•RC then appealed to the Appeal Division of the Supreme Court, claiming that the agreement did in fact contain such an implied term
Issue
•Did the contract of construction contain an implied duty to act reasonably such as to require the Minister to terminate on reasonable grounds?
玉米面做法
试用报告Reasoning
•If the term is to be implied in fact (as a specific term), then without the implied term the contract would need to be quite unworkable (making it necessary to imply the term to
give the contract business efficacy)
o Here, that requirement is met, becau if M was able to terminate at any time without having to show cau, the rights conferred under the contract would be
esntially worthless; this would be unfair and not efficacious
o However, just becau the contract is effective without the term does not indicate conclusively that it is not needed
o Look at the business efficacy of the contract without the term: the contract needs to be unworkable in order to imply a term in fact
•If the term is to be implied in law (as a generic term), then, for similar reasons, the relevant test of ‘necessity’ was met
红糖大枣发糕o The test for implying a general term in law is very similar to that for the
implication of a specific term in fact, though the test is not dealt with specifically o At a minimum, the Court has implied a duty to act reasonably into all building contracts
• A duty to act in good faith was not implied into all contracts
o Priestly JA: limits the duty to building contracts
o It is both a generic term (law) and a specific term implied in fact – it can be both •The duty to act in good faith/reasonably was breached by M:
o M terminated a major contract without even asking for an explanation of the delay
o This termination was unreasonable, becau the delay was caud by M and was not the fault of Renard Constructions
与山巨源绝交书o Good faith is equated with reasonableness
Decision
•The contract contains an implied duty of good faith which limits the way in which the
