Article on implied term in building contract

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Contracts ------------------+

Implied Terms In Building Contracts:Inference Or Imputation?

The Honourable Mr Justice Byrne*

I am concerned with contracts, and much of what Ihave to say will be applicable to all contracts.Nevertheless, as the title indicates, I have been asked toconcentrate upon aspects of the topic which are relevantto contracts of a particular type - those which are made ina very hard, material, commercial environment, theconstruction industry. This is an environment wherecommercial power may be wielded without compunctionand with regard for no interest but one's own.! Commonly,contractors and subcontractors are required to bidcompetitively against a contractual background which isunfriendly and, perhaps, largely immutable. Thecontractual terms to which they are required to conformmay be biased against them by a cautious or autocraticproprietor; they will very often be complex and, perhapsby reason of departure from standard forms or otherwise,obscure or even contradictory. This is no less true in thepublic sector than it is in private industry. Theconsequence has been that parties to construction contractshave often made hard bargains, or at least that is the wayit turned out. They then approach the Court asking that itsupplement or modify the terms to mollify their bargain.The classic technique that we see everyday in buildingcases is by inviting the Court to imply terms in the contract.This immediately creates a problem for a judge who hasbeen brought up on the robust 19th Century British fareof non-interference in commercial bargains, but who is,nonetheless, sympathetic to a claim by parties to a buildingcontract that they have been hard done by. The lawyer'straditional response to this conflict between principle andsympathy is to resort to fiction. Enter a bystander who isendowed not only with the reasonableness of the "personon the Bourke Street tram"/"person on the Bondi bus",but with that most unreasonable characteristic,officiousness. The Court turns back the clock, intrudesthis non-existent man2 into the negotiating arena who asksa fictitious question devised retrospectively and obtainsthe supposed testy answer "of course"3. In this way thedilemma is solved in a stroke. The theme of this paper isto analyse the technique employed by the Court inimplying terms and to observe how the fiction is giving

way to an acceptance that the law itself has a role to playin the formation and content of commercial contracts. Inshort, modem judges are tending to impute terms ratherthan to infer them.

It is necessary at the outset that I clear the deckssomewhat. I am not concerned with a number of conceptswhich, however related to implied terms, are nonethelessdistinct from them. I am not concerned with the questionwhether the court can infer the existence of the contractitself4 • I start from the position that a contract exists. Iam not concerned with questions ofconstruction ofexpressterms and the extent to which it is possible to interpretwhat is said or written in the light of the matrix of fact inwhich the contract is made.5 The circumstance whichinterests me now is the case where the contract is silenton a given point.

Nor am I concerned with rectification of a writtencontract which remedy may be available where the parties,having reached agreement on a term, have omitted toinclude it in the document recording their bargain.6

Finally, I am not concerned with the impact of the parolevidence rule by which precontract negotiations may notbe resorted to for the purpose of adding or varying acontract which has been reduced to writing.7

THE PRESENT POSITIONA conventional classification8 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 separatelyfrom those implied at common law, although many ofthem, such as the sale of goods warranties were firstformulated by the judges before they found their way intothe code of 1891. Terms implied by custom or usage maybe seen as a variation of terms implied from fact sincethey depend upon proof of a factual basis, but they aretraditionally treated as separate.9 The requirements for

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their implication are well established.10 It is with the thirdand fourth types of implied terms that I am interested.The requirements for them, or at least for the third type,are those set out in the leading case of BP Refinery(Westernport) Pty Ltd v Hastings Shire Council.!1 Thetask which I have set myself is to examine how thedistinction between the third and the fourth types ofimplied terms has been worked out with particularreference to construction contracts and how the Court now,and in the future, is likely to approach the task of implyingthem.

BP REFINERY (WESTERNPORT) PTY LTD VSHIRE OF HASTINGS

The BackgroundAs with so many topics in the law, a proper

understanding of the modem position requires us to turnthe clock back to see how it came about. It was not untilits 18th edition in 1930 that Chitty on Contracts containedany real treatment of the topic. There, the law is given asstated by Bowen LJ in The Moorcock12 to which I shallreturn. In the 21st edition ofAnson's Treatise on the LawofContract (1959) the topic makes its appearance in thatwork under two headings - terms implied under theMoorcock Rule and those implied by custom and bystatute.

I focus now upon The Moorcock which is of interest,not only because it is the leading case in the area, but alsobecause the term in question will strike a responsive chordin the ear of construction lawyers. It is necessary to remindourselves at the outset that this case was decided by awell-regarded court and in February 1889. The contractwas one for the use of a wharf and a jetty for the purposeof discharging cargo. It was obvious to all parties that theplaintiff's ship must moor at the jetty and that a vessel somoored was subject to the tide and must ground at lowwater. The ground under the ship turned out to have ahard ridge so that the ship suffered damage when it settledon it. The question was whether the court should imply aterm that the place was safe for a vessel to lie in.

The trial judge and all three members of the CourtofAppeal were prepared to imply such a term. The methodadopted by them is interesting. Lord Esher MR put it thisway: 13

"What, then, is the reasonable implication in sucha contract?

In my opinion honest business could not be carriedon between such a person as the respondent andsuch people as the appellants, unless the latter hadimpliedly undertaken some duty towards therespondent with regard to the bottom ofthe river atthis place. If that is so, what is the least onerousduty which can be implied?"

Bowen LJ, whose judgment is that which is alwaysquoted in this area, said this: 14

"Now, an implied warranty, or, as it is called, acovenant in law, as distinguished from an express

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contract or express warranty, really is in all casesfounded on the presumed intention of the parties,and upon reason. The implication which the lawdraws from what must obviously have been theintention ofthe parties, the law draws with the objectofgiving efficacy to the transaction and preventingsuch afailure ofconsideration as cannot have beenwithin the contemplation of either side; and Ibelieve if one were to take all the cases, and theyare many, ofimplied warranties or covenants in law,it will be found that in all ofthem the law is raisingan implication from the presumed intention of theparties with the object ofgiving to the transactionsuch efficacy as both parties must have intendedthat at all events it should have. In businesstransactions such as this, what the law desires toeffect by the implication is to give such businessefficacy to the transaction as must have beenintended at all events by both parties who arebusiness men; not to impose on one side all theperils ofthe transaction, or to emancipate one sidefrom all the chances offailure, but to make eachparty promise in law as much, at all events, as itmust have been in the contemplation ofboth partiesthat he should be responsible for in respect ofthoseperils or chances."

His Lordship came back late to the presumedintention of the parties. In order to determine this, it isnecessary to see what each of them knew. It is implicit inthe transaction that the ground was safe and, further, thatthis was a matter of which the jetty owners, not theshipowner, would have knowledge. His Lordship thenput the test in words familiar to the ears of modernconstruction lawyers - the allocation of risk: 15

"Now the question is how much of the peril of thesafety of this berth is it necessary to assume thatthe shipowner and the jetty owner intendedrespectively to bear - in order that such a minimumof efficacy should be secured for the transaction,as both parties must have intended it to bear?"

Fry LJ, in a short concurring judgment, added thatthe consideration which affected him in concluding forthe existence of the implied term was that the jetty ownerwho had the means of examining the river bottomneglected to do so: 16

"A number of comments may be made about thiscase by the modern observer with an eye on theconstruction industry. The observer might beforgiven for wondering how the term here came tobe implied whereas, only three years later, the samecourti7 rejected a claim by a contractorfor paymentfor extra expense incurred as a result ofbad groundwithout considering the possibility that the contractcontained an implied term that the ground was fitfor the structure. i8 Second, our observer mightwonder whether this case is an example ofa termimplied from fact or a term implied by law, but of

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course the distinction would not in 1889 have beenin the forefront ofthe judges' minds. On its face, itseems likely that a term that the mooring was fit forthe purpose contemplated by both parties wouldnow fall into the basket of implication by law.Finally, our observer might have been puzzled bythe use of the expression "efficacy of thetransaction" in the classic statement ofprincipleby Bowen Li. It cannot be correct to say that thecontract would be unworkable without the supposedterm. It may be harsh to put the risk on theshipowner, but it is, after all, only a risk. There isno inevitability that the commercial purpose oftheagreement must be defeated without the term. It ishowever, clear that the Court was not looking atthe question in such a severe way. The requirementof efficacy must be determined in a business-likeway, having regard to the reasonable expectationsof the contracting parties. "19

We now jump ahead half a century to 1939. Bear inmind that, for most of this period, anxious readers of thesuccessive editions of Chitty would not, by reading thattext have been aware of the Moorcock decision. Shirlawv Southern Foundries (1926) Ltd20 concerned anagreement between a company and its managing directorwhereby he was to hold that office for 10 years. Thequestion was whether, in those circumstances, thecompany might exercise the power conferred by its articlesof association to remove Mr Shirlaw from the office ofdirector, so that he would be managing director, but not adirector with a vote on the board. He argued that therewas an implied term in the articles of the company thatthis power be not exercised so long as he remainedmanaging director under his service contract. The trialjudge21 and two members of the Court ofAppeal22 agreed.In the course ofhis judgment, MacKinnon LJ propoundedthe law in terms which have become famous:

"I recognise that the right or duty ofa Court to findthe existence ofan implied term or implied terms ina written contract is a matter to be exercised withcare; and a Court is too often invited to do so uponvague and uncertain grounds. Too often also suchan invitation is backed by the citation ofa sentenceor two from the judgment of Bowen Li in TheMoorcock. They are sentences from an extemporejudgment as sound and sensible as all the utterancesofthat great judge; but Ifancy that he would have'been rather surprised ifhe could haveforeseen thatthese general remarks of his would come to afavourite citation of a supposed principle of law,and I even think that he might sympathise with theoccasional impatience ofhis successors when TheMoorcock is so oftenflushedfor them in that guise.

For my part, I think that there is a test that may beat least as useful as such generalities. IfI may quotefrom an essay which I wrote some years ago, I thensaid:

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'Prima facie that which in any contract is leftto be implied and need not be expressed issomething so obvious that it goes withoutsaying, so that, if, while the parties were makingtheir bargain, an officious bystander were tosuggest some express provision for it in theiragreement, they would testily suppress him witha common 'Oh, ofcourse!'

At least it is true, I think, that, ifa term were neverimplied by a judge unless it could pass that test, hecould 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 animportant decision in 1956.24 The case arose out of a motoraccident. A truck driven by an employee of Romford Icestruck and injured the plaintiff (the father of the driver)who sued the employer. So far, nothing remarkable. Theemployer was insured and the insurer conducting thedefence joined as third party the driver whose negligencelay behind the claim. The interest of this case lies in anargument put by the driver that there was an implied termof the contract of employment that, if the employer wasinsured, no claim would be made against the employee.Denning, LJ alone in the Court of Appeal25 was preparedto imply such a term, invoking the officious bystandertest.26 The significance of this case for my purposes liesin the treatment of this point by the House of Lords.27 Itis of no interest that the Lords by a majority rejected thesupposed implied term. Three of them, however, drew adistinction which has assumed importance in this area ofthe law. This is the distinction between terms which areimplied by general rules of law - those implied from thelegal relationship28 between contracting parties and whichshould be implied in all contracts of that type;29 and thosewhich are implied from the particular circumstances ofthe case.30

The next milestone is 1977. Liverpool CC v Irwinwas a landlord and tenant case. The council tenantswithheld rent in protest against the poor condition of the15 storey residential town block in which they lived. Thetrial judge found that lifts were out of order, staircasesunlit and the condition of the building generally wasappalling. It was accepted that the law compelled theconclusion that there was no implied term in a lease ofunfurnished premises that the landlord would maintainthe flats themselves in repair. 31 The tenants relied uponan implied term that the landlord would keep the commonareas which were not part of the rented premises in repairand properly lighted. The scene was a textbook one forthat champion of the underdog and inspiration of idealisticlaw students, by now, Lord Denning MR. His Lordshipfound for the tenants. He, unlike the other members ofthe Court of Appeal,32 was prepared to find the termsuggested. In so concluding, His Lordship ventured toquestion the approach to implied terms established in thetwo cases to which I have last referred. These cases, hesaid, do not represent the way in which courts act.33 He

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then referred to a number of terms which have beenimplied in cases such as contracts for the hire of goods,those for the supply of goods and materials and contractsto purchase a house in the course of construction.34 Thetest, His Lordship said, disclosed by these cases is not theofficious bystander test, not the test whether it was"necessary to give business efficacy to the contract", butwhether the term was reasonable in all the circumstances.35

The House of Lords36 acted quickly to extirpate this newheresy.37 Lord Denning's proposition that the Court willimply a term where it is reasonable was firmly rejectedand the requirement of necessity confirmed.38 So far asthe 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 LordFraser preferred the language, not of categories, but ofshades along a continuous spectrum.40 In such a spectrumwe might find at one end, that where lurk terms at law, anuncertainty whether the principle is, in truth, a term impliedby law or simply a principle oflaw.41 Then, moving acrossthe spectrum, we pass by terms established by commercialusage and arrive at the other end, where the existence ofthe implied term depends upon a legal relationship arisingfrom the particular contractual circumstances, termsimplied from fact. Indeed, it may be possible to moveone shade further, beyond the range of contract into thedark hue of tort, for where a special relationship isestablished by contract or otherwise this may give rise toa duty of care.42 Insofar as their Lordships were thinkingof categories in the Lister v Romford Ice terminology, thelanguage they used suggests that three of them analysedthe case as an implication by law43 and two as one ofimplication from fact,44 and of these five Lords, LordWilberforce alone was a member45 of the JudicialCommittee of the Privy Council who, sixteen months later,delivered their celebrated advice in BP Refinery(Westernport) Pty Ltd v Hastings Shire Council, the caseto which we must now tum.

The CaseThe case concerned a favourable rating agreement

made between BP Refinery (Westernport) Pty Ltd and theShire in 1963. This was part of a trade-off made under anagreement with the Victorian Bolte Government for theconstruction of the refinery at Hastings. In 1969 followingan internal reorganisation within BP, BP Refinery(Westernport) Pty Ltd transferred its shares to BPAustraliaLtd which then took possession of the refinery. The ratingagreement contained no provision for assignment and theShire assessed the new occupier at the ordinary rate. Thisassessment was upheld by the Full Court46 on the basisthat the relevant provision of the Local Government Actdid not permit the granting of a preferential rate to thenew occupier so that BP Australia Ltd was not entitled tothe benefit of the rating agreement. BP Australia Ltd thentransferred the property back to BP Refinery (Westernport)Pty Ltd. The Shire countered this move by contendingthat the rating agreement contained an implied term that

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it should continue only so long as BP Refinery(Westernport) Pty Ltd was the rateable occupier of theland and that the agreement had determined by theoperation of that term upon the transfer to BP AustraliaLtd. The Full Court upheld that submission. The basisfor this implication seems to have been to a large extentdependent upon its previous decision as to the impact ofthe legislation upon the agreement. If it was not competentfor the Shire to give preferential rate to a company whichwas at the time of the agreement not a rate-payer, theagreement could have no effect after the contracting rate­payer ceased to be the rateable occupier. BP Refinery(Westernport) Pty Ltd appealed from the Full Court directto the Privy Council. Surprisingly, their Lordshipsdeparted from their usual practice of offering to HerMajesty a unanimous advice. The majority47 were notprepared to imply the term suggested by the Shire. In thecourse of their advice they set out the conditions for theimplication of a term:

"Their Lordships do not think it necessary to reviewexhaustively the authorities on the implication ofaterm in a contract which the parties have not thoughtfit to express. In their view, for a term to be implied,the following conditions (which may overlap) mustbe 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 impliedif the contract is effective without it;

(3) it must be so obvious that "it goes withoutsaying";

(4) it must be capable ofclear expression;(5) it must not contradict any express term ofthe

contract. 48

The dissentients49 put the test this way:

'If, in order to make an agreement work, or,conversely, in order to avoid an unworkablesituation, it is necessary to imply a term; ifmoreover implication ofthat term corresponds withthe evident intention of the parties underlying theagreement, the law not only can but must imply theterm '."50

It is interesting to note that the majority, havingfound that the term proposed by the Shire did not meetthe requirements which they set out, concluded that,nonetheless, a term had to be implied in the ratingagreement to give it business efficacy. The term whichthey inserted in the agreement was that the benefit of theagreement extended to a company to which the rights ofBP Refinery (Westernport) Pty Ltd were assigned providedthat the BP Company of Australia Pty Ltd held 30% ormore of its issued capital.51 It will be readily noted that interms of the two categories of implied terms referred to inLister v Romford Ice this would be a term implied fromfact and the five preconditions to the implication of a termset out in this case have been consistently applied for termsof that category.52

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Implication at Law or of FactThe High Court53 has endorsed the distinction

between terms implied as a matter of law, terms whichare "a legal incident of a particular class of contract"and those implied from fact where this is necessary togive business efficacy to the particular contract, and thismay be taken to represent current orthodoxy.54 LordBridge, speaking of the distinction, and with theconcurrence of all of the members of the House of Lordshas said that previous decisions had indicated that it was"a clear one".55 It is a distinction which has an interestfor all lawyers in the construction industry, not merelyfor those with a leaning to taxonomy; it bears upon theway the term is pleaded, the way it is established, and ofcourse, the way the court approaches its task.

Pleading and proving an implied termThe Rules of Court oblige a party to plead facts, not

evidence, nor law.56 If the term is to be implied as a matterof law, it would seem, therefore, that it is not onlysufficient, but obligatory for the pleader merely to identifythe category of contract it is including, where this isnecessary the features of the contract which attract theoperation of the legal principle. Where the term is of theother category, the pleading must contain each of the factsfrom which the implication is to be drawn. As will beseen, these will include the terms of the contract relied onand the relevant factual background against which thecontract is to be analysed.

Proof of an implied term must also reflect thisdistinction. So far as an implication of law is concerned,the evidence required should be minimal. I leave to oneside evidence which might show that the parties intendedto exclude the supposed term. Take for example the termas to co-operation - that each party will do all that isreasonably necessary to secure performance of thecontract.57 The proof of the facts necessary to establishsuch a term will normally present no problem; in manycases the term will be admitted. The real area of contestis likely to be in the proof of breach. This will mean that,in cases where this category of term is in issue, the questionmay often be appropriate for determination as apreliminary issue.58

It will be seen from an examination of the caseswhere terms of this category have been implied that theyare formulated with considerable generality.59 In additionto the examples to which I have referred, the followingwell-recognised illustrations come readily to mind:

contractor will perform the work in a properand workmanlike manner;60contractor will complete the work within areasonable time;61proprietor will pay a reasonable price;62proprietor will indemnify the contractoragainst claims resulting from properperformance of the work;63proprietor will provide access sufficient toenable performance of the work;64designer will perform design work withreasonable skill and care.65

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Although all of these terms would satisfy theofficious bystander test, it is not necessary that they do sofor it is the law, not the parties, which imputes the term ina contract for the performance of work.

Let us now tum to the second category of impliedterm - those implied from fact. The attention of the pleaderand, ultimately that of the advocate, here is fastened uponthe particular case. The starting point is to muster all thecircumstances which collectively require that the inferencebe drawn for the contract before the court. These factswill commonly rise from the terms of the contract itselfand from the factual matrix against which it was made.

I interrupt myself at this stage to mention a matterwhich has often troubled· me on this topic. This is thepractice of pleading as part of the facts from which theterm, presumably one of fact, is to be implied, that theparties performed the contract on a particular basis. Thisis particularly a feature of pleading in building cases. Itoften happens that the parties to a building project, havingsigned their contract at the commencement of the work,ignore its terms thereafter, or adjust claims made under iton a basis which they consider fair and reasonable ratherthan under the contractual terms. An example of this isthe case where the contractor is delayed by late instructionsand seeks compensation. Although the contract maycontain no provision for prolongation costs, the proprietornot infrequently adjusts the price as if it did or gives someindication that this will be done. A moment's reflectionwill indicate that such a situation may give rise to avariation of the contract, to an inference of waiver, to someestoppel or to an entitlement based on restitution, or evento a new contract.66 Subsequent performance may alsoassist an inference that the parties in fact agreed upon aparticular express term which escaped the documentcontaining the contract, which might, therefore, berectified. It may, for present purposes, provide a basis forsupposing what response might have been given to theofficious bystander's question. But, even allowing forthis, I have always had the greatest difficulty understandinghow an event occurring after contract can, as a matter oflogic, amount to a fact from which a term can be impliedin the contract.

I return to the matters which should be pleaded andproved to establish a term implied from fact. The pleadershould spell out what the supposed term is and how it isthat its absence renders the contract inefficacious. It isclear that the primary source of the implication is the termsof the contract themselves whether they be written or oral.Where it would be appropriate for the purpose of constru­ing the contract to have· regard to the factual matrix, theobjective framework of facts which the contract came intoexistence,67 these should be pleaded and proved. Evidenceof the actual intention of the parties is, of course, inad­missible, except where this demonstrates that the partieswere both agreed that the supposed term should not beincluded.68

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The task of the CourtAuthority directs the Court in the case of each

category of terms to approach the task of implication in adifferent way. Where the task is that of looking forimplication of fact, it must focus on the particular contract,its terms and its factual background; where it is seekingto draw an implication of law it starts by looking for acontract of a definable type.69 In the case of a term impliedby law the Court must look at the contractual relationshipbetween the parties to determine whether it falls within adefinable category. If it does, and existing authorityindicates that the law will attach the term in question to acontract of that category, it will be done. In such a case,however, where authority gives no guide, the court mustproceed by the application of principle. In so doing, itproceeds, as it does in any uncharted area of common law,with caution, mindful of existing commercial practice,70using existing authority as analogy and bearing in mindthat its determination will establish a precedent for futurecontracts of that category. Second, it is not concernedwith the intention of the parties. Where the question is asto a term to be implied as of fact, attention is directed viathe officious bystander to the question what such a personwould suppose the negotiating parties would haveintended. Next, as already mentioned, a term to be impliedas a matter of law is likely to be expressed in terms ofmuch greater generality than terms implied as of fact.Finally, but this may be somewhat contentious, the Courtis likely to insist that a term to be implied from fact satisfya more severe reading of the requirement that theimplication be necessary for the efficacy of the contract.I would now like to consider briefly these differences andthen to examine two terms frequently inserted by the courtsinto building contracts - that the work and materials bereasonably fit for the purpose; and that the parties mustco-operate where this is required for the performance ofthe contract.

The Distinction between Terms at Law and Termsof Fact

The first step in the process of implication as a matterof law is said to be that of classifying the contract or therelationship which it establishes.71 But even this is notalways required, for the supposed term, such as that ofco-operation, may apply to all contracts.72 At the otherextreme is the relationship created by the contract withvery specific terms. In Scully vSouthern Health and SocialService Board73 the contractual relationship was definedas follows:

"The relationship ofemployer and employee wherethe following circumstances obtain:(1) the terms ofthe contract ofemployment have

not been negotiated with the individualemployee but result from negotiation with arepresentative body or are otherwiseincorporated by reference;

(2) a particular term of the contract makesavailable to the employee a valuable rightcontingent upon action being taken by himto avail himseifof its benefit;

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(3) the employee cannot, in all thecircumstances, reasonably be expected to beaware of the term unless it is drawn to hisattention."

In such a contract it is now the law that there is an"obligation on the employer to take reasonable steps tobring the term ofthe contract in question to the employee'sattention, so that he may be in a position to enjoy itsbenefit". How frequently might one encounter a contractof this definable type? Could such a term be incorporatedin a sub-contract in a building project where the terms ofthe head contract which have been incorporated byreference confer upon the subcontractor a valuable right,but one which requires action by the sub-contractor toavail itself of its benefit?

In my view Scully's case obscures an importantdistinction between the class of contract and thepreconditions for the existence of the term. To take theexample of a sale of goods, it is legitimate to say that,first, in every contract for the sale of goods the law willimply a term as to fitness, and, second that this termoperates only in a specified situation, namely, where thepurpose is disclosed and that this is done in circumstanceswhich indicate a reliance on the seller's skill and judgment.To my mind it is not legitimate to include in the definitionof the class of contract, not only the fact that it is a contractfor the sale of goods, but also that it is one where thespecified situation obtains. The distinction is ofmore thantheoretical importance; as the class of contract is definedmore narrowly, so is it more difficult for the courts todevelop a cohesive jurisprudence spelling out the rightsof parties in a given contractual relationship. This isparticularly important in building contracts which, despitea superficial uniformity, contain significant differences.If the preconditions for the existence of a term at law arewritten into the definition of the contract, the unfortunatetrial judge or arbitrator will have to contend with awilderness of unique contracts from which to select themost appropriate. In this way the value of the term impliedby law will be largely lost.

The second and fundamental difference between thetwo types of implied term lies in the presence or not in thejudicial process of an inquiry into the intention of theparties to the contract74 This must be taken as a referenceto their intention objectively determined, not to their actualintention.75 In the case of implication by law intention isnot the determining factor; the implication must rest onbroader considerations,76 although what theseconsiderations are has never been completely worked out.In Castlemaine Tooheys Ltd v Carlton & United BreweriesLtd, Hope JA77 discussed the cases on this point andconcluded that the supposed term will not be implied,absent existing authority to that effect, unless it is bothreasonable and necessary in the sense that the contractitself impliedly requires the insertion of the unexpressedterm.

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NecessityIf 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 acommercial sense.78 It is not sufficient that the term beadvantageous to one party.79 Yet, even here it is possibleto discern a difference in approach between the two typesof term, and even in the much-used expression "necessaryto give efficacy [or business efficacy] to the contract" thereis uncertainty. Despite some hints to the contrary,80 therequirement of necessity does not attach to the process ofimplication, but to the performance of the contract. Itdoes not mean simply that the term was so obviouslyintended by the parties the court is necessarily driven tomake the implication.81 It is, of course, correct to say thatthe court will be slow to imply a term, especially a termfrom fact,82 but we are not here concerned with this aspectof the topic. Necessity attaches to the performance of thecontract. But, even here, the concept is an elusive one.The frequent reminder that the efficacy must becommercial efficacy exposes this. In a given case, thisrequirement will be more or less difficult to satisfydepending upon whether attention is focussed on the"efficacy" or "commercial" components of this expression.

Consider, for example, some well-known caseswhere the implied term as to co-operation has been inquestion. It is implied in a conventional building contractthat the proprietor will provide to the contractor access tothe site as is required of the performance of the work83 inaccordance with the contract. 84 The use of the word"requirecf' highlights the aspect under discussion, for theterm is implied only so far as is necessary, not so far as isdesirable,85 to enable the contractor to carry out itsfundamental obligation - to construct the works inaccordance with the contract. Nevertheless, therequirement that the term be necessary for the businessefficacy of the contract has been applied in a flexible way.86In Hawkins v Clayton, Deane J87 adopted the expression"the implication ofthe term is necessaryfor the reasonableor effective operation of a contract of that nature in thecircumstances of the case."88

The Implied Term as to FitnessBy the middle of the nineteenth century it was

established that a contract for the sale of goods containedan implied term that the goods would be reasonably fitfor the purpose for which, as the parties knew, they wererequired.89 No such term was included in contracts forwork and labour or for the sale of materials to be affixedin the building work.90 This led to some surprising caseson each side of the line dividing the two types ofcontract91 .By 1930 there was authority that in a contract to sell anincomplete house and to complete it, there is a term that itbe on completion, reasonably fit for habitation.92 Thejudgments speak in terms of the law implying a term as tofitness in contracts of this kind where it was in thecontemplation of the parties that the house, whencompleted, was for the purchaser to live in. Nevertheless,the reference by Swift J to The Moorcock suggests that

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the process of implication involved a consideration of thesupposed intention of the parties - an implication as offact. The extension of the term to building contractsgenerally had to wait another 30 years. In McKone vJohnson93 it was accepted that, where the purpose forwhich the building was required was disclosed to thecontractor and it appeared that the proprietor relied, tothe contractor's knowledge, on the contractor's skill andjudgment, a term as to reasonable fitness would be impliedin an ordinary building contract. It is clear from this caseand the cases which have followed that the term is inserted,not as an implication of fact, but as an incident of therelationship between the parties.94 It is not relevant formy purpose to trace the interesting history of the gradualenlargement of this term to the present situation where itis readily available where the preconditions are satisfied.It is sufficient to note that the term which first appearedshyly as an implication from fact has now achievedrespectability as befits an implication at law where thecourt would not for a moment speculate upon the intentionof the parties or think to consider whether the fiveconditions laid down in the BP Refinery case weresatisfied.95 The question which such a development raisesis precisely how it can be that a term of one category canbe transformed into one of an altogether differentcategory? And, on a more practical level, at what pointalong this development does the pleader, the advocate andthe judge move from the principles applicable to one tothose applicable to the other?

The Implied Term as to Co-operationThis is the implied term which is most resorted to

in building cases. It assumes various manifestationsdepending upon the circumstances which bring the partiesinto conflict. At its most basic, it supposes that theproprietor will give to the contractor access to the site asis required to carry out the work and that the proprietorwill provide sufficient instructions and details as arenecessary for the same purpose. I do not propose to dwellon these implied terms except to ask a question which isfundamental to the analysis in this paper. It is a questionto which no easy answer is provided by authority. Thequestion is this: Is the supposed term one to be impliedby law or one to be implied from fact? For reasons whichI have endeavoured to expound, this question is not anidle one.

Expressed as particular manifestations of the impliedterm asto co-operation, one is drawn immediately towardsthe conclusion that these terms should be implied by law.From a practical point of view it is not so easy. Fewcontractors would see their case much advanced by theimplication of a term expressed so generally. The task ismade more complicated by the intrusion into thistheoretical debate of all the other terms of a typical buildingcontract, such as an obligation to accelerate to make uplost time or the traditionally obscure status of theconstruction programme and the effect of a right or a dutyto update it.96 What happens in the real world is that thesupposed term in question is massaged into greater

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particularity by both parties: by the contractor who wantsit to fit the facts which are hoped to constitute the breach;and by the proprietor who wants to show that it isinconsistent with some express term. The end result uponthe particular contract and in the particular facts is that allconcerned, for very good reason, treat the exercise as oneof implication from fact. Only a purist would complainabout such an approach to the task of implication of termsof this kind, and I do not number myself among them.But the situation raises the theoretical question: on whatside of Lord Bridge's line of"clear distinction" does suchan term fall? Nor is the problem dismissed by an appealto the analogy of the spectrum, given the differentprocesses 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 isthat the distinction between terms implied by law and thoseimplied by fact is much less clear than it might at firstappear. I have mentioned Lord Wilberforce's image of aspectrum on which the two categories of contract can beseen at either end. The closer one gets to the point ofdeparture for each of these extremities, the more attractiveis this image. But it is, in my view, not possible toembraceit without abandoning the fundamental conceptual andpractical distinctions that lie between the categories. Whenthe contract falls in this uncertain part of the spectrumhow is the pleader to formulate it; how is the advocate topresent it and how is the Court to determine it?

The present High Court has in many areas beenprepared to treat specific causes of action, not as discreterights, but as manifestations of a broader underlyingprinciple. Nowhere is this better illustrated than in thearea of tort. No longer do we treat a claim as one arisingfrom the law relating to occupier's liability,97 or from thatin Rylands v Fletcher98 or as economic/non-economicloss.99 These have gone the way of the old medieval causesof action; they are now subsumed under a principle basedon proximity. The same has been the experience in otherareas of law that construction lawyers know and love sowell, for example restitution,lOo equities arising out ofunconscionability101 and estoppels. 102 There are signs thatthe law relating to implied terms is already beginning toenjoy the same fate. Indeed, a close examination of thelogical processes involved in the implication of terms bylaw and from fact suggests to me that it is possible, as inthe law of negligence, to identify frequently encounteredcontracts where the relationship between the parties andthe requirements of commercial reality are such that it isnot difficult for the law to insert and the parties to acceptthe insertion into their contract of appropriate terms. Inother cases, as in the law ofnegligence, it will be necessaryto examine the relationship more closely, and from this todetermine whether the insertion is required. In each case,the critical factor is the requirement the contract be givencommercial efficacy; in the case offrequently encounteredcontracts and frequently inserted terms, this will gowithout saying, as is the case with the duty of care between

25

motorist and passenger, so that it will be scarcely necessaryto ask whether the contract is efficacious without it. Iventure to predict that the BP Refinery case, at least as itis now understood and applied, will be lucky to see outthe centenary ofFederation. Although it was not reportedin any of the English reports, it has been applied in thatcountry103 as well as in Australia, New Zealand104 andHong Kong,105 but in a far from rigid way, at least insofaras it concerns terms implied as a question of fact. InAustralia it has been said, first, that the five conditionsneed not all be met where the contract into which the termis to be inserted is not complete on its face or where it isoral or partly oral and the parties have never sought toreduce it to complete written form. 106 On the other hand,there are certain contracts where it is said that the courtsshould be slow to insert terms. These are contracts instandard form, particularly where the form is thatstipulated for by a government department107 or where itis apparent that the parties have set out their bargain in adetailed and comprehensive document. 108 Moreover, inHawkins v Clayton Deane J109 warned against thetemptation to formulate a precise mechanical test fordefining the terms, if any, which should be implied in acase where the parties have not sought to spell them out.Recently, in the English Court of Appeal, Steyn J110 putthe task of the Court as being that of determining "whetherthe proposed implication is strictly necessary if thereasonable expectations of the parties are not to bedefeated".lll

The fundamental problem to my mind lies in thedistinction which is said to originate in Lister v RomfordIce between terms implied by law and those implied fromfact. As we have seen, that distinction is, at best, arbitrary,at worst, illusory and, in any event, not helpful. Buildingand construction lawyers do not need to be told of therisks of erecting upon such an insubstantial footing theedifice which I have sought to describe. Furthermore,the exercise of looking for the supposed intention of theparties is futile. By the time they are embroiled in litigationit is unlikely that the Court will be able to identify whatthey actually had in mind on the contentious point and, inany event, this is irrelevant. Nor is it helpful to introducethe officious bystander. The supposed question is in truthposed112 and answered by the judge, not by some fictitiouscreature, nor even less by the parties themselves. Theprobabilities are that neither party foresaw thecircumstance which brings them to litigation. In such acase it is not sensible to speak of inferring their intention,objective or otherwise. What the Court is asked to do isto insert against the will of one party a term to make thecontract work. Whether this is a term which the law orcustom imposes willy nilly, or whether it is a term thatcommercial common sense dictates, the court islegislating. The implied term is in fact imputed, notinferred. Why should we not stand back and acknowledgethis? It will be apparent that this position in some respectsresembles the heresy propounded by Lord Denning MRin 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 thecriterion of reasonableness which his Lordship supported,and the more severe one of necessity which I accept.

The traditional reaction of the common law wheretheoretical analysis gets in the way of common sense is tojettison the former. It is not difficult to suppose a systemwhere the Court would ignore altogether the distinctionbetween terms implied by law and terms implied fromfact. When a plaintiff asks a Court to imply a term in acommercial contract, it would look at the contract as itstands, in the context in which it had been made and wasexpected to operate; it would be told how it would operatewithout the supposed term or whether it would not operateat all; and how the insertion of the supposed term wouldaffect the position. Where the supposed term is one whichthe cases have in the past readily implied in contracts ofthe type, it would be implied unless the parties hadexpressly or impliedly excluded it. 113 In other cases theterm would not be implied unless the plaintiffdemonstrated that, without it, the commercial intent ofthe contract would be defeated. 114 In such a case thequestion whether a term should be inserted, and the termsof that term would be a matter for the judge having regardto the intention of the parties objectively determined fromthe contract or from other circumstances known to themat the time of contract and, where necessary, to any relevantpolicy requirements. 115 Such an approach would notinvolve any attempt to speculate what might have beenthe actual, or supposedly actual, intention of the parties.This task, in any case, probably amounts to no more thanthe Court asking itself what it might have agreed to if ithad been in the shoes of the negotiators. To dress up thetask in terms of an answer to the officious bystander'sinquiry is merely to emphasise the obvious - that the Courtwill not without good cause intrude into a voluntarycontract - at risk of distracting attention from its realobjective which is to enable the commercial arrangementto fulfil the expectation of the parties. Let us by all meanserect in honour of the officious bystander a statue in hisimage, but let us not thereby delude ourselves that he isother than a character in a striking and colourful fable.Let us ask him whether he wants to continue to groanunder the burden that he has borne for the past fifty-fiveyears? I feel confident that his answer would be a testy"Ofcourse not". 0

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Footnotes1. 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 thatofficiousness could be considered a femalecharacteristic.

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 FrostHoldings Pty Ltd [1989] VR 695 which may standat the point of contact between the implied existenceof a contract and its implied terms. See alsoAotearoa International Ltd v Scan Carriers AlS[1985] 1 NZLR 513 at 556; [1985] 2 Lloyd's Rep419 at 442, per Lord Roskill. This case is discussedin Coote, "Contract Formation and the ImplicationofTerms" (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 WaitakiInternational Ltd [1992] 2 NZLR 58 at 64, Cooke Ppostulated as a type of implied term that deduced"by implication or interpretation from the expressterms of the contract". See too Paul v Mobil OilNZ Ltd [1992] 2 NZLR 194 at 202. Also, there isfrequently a point of contact here for an argumentbased on interpretation is often put as an alternativeto the implication of a term and, as we shall see, theimplication is made against the matrix of thecontract.

6. See for example Codelfa Construction Pty Ltd vState Rail Authority ofNSW (1982) 149 CLR 337at 346, per Mason J. The point of contact here isthat one of the circumstances in which a term isimplied is where the parties did not turn their mindsto the term but would have agreed the term had theydone so.

7. Here, too, there may be a point of contact since theterm which one party seeks to introduce into thewritten contract may have been discussed beforecontract and expressly omitted: CodelfaConstruction Pty Ltd v State Rail Authority ofNSW(1982) 149 CLR 337 at 352-4, per Mason J. Seethe interesting discussion of this in Hadjiyannakis,"The Parol Evidence Rule and Implied Terms: theSounds ofSilence" (1985) 54 Fordham Law Review35.

8. Although convenient, the cases admit nothing likea rigidly discreet classification of implied terms:Vickery v Waitaki International Ltd [1992] 2 NZLR58 at 64, per Cooke P.

9. See, for example, Hawkins v Clayton (1988) 164CLR 539 at 573, per Deane J.

10. Con-Stan Industries ofAustralia Pty Ltd v NorwichWinterthur Insurance (Australia) Ltd (1986) 160CLR 226 at 236-7. See also London Export CorpLtd v Jubilee Coffee Roasting Co Ltd [1958] 2 AllER 411 at 420, per Jenkins, LJ.

11. (1977) 16ALR363.12. (1889) 14 PD 64 at 68.

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13. At 67.14. At 68.15. At 69.16. At 71. It is difficult to see what that consideration

had to do with the task undertaken by the two otherjudges and for which the case is authority.

17. Bottoms v York Corporation (1892) Hudson's BC(3rd ed) 220, CA (comprising Lord Esher MR,Bowen, Kay LJJ).

18. In 1931 it was held that, in a contract between abuilder and a purchaser, there is an implied termthat the building be fit for habitation: Miller vCameron Estates Ltd [1931] 2 KB 113.

19. "A term can only be implied if it is necessary intheir business sense to give efficacy to the contract":Reigate v Union Manufacturing Co (Ramsbottom)Ltd [1918] 1 KB 592 at 605, per Scrutton LJ.

20. [1939] 2 KB 206.21. Sir Travers Humphreys, a common law judge with

considerable experience in the criminal law.22. MacKinnon LJ and Goddard LJ (another criminal

lawyer).23. At 227. His Lordship has acquired a considerable

reputation for the felicitous phrase, as isdemonstrated by an examination of the index to REMegarry, Miscellany at Law Stevens, London 1955p400.

24. Lister v Romford Ice & Cold Storage Co Ltd [1957]AC 555.

25. Denning, Birkett, Romer LJJ.26. [1956] 2 QB 180 at 192.27. [1957] AC 555.28. At 576 ("status"), per Viscount Simonds.29. At 586, per Lord Morton who then referred to the

Moorcock test.30. Lord Radcliffe and Lord Somervell held that such a

term should be implied by the application of theofficious bystander test.

31. Woodfall on Landlord and Tenant, 27th ed, 1968par 1491.

32. [1976] 1 QB 334, Denning MR, Roskill, OrmrodLJJ.

33. [1976] 1 QB at 329.34. At 330.35. As to this, see Bonython v The Commonwealth

(1948) 75 CLR 589 at 625, per Dixon J.36. [1977] AC 239. Incidentally, they allowed the

tenants' appeal on another point.37. It is so described by JP Swanton, "Implied

Contractual Terms: Further Implications ofHawkins v Clayton" (1992) 5 Jo of Contract Law127 at 130.

38. At 254, Lord Wilberforce (Lord Fraser concurringat 270); at 258, per Lord Cross; at 262, per LordSalmon; at 266, per Lord Edmund-Davies.

39. At 258.40. At 253-4.41. For example, it is by no means certain that the term

whereby the proprietor loses the benefit of aliquidated damages clause by acts of prevention isproperly to be seen as an implied term at all; ratherthan a positive rule of law applicable to liquidated

27

damages clauses. See SMK Cabinets v Hili ModernElectrics Pty Ltd [1984] VR 391 at 394-5, perBrooking J.

42. As, for example, the duty owed by an employer toan employee to provide a safe system of work:Wright v TNT Management Pty Ltd (1989) 15NSWLR 679 at 685, per McHugh JA.

43. Lords Wilberforce, Salmon, Fraser.44. Lords Cross, Edmund-Davies.45. But a dissentient.46. BP Australia Ltd v Hastings Shire Council [1973]

VR 194.47. Viscount Dilhome, Lords Simon of Glaisdale and

Keith of Kinkel.48. 16 ALR at 376.49. Lords Wilberforce and Morris of Borth-y-Gest.50. At 384.51. This requirement meant that the assignee met the

requirements of the agreement made with the Stateof Victoria for the construction of the refinery, thisagreement being part of the matrix against whichthe rating agreement was entered into.

52. Secured Income Real Estate Australia Ltd v StMartins Investments Ltd (1979) 144 CLR 596:Codelfa Construction Pty Ltd v State RailAuthorityof NSW (1982) 149 CLR 337: Hospital ProductsLtd v United States Surgical Corporation(1984) 156CLR41.

53. Con-Stan Industries of Australia v NorwichWinterthur Insurance (Australia) Ltd (1986) 160CLR 226 at 237; Codelfa Construction Pty Ltd vState Rail Authority ofNSW (1982) 149 CLR 337at 345, per Mason J.

54. Vroon vFoster's Brewing Ltd (unreported, SC (Vic),Ormiston J, 2097/1991, 11 March 1993);Castlemaine Tooheys Ltd v Carlton & UnitedBreweries Ltd (1987) 10 NSWLR 468; RenardConstructions (ME) Pty Ltd v Minister for PublicWorks (1993) 26 NSWLR 234 at 255-6; 9 BCL 40at 55-6, per Priestley JA (where terms implied fromfact are referred to as terms "implied ad hoc").

55. Scully v Southern Health and Social Services Board[1991] 4 All ER 563 at 571.

56. VIC: RSC RI3.02; NSW: RSC Pt 15 r 7.57. Mackay v Dick (1881) 6 App Cas 251 at 263, per

Lord Blackburn; Secured Income Real EstateAustralia Ltd v St Martins Investments Pty Ltd(1979) 144 CLR 596 at 607, per Mason J.

58. Pursuant to VIC: RSC R47.04; NSW: RSC Pt 31 r 2.59. London Borough ofMerton v Stanley Hugh Leach

Ltd (1985) 32 BLR 51 at 76, per Vinelott J.60. Riverside Motors Pty Ltd v Abrahams [1945] VLR

45; Foster v AT Brine & Sons Pty Ltd [1972] WAR157.

61. Charnock v Liverpool Corporation [1968] 3All ER473 at 477, per Salmon LJ.

62. Horton v Jones (No.2) (1939) 39 SR (NSW) 305 at319, per Jordan CJ.

63. R v Henrickson (1911) 13 CLR 473 at 480, perGriffith CJ.

64. Commonwealth v Austin Australia (1986) 5 AustConst LR (Pt 2) 19, SC(NSW).

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65. Voli v Inglewood Shire Council (1963) 110 CLR 74at 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 AuthorityofNSW (1982) 149 CLR 337 at 353, per Mason J.But compare the more restrictive view of BrennanJ at 403. To the extent of conflict, I believe that thejudgment ofMason J more accurately states the law.

68. Codelfa Construction Pty Ltd v State Rail AuthorityofNSW (1982) 149 CLR 337 at 352-3, per MasonJ. Such an intention may be indicated by the deletionof a term from a standard form agreement (MottramConsultants Ltd vBernard Sunley & Sons Ltd (1974)2 BLR 31 at 47, per Lord Cross); from the omissionof a term from a contract which is modelled on astandard form agreement (NZI Capital CorporationPty Ltd v Child (1991) 23 NSWLR 481); or,possibly, from the deletion of a term from a draft(Timber Shipping Co SA v London & OverseasFreighters Ltd [1972] AC 1 at 15-6, per Lord Reid).

69. In National Bank of Greece SA v Pinios ShippingCo No 1 [1990] 1 AC at 637 at 645-6, Lloyd LJmakes mention in this context of"one off' contractsas being inappropriate for an implication of law, amention which evokes memories of The Nema in avery different context.

70. Where the implication of a term as a matter of factin contracts of the definable type has become acommonplace, the court will import it into allcontracts of that type as a matter of course:Castlemaine Tooheys Ltd v Carlton & UnitedBreweries Ltd (1987) NSWLR 468 at 487, per HopeJA; Diveji v Mateffy Pearl Nagy Pty Ltd (1993)113 ALR 225 at 240, per Northrop, Gummow, HillJJ; Service Station Association Ltd v Berg Bennett& Associates Ltd (1993) 117 ALR 393 at 402, perGummow J; 179 Elizabeth Street Pty Ltd vAustcorpHotels Pty Ltd (1993) Aust Contract Reports 90-040.

71. Con-Stan Industries of Australia v NorwichWinterthur Insurance (Australia) Ltd (1986) 160CLR 226 at 237, per Deane J.

72. Butt v McDonald (1896) 7 QLJ 68 at 70-1, perGriffith 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 withthe associated question whether the term has beenexcluded by the parties expressly or impliedly.

75. References to "actual intention" in the judgment ofDeane J in Hawkins v Clayton (1988) 164 CLR 539at 570, must be understood in this light. SeeRoxburgh v Crosby & Co [1918] VLR 118 at 137,per Cussen J; Codelfa Construction Pty Ltd v StateRail Authority ofNSW(1982) 149 CLR 335 at 353,per Mason J; Adelaide Petroleum NL v PoseidonLtd (1990) 98 ALR 431 at 534, per French J.

76. Con-Stan Industries of Australia v NorwichWinterthur Insurance (Australia) Ltd (1986) 160CLR 226 at 237, per Gibbs CJ etc.

28

77. (1987) 10 NSWLR 468 at 488-9, speaking with theconcurrence of the other members of the Court ofAppeal.

78. Hospital Products Ltd v United States SurgicalCorporation (1984) 156 CLR41 at 139, per DawsonJ; at 118, perWilson J; at 66, per Gibbs CJ; CodelfaConstruction Pty Ltd v State Rail Authority ofNSW(1982) 149 CLR 337 at 346, per Mason J; RenardConstructions (ME) Pty Ltd v Minister for PublicWorks (1993) 26 NSWLR 234 at 257; 9 BCL 40 at57, per Priestley JA.

79. Secured Income Real Estate Australia Ltd v StMartins Investments Pty Ltd (1979) 144 CLR 596at 605, per Mason J. See, for example, Neodex Ltdv Borough of Swinton(1958) 5 BLR 34 at 51, perDiplock J (access available, but not the mosteconomical access, nor that contemplated by thetenderer 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 136­7, per Cussen J.

82. In The Jardine Engineering Corporation Ltd v TheShimizu Corporation (1992) 63 BLR 96 at 115 (SCHong Kong), Kaplan J refused to imply the supposedterms on the basis that it cannot be necessary toimply them where the plaintiff can succeed onanother basis. It is suggested, with respect, that thisis an incorrect application of the requirement ofnecessity.

83. The performance of the work being a fundamentalobligation under the contract: Secured Income RealEstate Australia Ltd v St Martins Investments PtyLtd (1979) 144 CLR 596 at 607, per Mason J.

84. Hence the obligation is not one to enable thecontractor 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 accessmust, however, be sufficient in nature and sufficientin time to enable the contractor to carry out thecontract work within the time frame imposed on it:Freeman & Son v Hensler (1900) Hudson's BC (3rded) 323, CA.

85. In any contract, particularly a building contract, co­operation between proprietor and contractor isdesirable. The law, however, will step in to insertan obligation to co-operate only where it isnecessary: Mona Oil Equipment Co v RhodesiaRailways [1949] 2 All ER 1014 at 1018, per DevlinJ; London Borough of Merton v Stanley HughLeach Ltd (1985) 32 BLR 51 at 80-1, perVinelottJ.

86. The difference between the majority and theminority in the BP case illustrates this trend.

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87.

88.

89.

90.

91.

92.

93.94.

95.

96.

97.

98.

99.

100.

164 CLR 573. See too Heimann v TheCommonwealth (1938) 38 SR (NSW) 691 at 695,per Jordan CJ ("necessary to imply the term in orderto make the contract operative according to theintention of the parties as indicated by the expressterms").His Honour's judgment on this topic, in manyrespects, sits uncomfortably with orthodoxstatements 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 futuredevelopment. See JP Swanton, "ImpliedContractual Terms: Further Implications ofHawkins v Clayton" (1992) 5 Jo of Contract Law127.See Benjamin on Sale (2nd ed) 1873 p525, The rulewas included in the codifying statutes in the 1890'swhich came to be VIC: Goods Act 1958 s 19(a);NSW: Sale ofGoods Act 1923, s19(1).Although building materials fall within thedefinition of "goods", an agreement to supply themin such circumstances is not a contract for the saleof goods: Brooks Robinson Pty Ltd v Rothfield[1951] VLR 405 at 408, per Dean J.Contracts held to be for the sale of goods includedcontracts for the supply of a meal in a restaurant(Lockett v Charles [1938] 4 All ER 170); to makeand fit false teeth (Lee v Griffin (1861) 1 B & S272; 121 ER 716; cf Samuels v Davis [1943] KB526) or to supply and lay a carpet: Philip Head &Sons Ltd v Showfronts Ltd [1970] 1 Lloyd's Rep140; whereas the following have been held to becontracts for work and materials: contracts to painta portrait (Robinson v Graves [1935] 1 KB 579; cfIsaacs v Hardy (1884) Cab & EI 287), to repair acar (GH Myers & Co v Brent Cross Service Co[1934] 1 KB 46), to apply hair dye (Watson vBuckley, Osborne, Garrett & Co Ltd [1940] 1 AllER 174) or to roof a house (Young & Marten Ltd vMcManus Childs Ltd [1969] AC 454).Lawrence v Cassel [1930] 2 KB 83; Miller CannonHill Estates Ltd [1931] 2 KB 113. See too Hancockv BW Brazier (Anerley) Ltd [1966] 2 All ER 901,CA.[1966] NSWR 471.See, for example, Cable (1956) Ltd v HutchersonBros Pty Ltd (1969) 123 CLR 143; BasildonDistrictCouncil v JE Lesser (Properties) Ltd [1985] 1 AllER 20 at 24-7, per Official Referee.Although, with respect to this term, it is likely thatit would satisfy them in any event.See Kitsons Sheet Metal Ltd v Matthew HallMechanical & Electrical Engineers Ltd (1989) 47BLR 82, Official Referee.Australia Safeway Stores Pty Ltd v Zaluzna (1987)162 CLR479.Burnie Port Authority v General Jones Pty Ltd(1994) 120 ALR 42, HCA.Caltex Oil (Aust) Pty Ltd v The Dredge"Willemstad" (1976) 136 CLR 529.Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR221.

101.

102.

103.

104.105.

106.

107.

108.

109110.

111.

112.

113.

114.

115.

*

Commercial Bank ofAustralia Ltd v Amadio (1983)151 CLR 447.Waltons Stores (Interstate) Ltd v Maher (1988) 164CLR 387.Colbart v Kumar (1992) 59 BLR 89 at 99, OfficialReferee; Coreco Ltd v Foxboro Great Britain Ltd(unreported, CA, 24 February 1992); Tatung (UK)Ltd vBritish Satellite Broadcasters Ltd (unreported,CA, 19 March 1992); J & J Fee Ltd v The ExpressLift Co Ltd (1993) 34 Con LR 147; Watts vAldington; Tolstoy-Miloslovaski v Welsby(unreported, CA, Neill, Steyn, Simon Brown LJJ,15 December 1993).Paul v Mobil Oil NZ Ltd [1992] 2 NZLR 194.The Jardine Engineering Corporation Ltd v TheShimizu Co (1992) 63 BLR 96 at 107-15, per KaplanJ.Hospital Products Ltd v United States SurgicalCorporation (1984) 156 CLR 41 at 121, per DeaneJ, where his Honour said that the term mustnevertheless still satisfy the "so obvious it goeswithout saying" test. See also Hawkins v Clayton(1988) 164 CLR 539 at 571; Khoury v GovernmentInsurance Office (NSW) (1984) 164 CLR 622 at 636.Codelfa Construction Pty Ltd v State RailAuthorityofNSW (1982) 149 CLR 337 at 374, per Aickin J.See also Liverpool CC v Irwin [1977] AC 239 at258, per Lord Cross.Codelfa Construction Pty Ltd v State RailAuthorityofNSW (1982) 149 CLR 337 at 346, per Mason J.164 CLR at 572.Watts v Aldington; Tolstoy-Miloslovaski v Welsby(unreported, CA, Neill, Steyn, Simon Brown LJJ,15 December 1993).This fundamental task was said to be that lying underthe two traditional tests, officious bystander test andthe business efficacy test.Codelfa Construction Pty Ltd v State RailAuthorityof NSW (1982) 149 CLR 337 at 374, Aickin Jdemonstrated the fact that the supposed answer willoften depend more on the formulation of thequestion than the disposition of the respondent.As is the case with terms implied by custom orusage." ...such term as the nature of the contract itselfimplicitly requires, no more, no less": LiverpoolCity Council v Irwin [1977] AC 239 at 254-5, perLord Wilberforce, quoted with approval in Hawkinsv Clayton (1988) 164 CLR 539 at 572, per Deane J.It may be that all or some of the considerations listedin the BP Refinery case, or at least the thinkingbehind them, might in the circumstances, bear uponthis task.

A paper presented by the Honourable MrJustice Byrne of the Victorian Supreme Courtto the Law Council of Australia - Business LawSection and The Building Dispute Practitioners'Society.

Reprinted with permission from BuildingDispute Practitioners' Society Newsletter.