A contract may consist of agreed express terms and also any terms that are deemed to be implied.
Implied terms are terms that have not been expressly agreed by the parties but are implied into the contract on the following grounds:
1. Usage or custom. A contract may be deemed to incorporate any terms which are customary to a particular trade or the place in which it is made. To be valid, the usage must be:
a. Certain, reasonable and not contrary to law.
b. Something more than merely trade practice.
2. The parties' previous course of dealings. Where the parties have consistently conducted business on certain terms in their previous course of dealings, then the court may imply a term relating to that previous course of dealing.
3. The intention of the parties, a term implied "in fact". A court may imply a term into a contract to fill a “hole” in its drafting. The reason for this is to reflect the parties' intentions when the contract was entered into. However, the test is an objective one, and the court will consider what a reasonable person would have understood the parties' intentions to be, given the background knowledge reasonably available to the parties at the time they entered the contract.
4. Common law. Terms implied at common law are terms that the courts will imply in relation to particular types or classes of contract. Such terms are a necessary characteristic of a particular type of contract.
5. Statute. Terms are implied under various statutes and statutory instruments such as:
a. Sale of Goods Act 1979. In contracts for the sale of goods, where the seller sells the goods in the course of business, the Act implies a number of terms relating to the goods.
b. Supply of Goods and Services Act 1982. The Act applies to contracts for works and materials. In relation to materials, sections 3 and 4 of the Act imply the same terms as sections 13 and 14 of the Sale of Goods Act 1979 imply into sale of goods contracts. For the work element of the contracts, section 13 implies a term providing that the services will be carried out with reasonable care and skill.
