2.1 Terms implied by reference to the nature of the contract

The courts may imply specific terms in relation to a variety of types of contracts due to policy considerations. It is not possible to list all such contract types here. A few examples will, however, be provided.

Typically contracts for the carriage of goods by sea are associated with special implied terms. For example, a seaworthy vessel must be provided at the start of the voyage. However, contracts for the carriage of goods by sea are by no means the only type of contracts in relation to which the courts have chosen to imply particular terms. Derbyshire Building Co Pty Ltd v Becker^[1]involved the hire of a saw used when building a fence. The saw was defective causing a hand injury to the user. The Court concluded that unless contradicted by an express term of the contract, there is an implied condition in contracts for hire that hired goods be reasonably fit for the purpose that they were hired for.

In G.H. Myers & Co v Brent Cross Service Co,^[2]the action related to a rod with a latent defect being installed into a car. Justice du Parcq stated that: “a person contracting to do work and supply materials warrants that the materials which he uses will be of good quality and reasonably fit for the purpose for which he is using them, unless the circumstances of the contract are such as to exclude any such warranty”.^[3] This statement was relied upon by the Court in Young & Marten Ltd v McManus Childs Ltd,^[4] as they fleshed out the relevant principle that a contract to do work and supply materials, in the absence of special circumstances, carries with it two implied warranties: (1) that those materials are of good quality, even to the extent that they are free from latent defects; and (2) that they are reasonably fit for their intended purpose.

In Australia, the High Court considered the matter of implied terms in contracts for work and materials in Helicopter Sales (Aust) Pty Ltd v Rotor-Work Pty Ltd.^[5] The dispute related to a contractor who serviced a helicopter and, in doing so, installed a faulty bolt which later caused the helicopter to crash. The owners of the helicopter sought compensation, arguing that the installation of the faulty bolt breached certain implied terms of the contract of service. The Court noted that the bolt failed due to a latent manufacturing defect which, to the plaintiff’s knowledge, did not lie within the defendant’s competence to identify while installing it. Whilst acknowledging that the outcome arguably was unfortunate from a public policy perspective, the Court found in the defendant’s favour, noting that:

A warrantor’s inability to ensure compliance with quality standards will often, of itself, provide no ground for the exclusion of an implied warranty of quality; no disregard of the legitimate interests of the warrantor will thereby be involved. But the case will be different where, as here, both contracting parties know all the relevant facts, have agreed upon an exclusive source of supply and are treating a third party’s certification as to quality as being critical.^[6]

These are just some examples and many others can be found. Consequently, to assess the likelihood of terms being implied in a particular contract, one must always seek to get familiar with the particular area in which the contract will operate.