Implied terms of contract important when recovering debts

29-November-2010 Commercial Disputes By admin

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.
 


The Court also noted that this was subject to the implication by mercantile usage such as the usual custom in a particular industry, professional practice, or past course of dealings between the parties.

Comment from Mark Streeter – Debt Recovery Lawyer

Ascertaining the precise terms, and extent of those terms, is fundamental in the appraisal stage of ascertaining whether or not you have enforceable rights or remedy for recovery of a debt against another party. The law of contract requires that there be a term of the contract, which when breached, causes damages, as necessary prerequisite for a successful recovery action. 

The starting point is then to articulate what the terms of a contract are so that you can adduce the appropriate evidence to demonstrate that the terms have not been complied with.
 

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