Implied Contracts in Australia: Everything You Need to Know

Contracts are an essential part of business relationships. They serve as a binding agreement between parties and outline the terms and conditions that each party is expected to fulfill. However, not all terms and conditions are explicitly stated in a contract. In some cases, certain obligations and expectations may be implied. In this Business Kitz article, we will discuss what implied contracts are in Australia and explore their various types.

What are Implied Contracts?

An implied contract is a legally binding agreement between two or more parties that is inferred from their conduct or circumstances, rather than explicitly stated in writing or orally. It arises when parties act in a manner that indicates they intend to enter into a contract, but the terms are not explicitly discussed or agreed upon.

In Australia, implied contracts are recognized and enforced under the common law, which means they are derived from the decisions of the courts rather than from statute law. The courts have established various principles to determine when an implied contract exists and what terms are included.

What are the different types of implied contracts?

There are several types of implied contracts in Australia, of which are based on different legal principles. Some of the common types include:

Implied Terms

Implied terms are terms that are not explicitly stated in a contract but are assumed to be part of the agreement. They are based on the intentions of the parties and the circumstances surrounding the contract. Implied terms can be divided into two categories: terms implied by law and terms implied by fact.

1. Implied-in-fact Contract

An implied-in-fact contract is an agreement inferred from the conduct of the parties involved. It is created when the parties act in a way that implies they have an agreement in place. For instance, if a person provides a service and the recipient accepts and pays for it, this can be seen as an implied-in-fact contract.

2. Implied-in-law Contract

An implied-in-law contract, also known as a quasi-contract, is not a true contract but is imposed by law to prevent unjust enrichment. It arises when one party confers a benefit on another party, and it would be unfair for the recipient to retain the benefit without compensation. For example, if a person provides emergency medical treatment to another person without their consent, the law may impose an obligation on the recipient to pay for the services rendered.

Statutory Implied Contract

A statutory implied contract is created by law and applies to certain industries or situations. For example, the Australian Consumer Law implies terms into consumer contracts, such as the guarantee of acceptable quality and the right to repair, replace, or refund faulty goods.

What are some examples of implied contracts?

1. Employment Contracts

Employment contracts may contain both expressed and implied terms. Implied terms can include a duty of good faith, a duty to provide a safe work environment, and the obligation to pay an employee’s salary. In some cases, implied terms may also be found in industry awards or agreements.

2. Sale of Goods Contracts

When a seller sells goods, they imply that the goods are of merchantable quality, fit for purpose, and match the description provided. These implied terms apply even if they are not expressly stated in the contract.

3. Building Contracts

Building contracts may contain both express and implied terms. Implied terms can include the obligation to complete work within a reasonable time frame, the duty to use reasonable care and skill, and the obligation to comply with building standards and regulations.

What’s the takeaway?

In conclusion, implied contracts are an important aspect of contract law in Australia. They are created when parties act in a way that implies they have an agreement in place, or when the law imposes an obligation on one party to compensate another. Implied terms can be found in various contracts, including employment contracts, sale of goods contracts, and building contracts. It is essential for parties to understand the types and implications of implied contracts to ensure they meet their legal obligations and avoid disputes.

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