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Implied Terms in Contract of Sale

When can a term be implied in a contract?

In a recent decision of Interlink Australia Pty Ltd v Lowe [2015] QCA 211, the seller’s home was built on 2 lots.  The buyer signed contracts to buy both, but intended to do so in different but related entities. Initially, the buyer sought to enforce both contracts, but on hearing, the buyer only sought specific performance of one contract for the lot upon which it intended to build a display home.

The contracts did not have a specific term as to a contemporaneous settlement of both lots.

The Court considered the basis for implying such a term.

In applying the principles accepted by the High Court in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales, the express contractual terms and background circumstances as to formation of the contracts and the subjective intention of the Parties, taken together, amply justified the implication of the term.

The evidence relied on and accepted by the trial judge was:

  1. the address of the land was given, in both contracts, as 57 Seaview Street; that was the address for both lots, not just one;
  2. all discussions prior to execution of the contracts were on the basis that the residential property was to be sold; that was both lots;
  3. both the buyer’s director and the seller knew that the buyer’s intention was to “bulldoze” the home, and that could only be done if the buyer had access to both lots;
  4. it was “inconceivable … that the seller would have in any way contemplated selling one lot only; and equally, it seems obvious … that the buyer would have realised that she would not sell unless she could sell both lots”;
  5. the buyer intended, as the seller knew, to build a display home on Lot 97, and to hold Lot 99 as an investment; and
  6. until the eve of the trial the buyer, through Interlink Australia, was seeking to have both lots transferred by the seller to one or other of the buyer’s companies.

On the facts of this case, a condition requiring contemporaneous settlement of both contracts was something that is so obvious as to go without saying, it was reasonable and equitable, it was capable of clear expression and did not contradict the contractual terms otherwise. Further, it was necessary to give efficacy to the contract, because without it Mrs Lowe would have been put in the position that her continued residence in her own home would be jeopardised, and the possibility of her house being cut or moved was a real one, given the buyer’s attitude. Against this background, the Court found the term as to contemporaneous settlement was implied.

In this case, the failure to properly draft contracts in the first instance was probably an oversight or error and led to an unnecessary and very expensive court dispute.The facts illustrate the importance of having contracts properly drafted at the outset, so that all necessary and relevant terms are expressly included.

Omitting terms can lead to uncertainty for both parties to a contract and can lead to costly and expensive disputes.

For further assistance in either drafting the terms of contracts or in resolving disputes as to the terms of contracts, please contact us.

Michael Sing
Special Counsel

supervising partners

Gavin McInnes

Partner
Office 07 3009 8444
Email g.mcinnes@rclaw.com.au

lawyers

Michael Sing

Special Counsel
Office 07 3009 8444
Email m.sing@rclaw.com.au