Test for implication
Confirmed in Bathurst NZ applies the BP Refinery ‘elements’ (not test) - with holistic consideration
1. Must be reasonable and equitable
2. Must be neccessary to give buisness efficacy to the contract (neccessary to give effect)
3. Must be so obvious it goes without saying
4. Must be capable of clear expression
5. Must not contradict any express terms of the contract
Discuss the evolution of implied terms
Traditional appraoch
- Business efficacy test (The Moorcock) Established that if you identify the purpose of the contract; is the implied term necessary to make the contract work?
- (Hamlyn and Co v Wood) Grain produced as bi-product from brewery (sold to the plaintiff), brewery shutting down. Not implied it would continue as no excess if no main supply.
- Officious bystander test (Shirlaw v Southern Foundries) term has to be “so obvious that it goes without saying” a test for this is the officious (busy body) bystander (neutral and don’t understand the contract).
Modern era
- BP Refinery: 5 elements (preferential rates for BP but changed to BP refinery - implied continue as one contract said yes to chnaging name and other was silent)
- Belize: Created confusion by stating the test “is that what the instrument read as a whole against the relevant background would be reasonably understood to mean?”; This merged contract interpretation.
Modern era - post Belize
English courts: diluted Belize Marks v Spencer (read narrowly); largely kept to BP refinery keeping implication and interpretation distinct
- NZ courts initially approves (as in Dysart and Mobil Oil)
- Courts then began to note the UK’s approach
Modern era - NZ’s current position
Bathurst confirmed that BP Refinery is the correct approach however, should be a holistic consideration.
- It is conceivable that a clause could be implied if failing at buisness efficacy but succeeding on being “so obvious it goes without saying”
- Retain high threshold of neccessity
- Do not use BP Refinery as a test but rather elements (excl. clear expression and contradict an express term).
Note:
- Barton v Morris (UK) Supports use of BP Refinery
- In 2023 Realestate.com v Hardingham (AUS) used reasonable person with background knowledge approach.
Overall structure of interpretation and implication
- Interpret express terms; if nothing said presumption is the contract did not intent to regialte these particular circumstances
- Do the BP Refinery factors point to an implied term that is neccessary to spell out the contracts meaning (5 elements)
Discuss incorportation under signed contracts
Rule in L’Estrange v Gracubub - signature rule applies even with onerous or unusual terms. This includes if the contract refers to other documents (e.g. subject to T&C’s on website).
Exceptions: fraud/misrep, non est factum, non contractual documents.
- Curtis v Chemical Cleaning Company (misrep case) - if someone makes a misrepresentation about the nature of the contract that induces you to sign then you are not bound by what you signed (exception to signature rule). Drycleaning for wedding dress. Here person asked what contract meant - agent said that there was an exclusion clause for a specific thing - actual contract included a much wider exclusion clause.
- Nalder & Biddle v C & F Fishing (non contractual documents case) - Signature rule only applies when the document can be reasonably expected to contain contractual terms. Here, a job card was an indication of the next set of repairs/work. This was not a reasonable place to expect a term; thus signing the job card which included the phrase “ we accept all your standard terms” was not binding.
Discuss incorporation under unsigned contracts
For a term to be incorportated must be…
1. Actual knowledge; OR
2. Resonable notice of term
The more onerus the more notice required
Red hand rule
- Thornton v Shoe Lane Parking
- Interfoto v Stilleto (huge late fee)
- Olley v Malbourugh Court (sign on back of hotel door limiting liability for theft)
By course of dealings
- Hardwick v Game Farmn - clear and consitent signalling from one party of invorperated term
- McCutcheon v MacBrayne - claimed the operators gave notice of limited liability, was not true only done sometimes.
By trade custom
Statutory authority of incorporation
s 50 CCLA - if a party tries limiting their liability the court will only allow it if it is fair and reasonable. What is fair and reasonable may involve looking at bargaining power between parties; whether a party received legal advice, etc.
