Terms implied in law apply to a particular class of contracts, not just a single contract.
They are implied into all contracts of a particular class or description (e.g., employment contracts, insurance contracts).
The rationale is not based on the intentions of the parties.
Categories are not closed and can develop over time.
Requirements for Recognizing a New Category
Two-stage test:
The term must be applicable to a definable class of contractual relationship (e.g., all employment contracts, all insurance contracts).
The term must be recognized as suitable to be implied in all contracts of that class by reason of necessity.
Necessity Test (Burn v Australian Airlines, endorsed in Breen v Williams):
The requirement of necessity reflects the concern that unless such a term be implied, the enjoyment of rights conferred by the contract would or could be rendered nugatory, worthless, or seriously undermined.
Policy considerations, social justice, and social consequences are also relevant.
Difficulty
It is a very high bar to satisfy.
Arguing for a new category would be a "big deal," potentially requiring a High Court case.
Examples of Recognized Terms Implied in Law
Sale of goods: goods are of merchantable quality and fit for purpose.
Hire of a boat: the boat is seaworthy.
Lease of a house: it is fit for habitation.
Employment contracts:
Employee will keep the employer's confidential information confidential.
The employer will own the intellectual property in all the work product done by employees in the course of their employment.
Liverpool City Council v Irwin (1977) - House of Lords
Example of successfully arguing for a new category of term implied in law.
Facts: Irwin was a tenant at Hague Heights in Liverpool, a social housing building in disrepair.
Issues: lifts not working, no lights in stairwells, vandalism, blocked rubbish chutes.
Irwin stopped paying rent, and the council sued to evict them.
Irwin countersued, claiming the council breached an implied term in law to maintain common areas.
There was no express term in the lease obliging either party to carry out these tasks.
House of Lords concluded there was an implied term in law: an implied term into high-rise tenancies to take reasonable care of the common areas.
In contracts of this sort, a lease in relation to an apartment in a high rise, there must be the following implied terms: a right of exclusive possession to the premises by the tenants, a covenant for quiet enjoyment, the right for the tenant and visitors to freely access and use the stairwell and lifts, and a right to use the rubbish chutes.
The necessity test was applied, deeming these terms essential for the tenants' enjoyment.
Breen v Williams (1996) - High Court of Australia
Facts: Julie Breen had silicone breast implants and consulted Doctor Williams for remedial surgery.
She needed her medical records to participate in a class action lawsuit in the US against the manufacturer (Dow Corning).
The doctor refused to hand over her medical records.
Breen claimed there was an implied term in the doctor-patient contract that she had a right to access her medical records (implied term in fact and/or implied term in law).
Julie Breen lost
The High Court held that there was no such implied term in law or in fact.
Justice Gumow's Reasoning:
Implied term in fact failed because it was not necessary for her to have access to her medical records to get the benefit of the therapeutic service contract.
The doctor offered to provide a summary of her file and prepare a report, which would be adequate for therapeutic purposes.
Implied term in law failed, referencing Burn v Australian Airlines.
It could not be said that unless she were to access her records unless that was implied as a matter of law that the enjoyment of the rights conferred upon the patient by the contract with a medical practitioner would or could be rendered nugatory, worthless or perhaps be seriously undermined.
The case highlights the high bar for establishing an implied term in law.
Since December 2001, under the Privacy Act, patients now have a right to access their personal health records.
University of Western Australia v Grey (2009) - Full Federal Court Case
The implied term failed.
Concerns a claim by the university to ownership of inventions, which ended up being quite valuable, by an academic researcher employed at the university, Doctor Grey.
Extra gloss on the necessity test: consider policy issues, justice, and social consequences because terms are being implied into a class of contracts.