IMPLIED TERMS IN CONSTRUCTION CONTRACTS

A paper presented to a joint meeting of the Society of Construction Law and

the Society of Chartered Surveyors in Ireland in Cork on 4th February 2013

John ME Lyden

March 2013

D156

www.scl.org.uk

1

IMPLIED TERMS IN

CONSTRUCTION CONTRACTS

John ME Lyden

Introduction

Construction contracts contain express terms, which may be in writing, or oral,

or a combination of both. To take a simple example: a plumber may have

submitted a quotation in writing (or perhaps by email) for the installation of a

new kitchen sink and the associated pipework and the house owner may have

replied in writing (or by email) ‘Your price is acceptable – please start next

week’. Under the Electronic Commerce Act 2000, section 19, documents

transmitted electronically have the same status as hard copies, in the context of

the conclusion of a contract.1

The plumber’s quotation and its acceptance may be accompanied by a

telephone call between the parties, in which further (oral) terms of the contract

will be agreed, such as what day the sink is to be installed, whether the

plumber will dispose of the old sink and so on.

In addition to these express terms, both in writing (including by email) and

oral, the law will imply further terms – for example, that the plumber will do

the work in a good and workmanlike manner and that the house owner will

afford reasonable access to facilitate the plumber’s work.

Implied terms generally

Implied terms may arise in at least five ways:

1. Under the Constitution of Ireland;

2. Under statute;

3. By the custom or usage of a particular trade;

4. By a course of dealings between parties;

5. Under the common law.

This paper concentrates on the last category of implied terms.

1 Unless otherwise stated, references to statutes in this paper are to Irish statutes or to

statutes in force in Ireland. With the exceptions of the English Commercial Court

(Comm), Chancery Division (Ch), Queen’s Bench Division (QB) and Technology and

Construction Court (TCC), the abbreviated court names given in brackets in footnotes are

those currently used by the neutral citation system in force in that jurisdiction.

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Terms implied under the Constitution of Ireland

In Meskell v Córas Iompair Éireann, the Supreme Court held that there was an

implied term in a bus conductor’s contract of employment to the effect that he

had a constitutional right either to join or not to join a trade union.2

In Glover v BLN Ltd, an office holder was summarily dismissed for alleged

misconduct by his employer, who contended that the contract contemplated

this action. Walsh J said:

‘This procedure was a breach of the implied term of the contract that the

procedure should be fair, as it cannot be disputed, in the light of so much

authority on the point, that failure to allow a person to meet the charges

against him and afford him an adequate opportunity of answering them

is a violation of an obligation to proceed fairly.’3

The implied term, to the effect that fair procedures will be applied, is not

confined to contracts of employment. In Bolger v Osborne, the plaintiff horse

trainer, and other trainers and jockeys, agreed to be bound by the rules of the

Irish Turf Club. The court treated those rules as being a private contract. The

plaintiff was fined £1,000 by the Turf Club arising from a race at Naas Race

Course in 1994 but gave no reason for this decision. Macken J said:

‘A charge was made against the jockey and against the plaintiff and

against the horse on the basis that the horse ‘did not run on its merits’,

by which is meant, in layman’s terms, that it did not run as fast as it

could have, or up to its potential on the day.

… the rules must be applied as in the case of rules constituting any other

contract ... where the rules give such power as fines, suspensions or

losses of licences the rules must be exercised strictly also from the

plaintiff’s point of view and in a manner which is not arbitrary ...

... it seems to me that a finding of fault, absent strict or vicarious liability

has no basis, was in breach of the contract existing between the parties,

was wholly irrational and, in the absence of any facts or matters being

disclosed to the plaintiff as to the allegation he was required to meet,

was in breach of his constitutional right to a fair and proper hearing.’4

[emphasis added]

This principle may be applicable where a construction contract states that an

employer (or its agent) can take drastic action against a contractor without

recourse to some form of third party determination. Some of the more

draconian clauses in the Public Works Contract5 may be subject to this

principle. If a clause is ambiguous and is capable of more than one meaning, a

term will be implied that the meaning compatible with a party’s constitutional

2 Meskell v Córas Iompair Éireann [1973] IR 121 (IESC).

3 Glover v BLN Ltd [1973] IR 388 (IESC), page 425.

4 Bolger v Osborne [2000] 1 ILRM 250 (IEHC), pages 252 and 263.

5 Eg Public Works Contract for Civil Engineering Works designed by the Employer:

downloadable from finance.irlgov.ie.

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rights will apply. In Macauley v Minister for Posts and Telegraphs, Kenny J

held, under Article 40.3 of the Constitution of Ireland: ‘… there is a right to

have recourse to the High Court to defend and vindicate a legal right’.6

In P Elliott & Co Ltd v Minister for Education, the contract was subject to the

RIAI Conditions of Contract 1968 edition, which provided that the final

certificate was conclusive in regard to certain matters. The Supreme Court

accepted the contractor’s contention that, because the final certificate clause

restricts the parties’ right to litigate either in court or in arbitration (in the

words of Finlay CJ), it must: ‘... be strictly construed in the sense that any

claim which falls to be barred by the issue of the final certificate must be

unambiguously within the terms of that sub-clause’. 7

Terms implied under statute

These are numerous, but perhaps the best known terms are those implied by

virtue of the Sale of Goods Act 1893 (as amended by section 10 of the Sale of

Goods and Supply of Services Act 1980). These implied terms include, inter

alia, the following:

‘12. (1) In every contract of sale ... there is–

(a) an implied condition on the part of the seller that ... he has a right

to sell the goods ...

13. (1) Where there is a contract for the sale of goods by description,

there is an implied condition that the goods shall correspond with the

description ...

14. … (2) Where the seller sells goods in the course of a business there

is an implied condition that the goods supplied under the contract are of

merchantable quality ...

(4) Where the seller sells goods in the course of a business and the

buyer, expressly or by implication, makes known to the seller any

particular purpose for which the goods are being bought, there is an

implied condition that the goods supplied under the contract are

reasonably fit for that purpose ...

(5) An implied condition or warranty as to quality or fitness for a

particular purpose may be annexed to a contract of sale by usage.’

The implied term of merchantable quality was held to apply to stone aggregate

supplied by a quarry in Noreside Construction v Irish Asphalt.8

6 Macauley v Minister for Posts and Telegraphs [1966] IR 345 (IEHC).

7 P Elliott & Co Ltd v Minister for Education [1987] ILRM 710 (IESC), pages 721-722.

8 Noreside Construction Ltd v Irish Asphalt Ltd [2011] IEHC 364, [2012] BLR 165, para

[53].

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Terms implied by the custom or usage of a particular trade

General principles

Keating states:

‘Custom and usage. Evidence is admissible to show that words were

used according to a special custom or usage attaching to the trade or

locality applicable to the contract. The custom must be strictly proved

and must be notorious so that everybody in the trade or locality

concerned enters into a contract with that custom as an implied term. It

must not be inconsistent with the express or necessarily implied terms of

the contract, must be reasonable and not against the law.’9

Fidelma White in Commercial Law states:

‘Technically, a custom refers to a practice in a particular area while a

usage refers to a practice in a particular trade. Today, the terms are used

interchangeably.’10

In Noreside Construction v Irish Asphalt,11

Finlay Geoghegan J adopted the

following statement of principle from McDermott, Contract Law:

‘The following is a non-exhaustive list of the requirements that must be

fulfilled before a custom may be implied:

(i) The custom must have acquired such notoriety that the parties

must be taken to have known of it and intended it should form part

of the contract.

(ii) The custom must be certain.

(iii) The custom must be reasonable, and the more unreasonable it is

the harder it will be to prove that it exists.

(iv) Until the courts take judicial notice of a custom it must be proved

by clear and convincing evidence.

(v) The custom must not be inconsistent with the express contract.’12

In Tucker v Linger, Lord Blackburn said:

‘The custom, when proved, is to be considered as part of the agreement:

and if the agreement be in writing, though the custom is not written, it is

to be treated exactly as if that unwritten customary clause had been

written out at length.’13

9 Stephen Furst QC and The Hon Sir Vivian Ramsey, Keating on Construction Contracts

(9th edition, Sweet & Maxwell, 2012), para 3-013.

10 Fidelma White, Commercial Law (2nd edition, Round Hall, 2012), page 203, footnote

17.

11 Noreside Construction v Irish Asphalt (note 8), para [46].

12 Paul A McDermott, Contract Law (Bloomsbury Professional (Ireland), 2001), para 7.07

[new edition due in 2013].

13 Tucker v Linger (1883) 8 App Cas 508 (UKHL), page 511.

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Attempts to establish the existence of a custom often fail. In O’Reilly v Irish

Press, Maguire P said:

‘... a custom or usage of any kind is a difficult thing to establish ... it

must be proved by persons whose position in the world of [journalism]

entitles them to speak with certainty and knowledge of its existence. I

have to be satisfied that it is so notorious, well known and acquiesced in

that in the absence of agreement in writing it is to be taken as one of the

terms of the contract between the parties.’14

In older cases, quaint local customs were accepted by the courts in some cases.

For example in Smith v Wilson, the parties’ agreement referred to a ‘thousand’

rabbits. The court held that this meant 100 dozen rabbits (ie 1,200 rabbits) and

not 1,000 rabbits. Lord Tenderden CJ said, ‘... we must suppose the term

thousand to have been used by the parties in the sense in which it is usually

understood ... when applied to the subject of rabbits.’15

In O’Connail v The Gaelic Echo, the court did accept that there were customs

in the newspaper trade in Dublin to the effect that a journalist would be

entitled to holiday pay and to one month’s notice in the event of dismissal.16

Construction examples: no custom accepted

In O’Rourke v Cauldwell, the plaintiff, an experienced project engineer, was

engaged on a one year contract.17

O’Higgins J rejected the defendant’s

contention that there was a custom to the effect that such a contract could be

terminated upon one week’s notice. In Kempston v Butler, the Irish Court of

Common Pleas held that an alleged custom to the effect that builder when

demolishing a house would have to prop and shore the adjoining premises,

irrespective of the length of time the two premises had stood together, was

void because it was both uncertain and unreasonable.18

In Antisell v Doyle, the plaintiff quantity surveyor prepared bills of quantities

at the request of an architect, but the project was abandoned.19

The plaintiff

contended that it was the custom in such circumstances for the employer to

pay the fees for the preparation of the bills of quantities. The court held that,

in the absence of an express agreement, the alleged custom could not bind the

employer because it was neither sufficiently certain nor well enough

established to constitute a legally recognised custom.

In Woods v NJ Ellingham, a drainage sub-contractor contended that there was

a custom in New Zealand to the effect that a contractor, employing a

drainlayer in abnormal terrain, must give the drainlayer advance notice of the

14 O’Reilly v Irish Press (1937) 71 Irish Law Times Reports 194 (IEHC), page 195.

15 Smith v Wilson (1832) 3 B & AD 728 (KB); 110 ER 266, page 267.

16 O’Connail v The Gaelic Echo (1954) Ltd (1958) 92 Irish Law Times Reports 156

(District Ct).

17 O’Rourke v Cauldwell (unreported, IEHC, 20 March 1998).

18 Kempston v Butler (1861) 12 Ir Common Law Reports 516 (Irish Court of Common

Pleas).

19 Antisell v Doyle [1899] 2 IR 275 (QB).

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abnormality, or pay for all the extra costs incurred.20

The court held that there

was not adequate proof of any such alleged custom.

In Noreside Construction v Irish Asphalt, it was alleged that stone aggregate

supplied from the defendants’ quarry was defective, and unsuitable for use in

buildings, because it contained pyrite. The defendants contended that there

was an established custom to the effect that quarries limited their liability to

replacement of defective product. However, Finlay Geoghegan J said:

‘I am not satisfied that there is evidence of a custom well known and

according to which quarry operators were entitled to limit their liability

for defective product to replacement product in the absence of the

inclusion of an express contractual term to that effect.’21

Construction examples: custom accepted

There have been very few modern cases concerning construction where the

courts hold that a term has been implied by reason of a trade custom or usage.

In Donovan v South Dublin Guardians, the invitation to tender stated that

drawings and specifications could be seen at the architect’s office. The

plaintiff builder’s tender was accepted but he said that he was not aware of any

general conditions of contract. The court accepted evidence from the architect

to the effect that, in Ireland, ‘specification’ included both details of the work

and the general conditions of contract (which had not changed for many years).

Palles LCB said:

‘Now, the plaintiff, a person in the building trade, who must be taken to

have known the meaning of the word ‘specification’ by its use in his

tender, incorporated therein those general conditions. It is immaterial

that he did not see or ask to see them. He knew there were conditions,

and therefore was in the same position as if he had actually seen them.’22

In Kincora Builders Ltd v Cronin, the architect’s specification stipulated that

window boards should be 1.25 inches thick and that floorboards should be

1.00 inch thick. The employer complained that this joinery was thinner by one

eight of an inch in each case. In accepting the evidence of a custom in the

joinery trade, Pringle J said:

‘I am satisfied, on the evidence of Mr Lyons, supported by that of Mr

Ambrose Byrne a timber importer, that the standard Irish practice is that,

when boards of a certain thickness are specified, this means the

thickness of the board as ordered from the timber merchant and that

when the boards are planed and finished or ‘wrot’, they are in fact 1/8th

20 Woods v NJ Ellingham & Co Ltd [1977] 1 NZLR 218 (NZSC).

21 Noreside Construction v Irish Asphalt Ltd (note 8), para [50].

22 Donovan v South Dublin Guardians (1904) 5 New Irish Jurist Reports 106 (Queen’s

Bench Division), page 108.

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of an inch less thick and that this explains the discrepancies in these

cases.’23

In Tony Cox v Jim 5, it was held that a reference in the parties’ agreement to

the sum of £800,000 was to that sum exclusive of VAT, on the basis of a well

established custom in the construction industry. Judge Bowsher QC said:

‘Mr Pickavance said that in his experience construction contracts are

almost always quoted exclusive of VAT and there is a general

understanding in the industry that VAT will be charged for and paid in

addition to the principal sum ...

The usual requirements for the existence of a custom exist. On the

evidence I find that there is a custom and that it is notorious, certain and

reasonable. I also find that it is not contrary to law, including the

intention or policy of any statute. It is a custom which exists regardless

of the knowledge (or lack of knowledge) of statute law on the part of

those engaged in the construction industry.’24

In Lynch Roofing Systems v Christopher Bennett the key issue was whether the

agreement between the plaintiff sub-contractor and the defendant main

contractor incorporated an arbitration clause.25

Morris P adopted the

following statement of principle, as set out in the headnote in British Crane

Hire v Ipswich Plant Hire:

‘… where parties to a contract of hire were both in the trade and of equal

bargaining power the conditions habitually imposed in such contracts

would be incorporated into the contract on the basis of the common

understanding of the parties that the usual conditions would apply.’26

Morris P held that the arbitration clause in the standard RIAI building contract

applied, adding:

‘In the present case I am satisfied that each party was sufficiently

familiar with the trade so as to lead a court to conclude that ... the

defendants would be understood and presumed to say ‘of course that is

quite understood’. I would find it hard to believe that a large roofing

contractor would undertake this contract without the benefit of a

building contract.’27

Terms implied by a course of dealings between the parties

In Noreside Construction v Irish Asphalt, Finlay Geoghegan J said:

23 Kincora Builders Ltd v Cronin (unreported, IEHC, 5 March 1973), page 21.

24 Tony Cox (Dismantlers) Ltd v Jim 5 Ltd 13 Const LJ 209 (OR), pages 211 and 212.

25 Lynch Roofing Systems (Ballaghaderreen) Ltd v Christopher Bennett and Son

(Construction) Ltd [1999] 2 IR 450 (IEHC).

26 British Crane Hire Corporation Ltd v Ipswich Plant Hire Ltd [1975] 1 QB 303 (EWCA).

27 Lynch Roofing Systems v Bennett (note 25), page 454.

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‘It is well established that terms and conditions may be incorporated into

a contract by signature, reasonable notice or by a course of dealing’.28

In Victor Hydraulics v Engineering Dynamics, Williamson J said:

‘... terms may be incorporated into contracts if they are part of the

normal course of dealing between two parties and the only reasonable

inference to be drawn is that they form the contractual basis for the

particular dealing under scrutiny.’29

In Circle Freight International v Medeast Gulf Exports, the parties had

transacted business on eleven separate occasions prior to the disputed contract.

The Court of Appeal held that certain standard terms had been incorporated

into the contract by a course of dealings between the parties. Taylor LJ said:

‘I consider that the defendants’ conduct continuing the course of

business after at least 11 notices of the terms and omitting to request a

sight of them would have led and did lead the plaintiffs reasonably to

believe the defendants accepted their terms. In those circumstances it is

irrelevant that in fact [the defendants] did not read the notices.’30

Implied terms under the common law

Implied in law or in fact

McDermott explains:

‘Terms are implied in law where the contract is of a defined type ... such

as the relationship of seller and buyer, owner and hirer ... contracts for

building works and so forth. The terms so implied may be described as

legal incidents of the particular type or class of contract in question ...

There are two conditions which must be met before a term can be

implied by law:

(i) the contract in question must be of a defined type; and

(ii) the implication of the term must be necessary ...

In addition to the terms implied into contracts as a matter of law, the

court may also imply a term in order to repair what it perceives to be “an

intrinsic failure of expression” by the parties.’31

In Society of Lloyds v Clementson, Steyn LJ said:

‘Terms implied in fact are individualised gap fillers, depending on the

terms and circumstances of a particular contract. Terms implied in law

are in reality incidents attached to standardised contractual relationships,

28 Noreside v Irish Asphalt (note 8), para [31].

29 Victor Hydraulics Ltd v Engineering Dynamics Ltd [1996] 2 NZLR 235 (NZHC), page

240.

30 Circle Freight International Ltd v Medeast Gulf Exports Ltd [1988] 2 Lloyd’s Rep 427

(EWCA), page 433.

31 McDermott (note 12), paras [7.13], [7.14] and [7.45].

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or perhaps more illuminatingly, such terms can in modern US

terminology be described as standardised default rules.’32

Terms implied in law

These terms apply to certain types of contract. In Lister v Romford Ice and

Cold Storage, Lord Tucker said: ‘Some contractual terms may be implied by

general rules of law’.33

In Liverpool City Council v Irwin, Lord Cross said:

‘When it implies a term in a contract the court is sometimes laying down

a general rule that in all contracts of a certain type – sale of goods,

master and servant, landlord and tenant and so on – some provision is to

be implied unless the parties have expressly excluded it.’34

But the term in question must be necessary. In Sweeney v Duggan, Murphy J

said:

‘I agree that a term may be implied independently of the intention of the

parties where it is necessary as a matter of law and logic to enable the

provisions of the agreement to have operative effect.’35

But McDermott states: ‘This requirement of necessity for terms implied by law

is less strict than the test of necessity used for terms implied by fact’.36

In Scally v Southern Health and Social Services Board, Lord Bridge of

Harwich said:

‘A clear distinction is drawn ... between the search for an implied term

necessary to give business efficacy to a particular contract and the

search, based on wider considerations, for a term which the law will

imply as a necessary incident of a definable category of contractual

relationship.’37

Examples of terms implied in law

In Siney v Dublin Corporation, it was held by the Supreme Court that, where a

housing authority was letting a house or flat, there was an implied warranty

that the dwelling was reasonably fit for human habitation.38

In Norta Wallpapers v John Sisk & Son, Henchy J said:

‘In all cases of supply and installation by a sub-contractor I conceive the

law to be that, unless the particular circumstances give reason for its

exclusion, there is implied in the contract a term to the effect that the

32 Society of Lloyd’s v Clementson [1995] CLC 117 (EWCA), page 131.

33 Lister v Romford Ice and Cold Storage Co Ltd [1957] AC 555 (UKHL), page 594.

34 Liverpool City Council v Irwin [1977] AC 239 (UKHL), page 257.

35 Sweeney v Duggan [1997] 2 ILRM 211 (IESC), page 222.

36 McDermott, note 12, para 7.17.

37 Scally v Southern Health and Social Services Board [1992] 1 AC 294 (UKHL),

page 307.

38 Siney v Dublin Corporation [1980] IR 400 (IESC).

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contractor will be liable to the employer for any loss or damage suffered

by him as a result of the goods, materials or installations not being fit for

the purpose for which they were supplied.’39

Terms implied in fact

The business efficacy test

The courts will imply terms where they are necessary to make the contract

work – to give the contract business efficacy. In The Moorcock, Bowen LJ

said:

‘In business transactions such as this what the law desires to effect by

the implication is to give such business efficacy to the transaction as

must have been intended at all events by both parties.’40

In Ireland, this well-known statement was endorsed by the Supreme Court in

Tradax v Irish Grain Board, where O’Higgins CJ said:

‘... the Courts may imply a term in order to repair an intrinsic failure of

expression. This is done to give business efficacy, as it is said, to a

contract which would otherwise lack it ... However, this power must be

exercised with care. The Courts have no role in acting as contract

makers ... to ... direct what agreement ought to have been made by two

people, whether businessmen or not, who chose to enter into contractual

relations with each other.’41

In Tradax, McCarthy J said:

‘... a court should seek to lend business efficacy to a contract by the

implication of a term which is necessary in order to do so. It is not the

function of a court to write a contract for parties who have met upon

commercially equal terms; if such parties want to enter into

unreasonable, unfair, or even disastrous contracts, that is their business,

not the business of the Courts. If, however, parties engaged in

commerce want to enter into a contract ... believing they have done so

and acting as if they have done so, then a court ought to import a term

where it is necessary to do so in order to give business efficacy to the

contract.’42

The officious bystander test

In Airscape v Heaslon Properties, Edwards J referred to The Moorcock and

Tradax.43

Then he said:

39 Norta Wallpapers (Ireland) Ltd v John Sisk & Son (Dublin) Ltd [1978] IR 114 (IESC),

page 123; 14 BLR 49, page 61.

40 The Moorcock (1889) 14 PD 64 (EWCA), page 68.

41 Tradax (Ireland) Ltd v Irish Grain Board Ltd [1984] IR 1 (IESC), page 14.

42 Tradax v Irish Grain Board note 41, page 26.

43 Airscape Ltd v Heaslon Properties Ltd [2008] IEHC 82, para [55].

11

‘The officious bystander test was formulated in Shirlaw v Southern

Foundries Ltd [1939] 2 KB 206 where MacKinnon J stated [page 227]:

“Prima facie that which in any contract is left to be implied and need not

be expressed is something so obvious that it goes without saying; so that,

if, while the parties were making their bargain, an officious bystander

were to suggest some express provision for it in the agreement, they

would testily suppress him with a comment of ‘oh, of course!’

McDermott points out44

that this test has been cited with approval in a

number of Irish cases including Carna Foods Ltd v Eagle Star Insurance

[1997] 2 ILRM 499; Sullivan v Southern Health Board [1997] 3 IR 123

and Sweeney v Duggan [1997] 2 ILRM 211.’45

It is not enough that a term would be reasonable

It will not be implied unless it is necessary to make the contract work. In

Trollope and Colls v North West Metropolitan Regional Hospital Board, Lord

Pearson said:

‘... it is not enough for the court to find that such a term would have been

adopted by the parties as reasonable men if it had been suggested to

them: it must have been a term that went without saying, a term

necessary to give business efficacy to the contract, a term which,

although tacit, formed part of the contract the parties made for

themselves.’46

That statement of principle enunciated by Lord Pearson in Trollope and Colls

was adopted by Lynch J in the Supreme Court in Carna Foods v Eagle Star.47

Requirements for the implication of a term implied in fact

These were set out by Lord Simon in BP Refinery v Hastings Shire Council:

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 terms of the contract.48

McDermott refers to BP Refinery and remarks that: ‘Whilst this may not be an

exhaustive test, it does provide a useful structure for analysing the case law’.49

44 [Author’s note] McDermott, note 12, para 7.46, footnote 102.

45 Airscape v Heaslon, note 43, para [56].

46 Trollope and Colls v North West Metropolitan Regional Hospital Board [1973] 1 WLR

601 (UKHL), page 609; [1973] 2 All ER 260, page 268.

47 Carna Foods Ltd v Eagle Star Insurance Co (Ireland) Ltd [1997] 2 ILRM 499 (IESC),

pages 504-505.

48 BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1978) 52 ALJR 20

(UKPC), page 26.

12

In Meridian Communications v Eircell, O’Higgins J reviewed various

authorities and said:

‘The following principles emerge:

o before a term will be implied in a contract it must be necessary to do

so, and not merely reasonable;

o the term must be necessary to give business efficacy to the

agreement;

o it must be a term which both parties intended, that is, a term based

on the presumed common intention of the parties;

o the court will approach the implication of terms into a contract with

caution;

o there is a presumption against importing terms into a contract in

writing and the more detailed the terms agreed in writing the

stronger is the presumption against the implication of terms;

o if the term sought to be implied cannot be stated with reasonable

precision, it will not be implied.

The decision of the court in all matters where contractual terms are

alleged to be implied is based on those principles.’50

In Compass Group v Mid Essex Hospital Services NHS Trust, Cranston J said:

‘The test for the implication of a term in the contract is whether, without

it, the “consequences would contradict what a reasonable party would

understand the contract to mean”, the touchstone being the “reasonable

expectations of the parties”: Attorney-General of Belize v Belize Telecom

Ltd [2009] UKPC 10, [2009] 1 WLR 1988, [22]-[23].’51

Terms that depend on peculiar facts

Some implied terms will be rare in practice because they depend on the

peculiar facts of a case. In Keegan and Roberts v Dublin County Council the

contract dealt expressly with services within the site but it did not deal with

services outside the site.52

Ellis J held that there was an implied term that the

council should have provided services as far as the site in order to give the

contract business efficacy. The judge applied The Moorcock principle to the

unusual facts of that case: an example of a term implied in fact as opposed to a

term implied in law.

49 McDermott, note 12, para 7.53.

50 Meridian Communication Ltd v Eircell Ltd [2002] 1 IR 17 (IEHC), page 41.

51 Compass Group UK and Ireland Ltd v Mid Essex Hospital Services NHS Trust [2012]

EWHC 781 (QB), para [44].

52 Keegan and Roberts v Dublin County Council (1981) 1-CLD-04-11 (IEHC).

13

Two terms are implied in many contracts

Firstly, a negative term

In Barque Quilpué Ltd v Brown, Vaughan Williams LJ said:

‘... there is an implied contract by each party that he will not do anything

to prevent the other party from performing a contract or to delay him in

performing it. I agree that generally such a term is by law imported into

every contract.’53

That implied term has been adopted by the courts in cases such as Merton LBC

v Leach; Jardine Engineering Corporation v Shimizu Corporation; Allridge v

Grand Actual; and Nala Engineering v Roselec.54

Secondly, a positive term

In Mackay v Dick, Lord Blackburn said:

‘Where in a written contract it appears that both parties have agreed that

something should be done, which cannot effectively be done unless both

concur in doing it, the construction of the contract is that each agrees to

do all that is necessary to be done on his part for the carrying out of that

thing though there may be no express words to that effect.’55

In Merton LBC v Leach, Vinelott J referred to Mackay v Dick and said: ‘As

regards the second of these two terms it is well settled that the courts will

imply a duty to do whatever is necessary in order to enable a contract to be

carried out’.56

In Martin Grant v Sir Lindsay Parkinson, Lawton LJ said:

‘There is, for example, by implication of law, an obligation to co-operate with

one another’.57

In Rosehaugh Stanhope v Redpath Dorman Long, Bingham LJ

said: ‘It is very well known that the courts readily imply a Mackay v Dick

term’.58

Mackay v Dick has been reaffirmed by the Supreme Court of South

Australia in Alstom Power Ltd v Yokogawa Australia Pty Ltd (No 7).59

However, implied terms will not be allowed to replace express terms to the

same or similar effect. In Davy Offshore v Emerald Field Contracting, clause

33.1 of the contract stated: ‘Subject to the terms hereof, the Company shall not

by any acts or omissions delay or obstruct the Contractor in the performance of

the Work’. The employer, EFCL, contended that, having regard to the express

53 Barque Quilpué Ltd v Brown [1904] 2 KB 264 (EWCA), page 271.

54 Merton LBC v Stanley Hugh Leach Ltd 32 BLR 51 (Ch), page 79; Jardine Engineering

Corporation Ltd v Shimizu Corporation 63 BLR 96 (HC – Hong Kong), pages 117-118;

Allridge (Builders) Ltd v Grand Actual Ltd 55 Con LR 91 (OR), page 123; and Nala

Engineering Ltd v Roselec Ltd [1999] CILL 1534 (TCC), page 1535.

55 Mackay v Dick (1881) 6 App Cas 251 (UKHL), page 263.

56 Merton LBC v Leach, note 54, page 80.

57 Martin Grant & Co Ltd v Sir Lindsay Parkinson & Co Ltd 29 BLR 31 (EWCA), page 41.

58 Rosehaugh Stanhope (Broadgate Phase 6) Ltd v Redpath Dorman Long Ltd 50 BLR 69

(EWCA), page 87.

59 Alstom Power Ltd v Yokogawa Australia Pty Ltd (No 7) [2012] SASC 49, para 572(2).

14

terms of clause 33.1 of the contract, there was no need for an implied term in

regard to co-operation on its part. Judge Thayne Forbes QC said:

‘I have therefore come to the conclusion that the contract is subject to an

implied term of co-operation, but only to the extent that such a term is

necessary to deal with circumstances not amounting to a breach by

EFCL of clause 33.1 of the contract.’60

In Airscape v Heaslon Properties, John Edwards J adopted a passage from

Chitty:

‘The Court will readily imply a term that each will co-operate with the

other to secure performance of the contract and that neither party will, by

his own act or default, prevent performance of the contract.’61

Many of the terms implied in a construction contract are really no more than

particular applications of these two complimentary and fundamental implied

terms.62

Implied terms on contractor’s part

Contractor will complete the works

In Brown v Norton, Davitt P held that the builder: ‘impliedly agrees (1) that he

will complete the building of the house ... and (3) that ... the work will be

carried out in a good and workmanlike manner and with sound and suitable

materials’.63

And within a reasonable time

Bailey, Construction Law, states:

‘If a contract does not stipulate a date or time for completion of a

contractor’s works, or provide a mechanism for doing so, this does not

mean that the contractor can complete its works whenever it chooses.

This is because, in such a case, the law will imply an obligation on the

contractor’s part to complete its works within a reasonable time.’64

In Bruno Zornow v Beechcroft Developments, Judge Davies QC said: ‘in the

absence of an express date for completion, there would, in any case, be

implicit in it an obligation to complete within a reasonable time’.65

In Allridge

(Builders) v Grand Actual, Mr Recorder Blunt QC said: ‘It was an implied

60 Davy Offshore Ltd v Emerald Field Contracting Ltd 55 BLR 1 (OR), page 59.

61 Airscape v Heaslon Properties (note 43), para [83]; from Hugh Beale (general editor),

Chitty on Contracts (27th edition, Sweet & Maxwell, 1994), para 24-027.

62 For a very comprehensive review of the law concerning these two implied terms, see

Aidan Steensma, ‘Implied Obligations of Non-Hindrance and Co-operation in

Construction Contracts’, Society of Construction Law Paper 162 (May 2010):

<www.scl.org.uk>.

63 Brown v Norton [1954] IR 34 (IEHC), page 56.

64 Julian Bailey, Construction Law (Informa, 2011), volume 2, para 11.14.

65 Bruno Zornow (Builders) Ltd v Beechcroft Developments Ltd (1989) 51 BLR 16 (OR),

page 31.

15

term of the contract that the plaintiff’s works would be completed within a

reasonable time from the date of commencement’.66

In Courtnay v Waterford

and Central Ireland Railway, Fitzgerald B said: ‘… an agreement to do works

as to the completion of which no time is stipulated is prima facie an agreement

to complete within a reasonable time …’.67

In Dundalk Shopping Centre v Roof Spray, the employers repudiated the

contract of roofing contractors due to their non-performance. Finlay P said:

‘I am satisfied that this repudiation of the contract was justified and that

the defendants had by that time failed in a fundamental term of the

contract namely to provide an effective waterproofing of this roof within

a reasonable time.’68

Is there an implied term that the contractor will proceed with due

diligence?

Hudson states:

‘The English standard forms provide that the contractor ‘shall ...

regularly and diligently proceed with the [works]’ ... but in fact, even in

the absence of such provisions ... there must be an implied term that the

contractor will proceed with reasonable diligence ...’69

‘... even in the absence of an express term for due diligence and of any

linked express termination clause, both such terms require to be implied

by law, in construction contracts and subcontracts generally, as a matter

of business efficacy.’70

‘Indeed, it is submitted that the universally accepted term

unquestionably implied by law for completion within a reasonable time

... can in practice only be given effect ... on the assumption that he does

perform with due diligence. The two concepts are ... inextricably

linked.’71

Hudson also states:

‘… it is submitted that, even in the absence of an express term for due

diligence and of any linked express termination clause, both such terms

may in some cases be implied by law, in construction contracts as a

matter of business efficacy.’72

66 Allridge v Grand Actual (note 54), page 123.

67 Courtnay v Waterford and Central Ireland Railway Co (1878) 4 LR Ir 11 (Exch Div),

page 19.

68 Dundalk Shopping Centre Ltd v Roof Spray Ltd (unreported, IEHC, 21 March 1979),

page 14.

69 IN Duncan Wallace QC, Hudson’s Building and Engineering Contracts (11th edition,

Sweet & Maxwell, 1995), volume 1, para 4.128.

70 Hudson, note 69, volume 2, para 9.034.

71 Hudson, note 69, volume 2, para 9.035.

72 Nicholas Dennys, Mark Raeside and Robert Clay (general editors), Hudson’s Building

and Engineering Contracts (12th edition, Sweet & Maxwell, 2010),

16

What is ‘due diligence’? In West Faulkner v Newham LBC, Judge Newey

said:

‘I conclude that ‘regularly and diligently’ should be construed together

and that in essence they mean simply that contractors must go about

their work in such a way as to achieve their contractual obligations. This

requires them to plan their work, to lead and to manage their workforce,

to provide sufficient and proper materials and to employ competent

tradesmen, so that the Works are fully carried out to an acceptable

standard and that all time, sequence and other provisions of the contract

are fulfilled.’73

In Allridge v Grand Canal Actual, it was conceded by the plaintiff and held by

the court that: ‘There were implied terms of the contract that the plaintiff ...

would ... carry out the works regularly and diligently’.74

However, in Leander

Construction v Mulalley, Coulson J reviewed both the textbooks and the case

law and concluded:

‘All the authorities point the same way: the courts have been very

reluctant to imply additional terms as to the timing or regularity of the

contractor’s performance prior to the contract completion date. In the

case most in point, namely Greater London Council v Cleveland Bridge

[34 BLR 50], both Staughton J and the Court of Appeal refused to imply

an obligation to proceed regularly and diligently, notwithstanding the

express words of the termination clause.’75

Contractor is entitled to plan and perform the work as it pleases

In Greater London Council v Cleveland Bridge and Engineering, Staughton J

said:

‘There is, moreover, a general principle applicable to building and

engineering contracts that in the absence of any indication to the

contrary, a contractor is entitled to plan and perform the work as he

pleases, provided always that he finishes it by the time fixed in the

contract.’76

That view was endorsed by the Court of Appeal in the same case,77

and in

Leander Construction v Mulalley.78

para 6-021.

73 West Faulkner Associates v Newham LBC 31 Con LR 105 (OR), page 139.

74 Allridge v Grand Canal Actual, note 54, page 123.

75 Leander Construction Ltd v Mulalley and Co Ltd [2011] EWHC 3449 (TCC), [2012]

BLR 152, para [39].

76 Greater London Council v Cleveland Bridge and Engineering Co Ltd 34 BLR 50

(Comm), page 66.

77 Greater London Council v Cleveland Bridg (note 76) (EWCA), page 78.

78 Leander v Mulalley, note 75, paras [33]-[34].

17

Contractor will provide adequate levels of manpower, plant and

resources

A necessary and logical consequence of the contractor’s implied obligation to

complete within a reasonable time (or by an express agreed completion date) is

that the contractor must provide adequate levels of manpower, plant and

resources: see the West Faulkner case above.79

Contractor will carry out the work in a good and workmanlike manner

and use sound and suitable materials

These two fundamental implied terms are often dealt with together. They have

been part of Irish law since at least as far back as Fitzpatrick v Brady.80

In

Brown v Norton, Davitt P held that the builder: ‘impliedly agrees ... that ... the

work will be carried out in a good and workmanlike manner and with sound

and suitable materials’.81

In Maguire v Rowan,82

Blayney J adopted the following statement of the law

from Hudson:

‘It is submitted that a contractor undertaking to do work and supply

materials impliedly undertakes:

(a) to do the work undertaken with care and skill or, as sometimes

expressed, in a workmanlike manner;

(b) to use materials of good quality ...

(c) that both the work and materials will be reasonably fit for the

purpose for which they are required, unless the circumstances of the

contract are such as to exclude any such obligation.’83

Contractor’s work and materials will be reasonably fit for the purpose

for which they are required

Insofar as the contractor decides what work is to be carried out, how it is to be

carried out, or selects the materials; this term will be implied: see Maguire v

Rowan above.84

Contractor will be responsible for the workmanship and materials of

domestic and nominated sub-contractors

In Norta Wallpapers v John Sisk, McMahon J said:

79 West Faulkner: note 73.

80 Fitzpatrick v Brady (Circuit Court, 1935), noted in Brown v Norton (note 63), page 52.

81 Brown v Norton, note 63, page 56.

82 Maguire v Rowan (unreported, IEHC, 5 May 1986), page 10.

83 IN Duncan Wallace QC, Hudson’s Building and Engineering Contracts (10th edition,

Sweet & Maxwell, 1970), page 274.

84 Maguire v Rowan: note 82.

18

‘Sisk should be liable to Norta for the default of a nominated sub-

contractor where that default consists in the supply of defective materials

... the same principle will apply to bad workmanship on the part of the

nominated sub-contractor.’85

In the case of a house, the contractor will make it reasonably fit for

immediate occupation as a residence when it is complete

See Brown v Norton.86

In the case of a design and build contract, the building will be

reasonably fit for its intended purpose

See Viking Grain Storage v TH White and Independent Broadcasting

Authority v EMI Electronics and BICC Construction; also Maguire v Rowan

above.87

However, in Surrey Heath Borough Council v Lovell Construction

Ltd it was held that there was an implied term to the effect that the contractors

‘would carry out their Contract work (including both their design and

construction functions) in a good and workmanlike manner and with the

proper care of skilled contractors’ (ie there was no implied term as to fitness

for purpose in regard to the contractors’ design).88

Contractor will warn the employer/designer where the design is

defective

This is not an obligation to go looking for defects in design but, rather, it is an

obligation to raise the alarm as and when the contractor becomes aware of

design defects.89

Contractor will use reasonable skill and care in the execution of the

works

Bailey states:

‘It is an implied obligation of a party who has undertaken to perform

work pursuant to a contract that it will use reasonable skill and care in

performing its contractual obligations. The term is implied at common

law.’90

In Dundalk Shopping Centre v Roof Spray, Finlay P said:

85 Norta Wallpapers (Ireland) Ltd v John Sisk & Sons (Dublin) Ltd [1978] IR 114 (IEHC),

page 119; also (1976) 14 BLR 49, page 57.

86 Brown v Norton, note 63, page 56.

87 Viking Grain Storage Ltd v TH White Installations Ltd (1985) 33 BLR 103 (OR), page

117; and Independent Broadcasting Authority v EMI Electronics Ltd and BICC

Construction Ltd (1980) 14 BLR 1 (UKHL), page 48; also Maguire v Rowan: note 82.

88 Surrey Heath BC v Lovell Construction Ltd (1988) 15 Con LR 68 (OR), paras [91]-[92].

89 Equitable Debenture Assets Corporation v William Moss Group Ltd (1984) 2 Con LR 1

(OR), (1984) 1 Const LJ 131; and Victoria University of Manchester v Hugh Wilson &

Lewis Womersley (1984) 2 Con LR 43 (OR).

90 Bailey (note 64), volume 1, para 3.118.

19

‘I am satisfied, therefore, that under the term undoubtedly implied into

the contract that they would use reasonable care and skill in the carrying

out of their work, they had a duty to provide for and insist upon any

special precautions which were required during the course of their

work.’91

In Maguire v Rowan, Blayney J held: ‘that a contractor undertaking to do work

... impliedly undertakes ... to do the work undertaken with care and skill’.92

In

Lindenberg v Canning, this implied term to exercise reasonable skill and care

was breached where a contractor failed to realise that a nine inch wall and a

chimney breast were structural elements despite their description, on drawings

prepared by the employer’s surveyor, as ‘non load bearing’. Judge Newey QC

said:

‘Instead, without taking any precautions whatsoever Mr Canning

proceeded to demolish the walls. I think that he behaved with much less

care than was to be expected of the ordinary competent builder and that

he therefore acted in breach of contract.’93

Contractor will handle plant with skill and care in a proper manner

In Kay Lim Construction & Trading v Soon Douglas, the High Court of

Singapore held that there was an implied term to the effect that the defendant

crane hirer would employ properly skilled and qualified labour and would

ensure that the dismantling and removal of a tower crane would be done in a

skilful and proper manner in accordance with any operating instructions for the

tower crane.94

Contractor will protect the works

As part of its obligation to use reasonable skill and care, the contractor must

take reasonable precautions to protect the works. In Dundalk Shopping Centre

Ltd v Roof Spray, Finlay P said:

‘It would be within the general knowledge ... of ... an experienced

builder that a roof in the process of being insulated or laid by any

method ... should not be actively damaged. ... If it was necessary to put

cat-walks or gang-planks across the roof so as to avoid any traffic on it

... it would have been an obvious act of care on the part of the defendants

... to ensure that it was carried out. None of these precautions were, in

fact, taken by the defendants nor is there any evidence ... that ... they

created any particular forms of cat-walks ... so as to preserve the roof

from traffic.’95

91 Dundalk v Roof Spray, note 68, page 8.

92 Maguire v Rowan, note 82, page 10.

93 Edward Lindenberg v Joe Canning (1992) 62 BLR 147 (OR), page 161.

94 Kay Lim Construction & Trading Pte Ltd v Soon Douglas (Pte) Ltd [2012] SGHC 186,

para [13].

95 Dundalk v Roof Spray, note 68, pages 8 and 9

20

Contractor will provide reasonable site security

Bailey states:

‘The allocation of risk of loss or damage to the works (or other property

on the site) resulting from the acts of third parties, such as thieves,

vandals, protesters, squatters or other trespassers, is usually a matter for

the agreement of the parties to the project. An agreement on

responsibility for site security may be express or implied. ...

In the absence of agreement as to risk allocation, a contractor who has

control or possession of a site may be subject to a duty of care to the

owner of the site to take reasonable care to ensure that the owner’s

property is not damaged, destroyed or stolen by third parties.’96

In Stansbie v Troman, a decorator was working in a house but failed to lock up

when he left the house. He closed the front door but he did not lock it.

Subsequently, a thief entered the house and stole some of the owner’s

property. Tucker LJ in the Court of Appeal held:

‘… [the] contractual relationship did impose a duty on the plaintiff

decorator to take reasonable care with regard to the state of the premises

if he left them during the performance of his work ... I do not think that

it was acting reasonably, that it was taking reasonable care, to leave this

empty house for a period of two hours with the front door in that

condition.’97

Contractor will comply with by-laws and building regulations

Dorter and Sharkey, in Building and Construction Contracts in Australia,

state: ‘A term will normally be implied that the contractor will carry out the

works in accordance with all relevant building by-laws and regulations: Foster

v AT Brine & Sons Pty Ltd [1972] WAR 157’.98

Implied terms on employer’s part

Employer will duly consider all tenders?

See Blackpool & Fylde Aero Club v Blackpool.99

Both McDermott and

Hudson mention the Canadian concept of Contract A and Contract B, whereby

the proposed construction contract is Contract B and Contract A is formed

when a tenderer submits its tender on foot of an invitation to do so from the

employer. It is said that, under Contract A, the employer must duly consider

any valid tender that has been properly submitted.100

96 Bailey, note 64, volume 2, paras 8.28-8.29.

97 Stansbie v Troman [1948] 2 KB 48 (EWCA), pages 50-51.

98 John B Dorter and John JA Sharkey, Building and Construction Contracts in Australia:

Law & Practice (Thomson Reuters, 1990), update 42, para 1.480.

99 Blackpool & Fylde Aero Club Ltd v Blackpool BC [1990] 1 WLR 1195 (EWCA).

100 McDermott (note 12), para 1.46, and Hudson, note 72, para 3-035.

21

However, in Howberry Lane v Telecom Éireann, Morris P said: ‘Even if, as

counsel submits, this is a recognised emerging jurisprudence in Canada I do

not accept it as representing the law in this jurisdiction’.101

Notwithstanding

these dicta, McDermott states: ‘In the absence of a viable alternative

mechanism, the Contract A/Contract B analysis is still the most convenient

way to understand the case law on tendering’.102

Employer must evaluate all tenders fairly

In Harmon CFEM Facades v House of Commons, Judge Humphrey LLoyd

QC said:

‘I consider that it is now clear in English law that in the public sector

where competitive tenders are sought and responded to, a contract comes

into existence whereby the prospective employer impliedly agrees to

consider all tenderers fairly.’103

In SIAC Construction v Mayo County Council, Fennelly J in the Supreme

Court said: ‘The principle of equal treatment of tenderers lies, as the European

court has said, at the heart of the directive’.104

In Scott v Belfast Education

and Library Board, Weatherup J said:

‘Having considered all of the authorities ... I would state as follows.

First of all, I am satisfied that an implied contract can arise from the

submission of a tender. ... Secondly, I am satisfied that an implied

contract may arise from a tendering process for a public works contract,

even though the particular contract is below the financial level of the

regulations that apply in relation to public works contracts. ... Thirdly, I

am satisfied that the implied terms of such an implied contract extend to

the implied term of fairness and good faith.’105

Avoid trespassing on adjoining property

A contractor, employer, or any of their agents must be extremely careful not to

trespass on adjoining property or to sanction such trespass. Hudson states:

‘Ignorance of the boundaries will be no excuse. The slightest violation

of a boundary will be a trespass, such as placing objects on the

claimant’s land, driving nails into their wall, using it to support

scaffolding, or leaving a ladder, planks or a shed or piling rubbish

against it ... It is also a trespass to make excessive use of a private right

of way.

101 Howberry Lane Ltd v Telecom Éireann [1999] 2 ILRM 232 (IEHC), page 239.

102 McDermott, note 12, para 1.48.

103 Harmon CFEM Façades (UK) Ltd v Corporate Officer of the House of Commons (1997)

67 Con LR 1 (TCC), page 169.

104 SIAC Construction Ltd v Mayo County Council [2002] 3 IR 148 (IESC), page 169. ‘The

directive’ is now Directive 2004/18/EC of the European Parliament and of the Council of

31 March 2004 on the coordination of procedures for the award of public works

contracts, public supply contracts and public service contracts OJ 2004 L134/114.

105 Scott v Belfast Education and Library Board [2007] NICh 4, 114 Con LR 209, para [6].

22

Trespass equally includes a violation of the air space above the

claimant’s land, at any rate at a height which would interfere with any

possible use of their land. Moreover, an injunction is obtainable as of

right and as a matter of course in the case of continuing trespasses ... it

will be irrelevant that the claimant has in fact suffered no damage.’106

In Anchor Brewhouse v Berkley House (Docklands) Developments, it was held

that a tower crane invading the neighbour’s airspace was a trespass and proof

of damage was not a pre-requisite for legal proceedings.107

The following two Irish cases illustrate the strict view that the courts take, in

regard to trespass. In Hanks v Arterial Drainage Co Ltd, the contractor was

employed by a drainage board to carry out drainage works.108

The contractor

entered the plaintiff’s land before the board had paid compensation to him.

The court held that the contractor was liable to the plaintiff landowner in

trespass for damage caused to his lands. In Monks v Dillon, the defendant

engineer designed drainage works, prepared plans and specifications, and

supervised the execution of such works on the plaintiff’s land before the

plaintiff had been paid compensation by the employer, a drainage board. The

court held that such actions constituted a trespass and that the engineer was

personally liable to the landowner for the trespass caused to his lands. In the

view of the court, the engineer had supervised unlawful works. Law C said:

‘The Defendant’s plans and specifications indicated the precise works to

be done on the Plaintiff’s land. ... But here the works which the

Defendant had himself planned, which he directed the contractor to

execute ... were wholly and absolutely illegal, no matter how they were

done, or what care or precaution were taken by all concerned in their

execution.’109

And Palles CB said:

‘The lands, upon which the plans showed that these works were to be

executed, comprised certain lands of the Plaintiff which the Drainage

Board had not purchased. ... The general rule is undoubted, that not only

those who commit or direct, but also those who aid or abet, a trespass,

are responsible. ... the Defendant aided and encouraged the contractor in

carrying out a work the execution of which necessarily involved a

trespass upon the Plaintiff’s lands, and, therefore, aided and encouraged

such a trespass.’110

106 Hudson, note 72, para 1-159.

107 Anchor Brewhouse Developments Ltd v Berkley House (Docklands Developments) Ltd

(1987) 38 BLR 87 (Ch).

108 Hanks v Arterial Drainage Co Ltd (1880) 6 LR Ir 10 (Exch Div).

109 Monks v Dillon (1883) 12 LR Ir 321 (CA - Ireland), pages 324 and 325.

110 Monks v Dillon, note 109, pages 325, 326 and 328.

23

Employer will give the contractor full possession of the site on time

Failure by the employer to give possession of the site to the contractor is

clearly a breach of contract. This includes failure to acquire a sufficient legal

title, or licence, in the lands from third parties.

In Arterial Drainage Company v Rathangan River Drainage Board, the

contract stated that: ‘the said Board will provide all lands which shall be

permanently required for the purpose of the said works’. The employer failed

to acquire the necessary legal wayleaves over third party lands to facilitate

drainage works. The court referred to:

‘… the non-compliance of the Defendants with what is a condition

precedent on their part in providing the lands permanently required for

the execution and completion of said works, such non-compliance

having ... rendered the execution of said works impossible ... we are of

opinion that the Defendants, having made default in the performance of

this condition, which, in substance, prevented Plaintiffs performing their

portion of the contract, the Plaintiffs are entitled to treat the contract as

rescinded, and to sue as upon a quantum meruit for the value of the

works they had executed.’111

In Freeman v Hensler, the contractor undertook to demolish 15 houses and to

build 12 new houses on the same site. But the employer only handed over the

site in a piecemeal manner. The Court of Appeal held that it was an implied

term of the contract that the employer should give possession of the whole site

to the contractor within a reasonable time.112

Where nothing is said about

possession of the site, there is an implied term to the effect that the contractor

must be allowed use and possession of the site as required for the purposes of

carrying out its works.113

Where part of the site was occupied by a man, his wife and his dog as well as

an old car and packing cases, it was held that the employer was in breach of

contract in failing to give possession of the site: Rapid Building v Ealing

Family Housing Association.114

Where physically possible to do so, the site should not only include the

footprint of the buildings but also working space around it. In The Queen in

Right of Canada v Walter Cabott Construction, the court said:

‘It is fundamental to a building contract that work space be provided

unimpeded by others. The proposition of law is succinctly put by the

learned author of Hudson’s Building and Engineering Contracts, 10th

edition (1970), at page 318, as follows: “Since a sufficient degree of

possession of the site is clearly a necessary pre-condition of the

111 Arterial Drainage Co Ltdmpany v Rathangan River Drainage Board (1880) 6 LR Ir 513

(Exch Div), page 530.

112 Freeman v Hensler (1900) 64 JP 260 (EWCA).

113 Ductform Ventilation (Fife) Ltd v Andrews-Weatherfoil Ltd [1995] SLT 88 (CSOH).

114 Rapid Building Group Ltd v Ealing Family Housing Association Ltd (1984) 29 BLR 5

(EWCA), page 13.

24

contractor’s performance of his obligations, there must be an implied

term that the site will be handed over to the contractor within a

reasonable time of signing the contract ... and ... a sufficient degree of

uninterrupted and exclusive possession to permit the contractor to carry

out his work unimpeded and in the manner of his choice ...” This

statement of the law was adopted by Spence J, in the Penvidic

case115

.’116

[emphasis added]

Employer will not interfere with the contractor’s suppliers

See Acrow v Rex Chainbelt.117

Employer, or its agents, will do all things necessary to allow the

contractor to carry out the work

In Merton LBC v Leach, Vinelott J said:

‘It is recognised in all the leading text books that a contract

incorporating the JCT standard terms falls within the category of

contracts in which a requirement that a building owner will ‘do all that is

necessary to bring about completion of the contract’ will be implied ... I

think that this implied undertaking by the building owner extends to

those things which the architect must do to enable the contractor to carry

out the work and that the building owner is liable for any breach of this

duty on the part of the architect.’118

Contractor is entitled to plan and perform the work as it pleases

In Greater London Council v Cleveland Bridge and Engineering , Staughton J

said:

‘There is, moreover, a general principle applicable to building and

engineering contracts that in the absence of any indication to the

contrary, a contractor is entitled to plan and perform the work as he

pleases, provided always that he finishes it by the time fixed in the

contract.’119

That view was endorsed by the Court of Appeal in the same case, and in

Leander Construction v Mulalley.120

115 [Author’s note] Penvidic Contracting Co Ltd v International Nickel Co of Canada Ltd

(1975) 55 DLR (3d) 748.

116 The Queen in Right of Canada v Walter Cabott Construction Ltd (1975) 21 BLR 42

(Federal Ct of Appeal – Canada), page 56.

117 Acrow (Automation) Ltd v Rex Chainbelt Inc [1971] 1 WLR 1676 (EWCA), page 1680.

118 Merton LBC v Leach, note 54, page 81.

119 Greater London Council v Cleveland Bridge and Engineering Co Ltd (1984) 34 BLR 50

(Comm), page 66.

120 Greater London Council v Cleveland Bridg (note 119) (EWCA), page 78, and Leander

Construction v Mulalley, note 75, paras [33]-[34].

25

Employer’s obligation to supply information and instructions

Employer, or its agents, will provide correct information to the

contractor and will do so in a timely manner

In Merton LBC v Leach, Vinelott J said: ‘It must have been in the

contemplation of the parties that the architect would act with reasonable

diligence and would use reasonable care and skill in providing this

information’.121

In J & J Fee v Express Lift, Judge Bowsher QC said:

‘The contract cannot be made to work unless the information is supplied:

it is essential. Moreover, there is no point in supplying that information

unless it is supplied in such a manner and at such times as is reasonably

necessary for the defendants to have it in order for the defendants to

fulfil their obligations under the sub-contract.’122

In Scottish Power v Kværner Construction, Lord MacFayden held that a main

contractor:

‘Owed to [sub-contractors] a duty to provide or arrange for the provision

to [the sub-contractors] of such full, correct and co-ordinated

information concerning the sub-contract works as was or ought

reasonably to have been known by [the main contractor] to be required

by [the sub-contractors], and that in such manner and at such times as

was reasonably necessary to enable [the sub-contractors] to fulfil their

obligations under the sub-contract.’123

In Royal Brompton Hospital v Hammond, Judge Hicks QC considered the role

of the engineers in the provision of co-ordination drawings on a major hospital

project.124

He held that the co-ordination drawings should be provided in time

to enable the contractor to prepare his installation drawings and thus to carry

out and complete the works in accordance with the contract programme. The

parties contemplated that failure, on the engineers’ part to perform their

obligations, would involve the employer in damages, including liabilities to

the contractor.

A succinct statement of this obligation is to be found in Vincent Powell-

Smith’s Problems in Construction Claims:

‘Under any standard construction contract it is an implied term that the

architect (or engineer) will issue to the contractor in due time such

instructions, drawings, details and other information as the contractor

needs to carry out the works in accordance with his obligations under the

121 Merton LBC v Leach, note 54, page 82.

122 J & J Fee Ltd v Express Lift Co Ltd 34 Con LR 147 (OR), page 158.

123 Scottish Power plc v Kværner Construction (Regions) Ltd [1999] SLT 721 (CSOH).

124 Royal Brompton Hospital NHS Trust v Hammond (No 4) 69 Con LR 170 (TCC).

26

contract. Breach of this implied term will entitle the contractor to

damages at common law.’125

However, there is no implied term to the effect that the architect/engineer

should furnish information and instructions so as to allow the contractor to

work to an accelerated programme, which aims to complete ahead of the

contract date for completion: Glenlion Construction v The Guinness Trust.126

Other implied terms on employer’s part

Employer will allow the contractor to do all building work on site

In Commissioner for Main Roads v Reed and Stuart, Stephen J said:

‘Clause 18 is a common enough provision to be found in engineering

contracts and permits of the omission from time to time by the proprietor

of portion of the contract works. What it clearly enough does not permit

is the taking away of portion of the contract work from the contractor so

that the proprietor may have it performed by some other contractor –

Carr v JA Berryman Pty Ltd (1953) 89 CLR 327.’127

Architect/engineer will fairly hold the balance between the employer and the

contractor

In Sutcliffe v Thackrah, Lord Reid said:

‘The building owner and the contractor make their contract on the

understanding that in all such matters the architect will act in a fair and

unbiased manner and it must therefore be implicit in the owner’s

contract with the architect that he shall not only exercise due care and

skill but also reach such decisions fairly holding the balance between his

client and the contractor.’128

In Walton v Illawarra, McDoughall J said:

‘The Superintendent was not a party to the contract, but someone

appointed under it. No doubt, she was required to act honestly, fairly

and reasonably. But those obligations were imposed on her, at least in

the first instance, by operation of law, by reason or as an incident of the

position that she held, and not by the terms of the contract to which she

was not a party.’129

In Nash Dredging v Kestrel Marine Lord Ross said: ‘It is plain ... that the ...

employers sought to give the engineer instructions as to how he should

perform his function as certifier. In my opinion they had no right to do so, and

125 Vincent Powell-Smith, Problems in Construction Claims (BSP Professional Books,

1990), page 100.

126 Glenlion Construction Ltd v The Guinness Trust 39 BLR 89 (OR).

127 Commissioner for Main Roads v Reed and Stuart Pty Ltd 12 BLR 55 (HCA), page 61.

128 Sutcliffe v Thackrah (1974) 4 BLR 16 (UKHL), page 21.

129 Walton v Illawarra [2011] NSWSC 1188, 28 BCL 202, para [39].

27

what they did constituted improper interference with the engineer’s

independence and function’.130

Where the certifier was required to refer to the employer in writing before (i)

allowing any extension of time or (ii) issuing any variation instruction worth

more than £1,000; and the contractor had not been informed of these

instructions; the court held that the certifier was in a position which conflicted

with his duty to act impartially and the contractual machinery had broken

down.131

Employer will ensure that the architect/engineer will do his/her job as

certifier

In Australia, work on a mail exchange was certified by the employer’s in

house Director of Works. The contractor complained that his application for

an extension of time for completion had not been dealt with impartially.

The Supreme Court of New South Wales held that there were implied terms in

the contract to the effect that (i) The employer would not interfere with the

Director of Works’ duties as certifier; and (ii) The employer would ensure that

the Director of Works did his duty as certifier.132

In Croudace Ltd v Lambeth LBC, a council’s chief architect retired and was

not replaced. Nobody would certify the contractor’s claims for delay and

disruption. The Court of Appeal held that there was an implied term to the

effect that a new architect would be appointed to act as certifier.133

Employer will act reasonably, where the contract confers a discretion on

the employer

In Abu Dhabi National Tanker v Product Star Shipping, Leggatt LJ said:

‘Where A and B contract with each other to confer a discretion on A,

that does not render B subject to A’s uninhibited whim. In my

judgment, the authorities show that not only must the discretion be

exercised honestly and in good faith, but, having regard to the provisions

of the contract by which it is conferred, it must not be exercised

arbitrarily, capriciously or unreasonably.’134

In Compass Group v Mid Essex Hospital Services NHS Trust, Cranston J said:

‘Crucially the law reports are now replete with authorities where a term

has been implied in a commercial contract as a restriction on the

exercise of a contractual discretion: the discretion must be exercised in

130 Nash Dredging Ltd v Kestrel Marine Ltd [1986] SLT 62 (CSOH), page 66A.

131 Bernhard’s Rugby Landscapes Ltd v Stockley Park Consortium Ltd 14 Const LJ 329

(OR).

132 Perini Corporation v Commonwealth of Australia 12 BLR 82 (NSWSC).

133 Croudace Ltd v Lambeth LBC 33 BLR 20 (EWCA), page 34.

134 Abu Dhabi National Tanker Co v Product Star Shipping Ltd (The ‘Product Star’) [1993]

1 Lloyd’s Rep 397 (EWCA), page 404.

28

good faith, and not in an arbitrary, capricious or irrational manner. ...

The purpose of the implied term was to prevent the abuse of power; the

test was one of rationality ie whether no reasonable contracting party

would take the decision to exercise the discretion in the way it was

exercised ... More recently, in JML Direct Ltd v Freestat UK Ltd [2010]

EWCA Civ 34, Moore-Bick LJ held that the implied obligation not to

act in an arbitrary, irrational or capricious manner was ‘likely to be

implicit in any commercial contract under which one party is given the

right to make a decision on a matter which affects both parties whose

interests are not the same ...’135

Employer will nominate sub-contractors in due time

See Leslie v Metropolitan Asylums District.136

Architect/engineer will adjust prime cost and provisional sums when the

true cost of the items concerned is known

See Tuta Products v Hutcherson Brothers.137

Employer will make progress payments to the contractor

This term will not be implied on small one-off jobs, known as entire contracts.

The construction of two dairies was held not to be an entire contract and the

contractor was entitled to be paid for the work he had carried out prior to

leaving the site.138

In the absence of an agreed price, the employer will pay on a quantum

meruit basis for the work carried out

Bailey, Construction Law, states: ‘In the absence of agreement on price, the

contractor is entitled to be paid a reasonable remuneration for work which it

performs under the contract in question’.139

As authority for that statement, Bailey cites inter alia the decision of the

House of Lords in AE Farr v Ministry of Transport, in which Lord

MacDermott said:

‘If ... the parties were agreed that all reasonably required working space

excavation would be paid for, their intention ... must have been that,

where there was no appropriate rate or rates for the purpose, a reasonable

rate would be paid ... no other conclusion as to intention seems possible

and I would, therefore, imply a term to the effect stated.’140

135 Compass Group v Mid Essex Hospital Services, note 51, para [45].

136 Leslie & Co v Metropolitan Asylums District 68 JP 86 (EWCA), page 88.

137 Tuta Products Pty Ltd v Hutcherson Brothers Pty Ltd 46 ALJR 549 (HCA), page 553.

138 Lockhart v Collingwood Co-Operative Dairy Co Ltd [1920] NZLR 412 (NZSC).

139 Bailey, note 64, volume 1, para 2.21.

140 AE Farr Ltd v Ministry of Transport 5 BLR 94 (UKHL).

29

Keating states: ‘If the contractor does work under a contract express or implied

and no price is fixed by the contract, he is entitled to be paid a reasonable sum

for his labour and materials supplied pursuant to an implied term.’141

Keating is referring to a situation where a contract exists, and the parties have

agreed that the contractor should carry out work, but no price is agreed. But

what if no contract has been concluded and the contractor subsequently carries

out work? In British Steel Corporation v Cleveland Bridge, Robert Goff J

said: ‘If ... no contract was entered into ... the law simply imposes an

obligation on the party who made the request to pay a reasonable sum for such

work as has been done pursuant to that request.’142

Quantum meruit will also apply if the pricing machinery in the contract breaks

down.143

Sub-contracts

Many of the terms held to be implied in main contracts will, where

appropriate, also be applied to sub-contracts with the main contractor

substituted for the employer and the sub-contractor substituted for the

contractor.

No implied term about pay-when-paid

Contractors have been unsuccessful in contending that sub-contracts contain

implied pay-when-paid terms. In New Zealand, in Smith & Smith Glass v

Winstone Architectural Cladding Systems, Master Towle said:

‘It could not be seriously suggested that there could be implied into any

contract made between a contractor and subcontractor that the latter was

only to be paid once the head contractor had been paid, for this would

involve an acceptance by the sub-contractor of the financial viability of

the entire project.’144

In Hong Kong, in Grand Choice Construction v Dillingham Construction,

there was no written contract. The contractor contended that there was an

implied term to the effect that the sub-contractor would carry out its works ‘in

all respects in accordance with and subject to the provisions of the Main

Contract’ and that the usual pay-when-paid machinery should apply. Kaplan J

rejected those contentions and said:

‘[While the contractor submitted that pay-when-paid was] the normal

way of doing business in Hong Kong … as I have said, no trade custom

or usage has been pleaded, and in any event an oral agreement for such a

contract is itself most unusual. The fact that [the sub-contractor]

141 Keating, note 9, para 4-020(b).

142 British Steel Corporation v Cleveland Bridge and Engineering Ltd 24 BLR 94 (QB),

page 122; [1984] 1 All ER 504, page 511.

143 Fanning Brothers v Wicklow County Council (note) [1985] ILRM 638 (IEHC).

144 Smith & Smith Glass Ltd v Winstone Architectural Cladding Systems Ltd [1992] 2 NZLR

473 (NZHC), page 479; [1993] CILL 898, page 899.

30

admitted in cross-examination that he was familiar with the ‘pay-when-

paid’ provision is neither here nor there to the pleaded case.’145

In Canada, in Pro Star Mechanical Contractors v Farmer Construction, the

contractor contended that a pay-when-paid clause should be implied into the

sub-contract. Such a clause was contained in the contractor’s standard form of

sub-contract. When the sub-contract was awarded, the contractor wrote to the

sub-contractor stating: ‘We will forward our form of Contract to you for

signature immediately after the Prime Contract is formally executed’.146

Although the sub-contractor had seen the contractor’s standard form on other

projects, he did not sign any such form in respect of the present project. He

contended that he had not agreed to a pay when paid clause in respect of the

present project. Cowan J found that the pay-when-paid clause could not be

imported into the agreement by implication as the sub-contractor had never

agreed to it and one payment had been made by the contractor without protest.

Conclusion

The courts will not make a contract for the parties where none exists. But

where an agreement has been concluded which does not expressly deal with

relevant eventualities, a court may, whilst exercising caution, implement the

presumed intention of the parties by the implication of suitable terms which

are necessary in the circumstances of the case.

John M E Lyden FSCSI, FCInstCES, MRIN, MCIArb, MEWI is a

construction contract consultant, chartered quantity surveyor, arbitrator and

conciliator practising in County Cork.

© John Lyden and the Society of Construction Law 2013

The views expressed by the author in this paper are his alone, and do not necessarily

represent the views of the Society of Construction Law or the editors. Neither the

author, the Society, nor the editors can accept any liability in respect of any use to

which this paper or any information or views expressed in it may be put, whether

arising through negligence or otherwise.

145 Grand Choice Construction Co Ltd v Dillingham Construction (HK) Ltd, noted by David

Bateson at [1992] 9 ICLR 410.

146 Pro Star Mechanical Contractors Ltd v Farmer Construction Ltd (British Colombia

Supreme Court, 6 July 1994; CarswellBC 2016).

31

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