The general rules governing the implication of terms by the courts, which apply to general contracts, also apply in the same way to construction contracts. A number of implied terms specific to construction contracts also exist, many of which relate to design and quality and are closely aligned with the law of sale of goods. Much of the relevant case law on implied terms comes from England, however it remains applicable to Irish law. However, it is important to bear in mind that the existence or otherwise of specific implied terms within a particular contract will be judged on a case by case basis.

The common law has developed a number of principles by which a term may be implied into a construction contract:

  • the term is required to make the contract work - the "business efficacy" test
  • the term is implied by law, such as by the Sale of Goods Acts
  • the term is a specific custom or practice
  • the term can be imputed from the intention of the parties

In order to imply a term for business efficacy, the court must be satisfied that the term is:

  • reasonable and equitable;
  • is necessary to give business efficacy to the contract, i.e. no term shall be implied if the contract is effective without it;
  • is so obvious that 'it goes without saying';
  • is capable of clear expression; and
  • does not contradict any express term of the contract. Importantly, courts have consistently emphasised that they will only imply a term for business efficacy if it is necessary to make the contract work.

Where there is a comprehensive written contract, such as a standard form of building contract, there may be very little scope for the implication of any terms. if the parties have expressly dealt with a matter in the contract, no term dealing with the same matter can be implied. But where there is no written contract, or where the terms of a written contract do not deal with certain matters, terms may be implied. Some of the more usual implied terms held to apply to construction contracts are described below:

Employer implied terms

Cooperation

An employer impliedly agrees to do all that is necessary on its part to bring about completion of the contract. For example, it must give possession of the site within a reasonable time. An employer may be obliged to obtain planning permission or other statutory consents in sufficient time to enable the contractor to proceed without delay. If an architect is to supervise the work, an employer must appoint an architect. An implied term of co-operation extends to those duties which the architect must perform to enable a contractor to carry out the works; an employer can be held liable for any breach of this implied duty by the architect. Within the implied term of co-operation, is the implied positive obligation to do anything which may be necessary to enable the other party to perform its obligations.

Contractor implied terms

Time

If the contractual date for completion has passed, or an act of prevention by an employer renders the date for completion inoperable, the date for completion will be substituted with an implied obligation on a contractor to complete the works within a reasonable time. There is no implied term that a sub-contractor must execute its own works to meet the contractor's programme. It is a subcontractor's obligation to finish by the completion date stated in the subcontract and is otherwise a matter for a subcontractor to organise its programme of work as it sees fit. The recent case of Leander Construction Ltd v Mullaley & Company Ltd1 also reinforces the reluctance of the courts to imply an obligation to proceed with works regularly and diligently where a contractual completion date exists.

Workmanship

A contractor must carry out work with all proper skill and care in a good and workmanlike manner. Case law suggests that this is a continuing duty during construction and does not only arise upon completion. In deciding what degree of skill is required, the courts will consider all the circumstances of the contract including the degree of skill expressly or impliedly represented by a contractor.

Materials

If a contractor is to supply materials it impliedly warrants that the materials it will use are (1) reasonably fit for the purpose for which they will be used and (2) of good quality, unless the express terms of the contract and any admissible surrounding circumstances show that the parties intended to exclude either or both warranties. Where an employer makes known to a contractor the particular purpose of the works and the works are of a kind which the contractor holds itself out as performing, and an employer relies on a contractor's skill and judgment, there is an implied warranty that the works as completed will be reasonably fit for the particular purpose.

Excluding implied terms

In order for parties to a contract to exclude various implied terms, they must ensure that they prepare the contract to govern all eventualities that will arise. This is a difficult task, but eventualities that can be forseen should be dealt with explicitly in the contract. An 'exclusive remedies' clause can be used to prevent either of the parties bringing any claims otherwise than under the terms of the contract. However even an exclusive remedies clause will not succeed in excluding implied terms which are necessary and fundamental to the operation of a construction contract.

Footnotes

1. [2011] EWHC 3449

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.