<P> A term may either be express or implied . An express term is stated by the parties during negotiation or written in a contractual document . Implied terms are not stated but nevertheless form a provision of the contract . </P> <P> Terms may be implied due to the factual circumstances or conduct of the parties . In the Australian case of BP Refinery (Westernport) Pty Ltd v Shire of Hastings the UK Privy Council proposed a five - stage test to determine situations where the facts of a case may imply terms . The classic tests have been the "business efficacy test" and the "officious bystander test". Under the "business efficacy test" first proposed in The Moorcock (1889), the minimum terms necessary to give business efficacy to the contract will be implied . Under the officious bystander test (named in Southern Foundries (1926) Ltd v Shirlaw (1940) but actually originating in Reigate v. Union Manufacturing Co (Ramsbottom) Ltd (1918)), a term can only be implied in fact if an "officious bystander" listening to the contract negotiations suggested that the term be included the parties would promptly agree . The difference between these tests is questionable . </P> <P> Statutes or judicial rulings may create implied contractual terms, particularly in standardized relationships such as employment or shipping contracts . The Uniform Commercial Code of the United States also imposes an implied covenant of good faith and fair dealing in performance and enforcement of contracts covered by the Code . In addition, Australia, Israel and India imply a similar good faith term through laws . </P> <P> In England, some contracts (insurance and partnerships) require utmost good faith, while others may require good faith (employment contracts and agency). Most English contracts do not need any good faith, provided that the law is met . There is, however, an overarching concept of "legitimate expectation". </P>

In addition to the standard requirements for a contract to be valid