Commercial contracts are often entered into without a defined end date or term. That is perhaps not surprising given the initial optimism that often accompanies a new trading relationship. These contracts are sometimes described as “indefinite”, meaning they are silent as to when they will come to an end.
When circumstances change, how does one party to an “indefinite” agreement terminate the contract? Courts can imply a term into indefinite contracts allowing one party to terminate on reasonable notice – but what will constitute “reasonable notice”?
The Court of Appeal of Queensland has recently provided some helpful guidance.
Implication of contractual terms
Implied terms in contracts are common. Even the most diligently and carefully considered contracts cannot expressly provide for all events and circumstances that can arise in the commercial dealings between parties. It is sometimes said that implied terms “fill the gaps” left by the parties and that the implication of a term is said to arise because it represents the unexpressed intention of the parties.1
Terms can be implied by law or by fact.
Implying a term by law means the term is implied because of the particular type or class of contract. For example, where a contract involves the execution of work or the supply of materials, the law implies terms requiring reasonable care when doing the work or supplying the materials.
Alternatively, a term may be implied in fact, by reference to the conduct of the parties, their objectively ascertained intentions when entering the contract and also a consideration of whether the implied term is necessary to make the specific contract work or make commercial sense. When implying a term in fact the Court will consider whether the implied term is:2
- reasonable and equitable;
- necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
- so obvious that “it goes without saying”;
- capable of clear expression; and
- contradicts any express term of the contract.
Impact Healthcare Pty Ltd v St Vincent’s Private Hospitals Ltd3
About 25 years ago, a hospital was proposed to be constructed by Holy Spirit Northside Private Hospital Ltd (HSNPH), which needed an emergency centre. HSNPH approached Dr Kay to assist in managing and operating the emergency centre. An agreement was formed between HSNPH and Dr Kay’s company Impact Healthcare Pty Ltd (Impact). The agreement commenced on 1 October 2000 and contemplated an indefinite period.
In 2019, HSNPH assigned its rights under the agreement to St Vincent’s Private Hospitals Ltd (the Hospital). The Hospital attempted to terminate the agreement with Impact and argued that it could do so by giving reasonable notice. The Hospital argued this term could be implied into the agreement. Impact disputed the existence of such a term.
The Hospital submitted that a general right to terminate on reasonable notice should be implied either by law (as a standard incident of this class of contract) or in fact (necessary to make the specific agreement work). At first instance, the Court found that the term was implied in both law and in fact. That finding was reversed on appeal.
Key findings of the case
Implication by law
The Court found that there was no basis for the proposition that “commercial contracts of indefinite duration” formed a class of contract into which a right to terminate could be implied.
The Court found that the Hospital was unable to articulate the “necessity” which supports the implication of the disputed term in law in all “commercial contracts of indefinite duration”.4 Relevantly, the Court held:
The exercise of judicial power to imply such a term in all commercial contracts of indefinite duration is not justified.… One cannot discern from such a broad category anything about the inherent nature of all such contracts, or the relationship between the parties to them, which renders it necessary to imply, as a default in every contract falling within the class, the disputed term.5
Implication by fact
On Appeal, the Court relied on extrinsic evidence to establish the parties’ objective intention for the agreement to continue indefinitely, with the termination clauses in the agreement being the sole source of the parties’ right to terminate and provided for limited circumstances in which a right to termination could be exercised.
The Court ultimately found, applying the BP Refinery criterion, that an implied right to terminate was not necessary for business efficacy, not so obvious as to go without saying and in fact contradicted the express terms of the contract.
Key takeaways
The decision in Impact Healthcare Pty Ltd v St Vincent’s Private Hospitals Ltd is an important reminder of the difficulties that can be experienced when attempting to rely on implied terms said to arise by implication at law or by fact. The decision serves as a timely reminder of the fundamental principle of contract law that a Court will not re-write an agreement. So far as they are able, Courts must of course give commercial agreements a commercial and business-like interpretation. However, Courts are constrained by the language actually used by the parties in their agreement. If, after considering the contract as a whole and the background circumstances known to both parties, a Court concludes that the language of a contract is unambiguous, the Court must give effect to that language unless to do so would give the contract an absurd operation.
In particular, the decision in Impact Healthcare reinforces that a term allowing termination on reasonable notice will not be implied into “commercial contracts of an indefinite nature” as a matter of law. On 11 June 2026, the High Court refused the Hospital’s application for special leave to appeal the decision.
- Luxor (Eastbourne) Ltd v Cooper [1941] AC 108. ↩︎
- BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 605-606. ↩︎
- Impact Healthcare Pty Ltd v St Vincent’s Private Hospitals Ltd [2026] QCA 21. ↩︎
- Impact Healthcare Pty Ltd v St Vincent’s Private Hospitals Ltd [2026] QCA 21 at [70] referring to Martin-Baker Aircraft Co Ltd v Canadian Flight Equipment Ltd [1955] 2 QB 556 [28] per French CJ, Bell and Keane JJ and [60] per Kiefel J. ↩︎
- Impact Healthcare Pty Ltd v St Vincent’s Private Hospitals Ltd [2026] QCA 21 [71] ↩︎