Implied Contract
A legally-binding obligation that arises from the conduct of one or more parties or circumstances of an agreement.
What Is an Implied Contract?
An implied contract is a legally binding obligation that arises from the conduct of one or more parties or circumstances of an agreement. It has the same legal effect as an express contract.
An express contract is any verbal or written agreement between two parties intended to be legally enforceable and that both parties agree to carry out specific obligations.
Most contracts involve a benefit exchange, where one party receives products or services, and the other party is compensated for the goods or services delivered.
Contrarily, this contract is assumed to exist and requires neither a written nor an oral confirmation.
Compared to express more common contracts, implied contracts are comparatively uncommon. Express contracts are often formal, written agreements. However, they can also take the form of oral contracts.
Key Takeaways
- Implied contracts are legally binding obligations arising from the conduct, actions, or circumstances of the parties involved rather than from a written or spoken agreement.
- Implied-in-Fact Contracts are formed through the actions and circumstances indicating a mutual understanding and agreement between the parties. An example is a teenager receiving movie tickets in return for walking a neighbor’s dog.
- Implied contracts can be harder to enforce due to the lack of written documentation. The enforcing party must demonstrate the implied terms through actions or circumstances that indicate mutual consent (for implied-in-fact) or the fairness principle (for implied-in-law).
- If an implied contract is breached, the aggrieved party can pursue remedies similar to those for express contracts, including litigation, arbitration, or mediation.
Understanding Implied Contract
A prior express agreement between the parties is frequently the basis for an implied contract.
Even if you may not even speak when you place an order for food in a restaurant, you still consent to get products or services in exchange for money, even though you did not explicitly sign a contract.
You can't enjoy the food and then decline to pay because you didn't sign a contract.
A judge would find the presence of an "implied contract" between you and the restaurant and order you to pay up to prevent someone from receiving something for nothing, or, as it is known in legal terms, unjust enrichment.
In some cases, it is more challenging to enforce an implied contract due to a lack of paperwork.
No one should get unfair benefits at the expense of another. According to implicit contract principles, fair play can be achieved without a written or verbal agreement.
One sort of implied contract is, for instance, the implied warranty. A product must be able to perform its role before being acquired. For example, a new air conditioner must produce cool air; otherwise, the seller or the manufacturer has broken the conditions of an implicit contract.
Since obtaining a signed document is not always sufficient to establish the validity of a claim, it can be challenging to enforce such contracts. Additionally, these contracts are subject to restrictions in some jurisdictions.
For instance, in some courts, a contract for a real estate transaction must be supported by a written agreement.
Implied-in-Fact vs. Implied-in-Law Contracts
The fundamental fairness principle, which holds that no party should benefit from another without the contributing party receiving just compensation, forms the basis for the legal enforcement of implicit contracts.
Implied-in-fact and implied-in-law contracts are the two types.
| Aspect | Implied-in-Fact Contracts | Implied-in-Law Contracts (Quasi-Contracts) |
|---|---|---|
| Basis of Formation | Formed by the conduct and circumstances of the parties involved | Formed by courts to prevent unjust enrichment |
| Intention to Contract | Both parties have a tacit understanding and intend to form an agreement | Neither party intends to form a contract |
| Key Characteristics | Shares qualities with express contracts (offer, acceptance, consideration) | Based on fairness, even if no explicit agreement exists |
| Example Scenario | A teenager receives movie tickets for dog walking services | A doctor provides emergency medical care to an unconscious person and later bills for services |
| Demonstration of Agreement | Conduct and circumstances suggest mutual agreement | Facts and fairness principle indicate the need for compensation |
| Enforceability | Requires proof of mutual intent and actions | Enforceable based on the need to prevent one party from unfairly benefiting at another's expense |
| Typical Use Case | Regular exchanges that imply agreement (e.g., services rendered for compensation) | Situations where one party provides a necessary service without prior agreement |
| Legal Remedy | Litigation, arbitration, or mediation to enforce terms | Court recognition of the need for compensation despite the absence of a traditional agreement |
How are Implied Contracts Enforced?
A number of crucial procedures and legal precepts are necessary to enforce implied contracts:
1. Finding the Implied Contract
Finding the implied contract and proving its existence is the first stage. This entails proving that both parties meant to make a legally enforceable agreement, either implied-in-fact or implied-in-law (quasi-contract), by means of acts, circumstances, or the fairness principle.
2. Proof of Terms
In implied-in-fact contracts, the parties' conduct and actions imply the terms and conditions. To do this, it must be demonstrated that there was an offer, an acceptance, a consideration (exchange of value), and a shared desire to be legally bound by the conditions.
3. Legal Remedies
Once established, implied contracts can be enforced through legal remedies similar to those available for express contracts:
- Damages: The non-breaching party may seek monetary compensation for any losses incurred due to the breach of the implied contract.
- Specific Performance: In cases where monetary damages are inadequate (typically for unique items or services), a court may order the breaching party to perform their obligations as specified in the implied contract.
Note
In implied-in-law contracts, restitution prevents unjust enrichment by requiring the party to compensate the other party for the value received.
4. Court Procedures
To enforce the implied contract terms, the non-breaching party will frequently file a lawsuit. This could entail proving a violation of the contract, providing evidence of the implied agreement, and making the case for the proper remedies.
5. Alternative Dispute Resolution
To settle disagreements resulting from implicit contracts, parties may also choose to use mediation or arbitration. These techniques offer an alternate avenue for settlement negotiations outside of customary judicial procedures.
6. Statute of Limitations
Implied contracts are subject to statutes of limitations, which provide a deadline for filing a lawsuit, just like any other type of contract. To maintain their right to enforce the implied contract, the parties must bring legal action within the allotted time frame following the breach.
Conclusion
Implied contracts are legally enforceable agreements that have the same enforceability as express contracts because they result from the actions or circumstances of the persons involved.
They can be implied-in-law, established by courts to maintain equity and avoid unfair enrichment, or implied-in-fact, formed by the acts and mutual understanding of the parties.
Implied contracts, albeit harder to enforce because they aren't in writing, are enforced by the use of legal remedies such restitution, damages, and specific performance.
These contracts must be enforced by establishing their existence and conditions through events and actions, using legal processes, and occasionally choosing to use alternative dispute resolution techniques.
Implied contracts, which represent the basic fairness concept in legal transactions, guarantee that parties behave in good faith and fulfil their obligations notwithstanding their complexity.
Implied Contract FAQs
It is a non-verbal, unwritten, and legally-binding agreement that results from the parties' conduct or a specific circumstance.
When you take a taxi and instruct the driver, there exists an implied contract between you and the driver.
It is assumed that in return for his services, the taxi driver will get consideration in the form of money.
There are two types - implied in fact and implied in law.
The term implied-in-fact contract is deduced from parties' actions or circumstances associated with a particular case. In contrast, an implied-in-law contract is formed by the law when one party gets an unfair benefit at the expense of another.
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