Implied Contract: Definition, Example and Types

In the realm of contract law, agreements are generally formed through express terms that are explicitly stated and agreed upon by the parties involved. However, there are also situations where contracts can be formed implicitly, through the actions, conduct, or circumstances of the parties. Such contracts are known as implied contracts. In this article, we will delve into the definition of implied contracts, provide examples to illustrate their application and explore the different types of implied contracts.

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What Is An Implied Contract Definition?

An implied contract is a legally binding agreement that is not explicitly stated in words but is inferred or deduced from the conduct, actions, or circumstances of the parties involved. These contracts are based on the principle of “meeting of minds” between the parties, even though their intentions may not have been expressly communicated.

Implied contracts can be formed in various contexts, including employment relationships, business transactions, and everyday interactions. They often arise when one party provides a good or service, and the other party accepts it without any explicit discussion of payment terms or contractual obligations. In such cases, the law recognizes the existence of an implied contract to ensure fairness and prevent unjust enrichment.

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Types of Implied Contracts

Implied contracts can be further classified into two main types:

Implied-In-Fact Contract Definition

These contracts are inferred from the parties’ conduct, actions, or circumstances, which demonstrate an intent to enter into a contract. The terms and obligations are not explicitly stated but can be deduced from the parties’ behavior or the nature of their relationship. Implied-in-fact contracts are enforceable in court, just like express contracts.

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Implied-At-Law Contract Definition

Unlike implied-in-fact contracts, implied-at-law contracts, also known as quasi-contracts, are not based on the parties’ actual intentions or agreement. Instead, they are imposed by the court to prevent one party from being unjustly enriched at the expense of another. Quasi-contracts are typically used when no actual contract exists, but one party has received a benefit and would be unfair to keep it without compensating the other party.

For example, if a contractor mistakenly performs renovations on the wrong house but increases its value, the court may impose a quasi-contract to ensure that the contractor is compensated for the benefit provided.

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What Are Implied Contract Examples

To better understand how implied contracts work, let’s consider a few examples:

Implied Contract Example 1: When you visit a grocery store and place items in your cart, an implied contract is formed between you and the store. By taking the items and proceeding to the checkout, you implicitly agree to pay the listed prices. Although you may not have explicitly agreed to any terms, your conduct demonstrates your intention to enter into a contractual relationship.

Implied Contract Example 2: Implied contracts often arise in employment settings. When an individual accepts a job offer and begins working, an implied contract is formed between the employer and the employee. The terms and conditions of employment, such as salary, benefits, and job responsibilities, may not be explicitly outlined but are understood based on industry norms, prior discussions, or the behavior of the parties.

Implied Contract Example 3: Suppose you hire a contractor to renovate your kitchen. Even if you didn’t sign a written implied agreement, an implied contract exists based on your discussions, the contractor’s actions in starting the work, and the expectation of payment upon completion. The law recognizes the existence of an implied contract to ensure that both parties fulfill their obligations.

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Implied Contract vs Express Contract

Most express and implied contracts involve mutual consent and a meeting of the minds. An express contract, on the other hand, is formally negotiated by an oral or written agreement. Circumstances or the acts of parties create an implied contract. A real estate contract is an express contract that must be in writing to be executed. Ordering a pizza is an implied contract because the pizza business is bound to serve pizza to the customer once the purchase is complete.

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Are Oral Contracts Enforceable?

The enforceability of oral contracts can vary depending on the jurisdiction and the nature of the contract. In some cases, oral contracts are valid and enforceable, while in others, they may be subject to limitations. It is generally advisable to have contracts in writing to avoid potential misunderstandings and disputes. However, certain contracts, such as those for small-scale transactions or personal services, may be oral and still enforceable if there is sufficient evidence to prove the existence and terms of the agreement.

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How Are Implied Contracts Enforced?

Implied contracts, whether implied-in-fact or implied-at-law, are generally enforceable in a court of law. The court will examine the conduct, actions, and circumstances of the parties to determine the existence and terms of the contract and ensure that both parties are treated fairly.

To establish the enforceability of an implied contract, certain elements must be satisfied:

Mutual Assent: The parties involved must demonstrate a mutual understanding and agreement, even if it is not explicitly stated. Their actions and conduct should indicate a meeting of minds.

Offer and Acceptance: Implied contracts require an offer by one party and acceptance by the other. This can be implied through actions or conduct rather than explicit statements.

Consideration: Like express contracts, implied contracts also require consideration, which refers to something of value exchanged between the parties. Consideration can be in the form of goods, services, or a promise to perform or pay.

Legality: Implied contracts must involve lawful activities and cannot be formed for illegal purposes.

If these elements are met, the court can enforce the implied contract and hold both parties accountable for their obligations.

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Avoiding Implied Contracts

While implied contracts can sometimes be beneficial, there may be situations where parties prefer to avoid them. To avoid the formation of an implied contract, it is important to be clear and explicit in your intentions and expectations. Here are a few strategies to consider:

1. Written Contracts: Whenever possible, formalize agreements in writing. A written contract explicitly states the terms, conditions, rights, and obligations of the parties involved, leaving no room for ambiguity or misunderstandings.

2. Clear Communication: Ensure that there is clear and open communication between the parties involved. Clearly articulate your intentions, expectations, and any conditions or requirements you may have.

3. Express Agreements: Clearly express your agreement or disagreement with any proposed terms or conditions. If you do not agree to something, make it known explicitly to the other party.

4. Documentation: Maintain records of discussions, agreements, and any changes made to the terms of an agreement. These records can serve as evidence in case of disputes or misunderstandings.

5. Seek Legal Advice: If you are uncertain about the terms or implications of a contract, consult with a legal professional who can provide guidance and ensure that your rights and interests are protected.

Conclusion

Implied contracts play a vital role in contract law by recognizing and enforcing agreements that are formed implicitly through the actions, conduct, or circumstances of the parties involved. They provide a mechanism to ensure fairness and uphold the principle of mutual assent, even in situations where the terms are not explicitly discussed.

Understanding the concept of implied contracts is crucial for individuals and businesses alike, as they can arise in various contexts. Whether it is a grocery store purchase, an employment relationship, or a contractor service, implied contracts help establish the rights and obligations of the parties involved.

By recognizing the existence of implied contracts, the legal system ensures that individuals and businesses are held accountable for their actions and that fairness prevails in contractual relationships.

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