Contracts are not necessarily as dramatic as movies make them out to be. A very big misconception is that contracts only happen when you sign “agree” on a document. However, you can actually enter a binding contract without ever signing a document.
Whenever a contract isn’t built on words but on conduct and circumstances, it’s called an implied contract. For example, you go to the grocery store, buy groceries, pay, and walk out. Nobody had to read you a contract or ask you to sign a document, but a contract just happened.
Implied contracts are even more common than written agreements and just as binding as signed agreements, in most cases. Here’s how they work, the two types you need to know, and when a court will actually enforce one.
Quick Answer: An implied contract is a legally enforceable agreement that was never explicitly stated in writing or said out loud. It’s an agreement that’s inferred from the parties’ actions or conduct.
There are two kinds of implied contracts: an implied-in-fact contract, which happens when the parties’ conduct clearly points to a mutual agreement, and an implied-in-law contract, or a quasi-contract, which a court imposes to stop one party from unfairly benefiting at another’s expense.
What is an Implied Contract?
An implied contract means a legally enforceable agreement that wasn’t explicitly stated or written down. Why? The law treats it as a legally binding agreement because your and the other party’s conduct made the agreement obvious.
This doesn’t mean that all your actions imply a contract; some contracts still need to be written and signed to be legally binding.
The Two Types Of Implied Contracts
Implied contracts are simply valid contracts that are never written or spoken, and they fall into two main categories:
Implied-in-fact Contracts
An implied contract is formed when your actions and the other party’s actions show that you have an agreement. For example, you go to a bookstore, you buy a book, and pay. You don’t have to loudly declare that “I hereby agree to pay $20 to purchase this book.” Instead, you pick up the book you want, you walk to the counter and pay. That interaction is the contract.
Implied-in-law Contracts (Quasi-contracts)
Unlike the implied-in-fact contracts, this one isn’t because of your actions; it’s more about ethics. A court imposes this regardless of your initial agreement. This typically happens when all the factors that make a contract a valid agreement are missing due to unforeseen circumstances.
A good example is being unconscious after an accident and being rushed to surgery. You couldn’t have consented to the contract, but it was needed to save your life. In most cases, you can’t just walk away saying you didn’t ask for the treatment; a court can still mandate you to pay for the treatment. It would be unjust to let the hospital bear the cost when the treatment enriched you.
Implied Contract Vs. Express Contract
An implied contracts are agreements that are legally binding even without vocalizing or writing the agreement, while an express contract is the traditional contract where you have a verbal or written agreement with the other party.
In most cases, it’s strongly advisable to have an express contract. This ensures you and the other party have a mutual understanding and can specify exactly what you want in the contract.
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When Is An Implied Contract Legally Binding?
Not every action implies an agreement. Here are some elements that need to be present before your actions qualify as an implied agreement:
- An agreement: There must be an offer and an acceptance (e.g price of goods, and you accepting to pay)
- Consideration: All the parties involved must give something valuable in exchange.
- A legal purpose: This agreement and exchange must be within the boundaries of the law
- Volition: All parties consented to the agreement voluntarily; no one was coerced into the actions that led to the agreement.
- Capacity: The circumstances of the parties involved at the time must be able to accommodate the agreement.
If all the criteria above are met, then it is an implied-in-fact contract whether expressly stated or implied.
However, for an implied-in-law contract, it works a bit differently because it’s impossible to meet the above criteria. The court enforces it even if all the factors above are not present because not enforcing it would create an injustice. The litmus test for this type of contract is unjust enrichment: would one party walk away with an unearned benefit at the other’s expense? If so, then that makes it an implied contract.
Examples Of Implied Contracts
Here are some common examples of implied contracts:
- Ordering at a restaurant: You go to a restaurant, place your order, eat or take out, and you pay for it. Every action from when you entered the restaurant till picking up the bill implies an implied contract.
- Ongoing services with no new paperwork: A cleaner comes to trim your garden every month, and you open your yard and pay them. Even without a fresh signed agreement each time, your conduct implies a contract.
- Emergency care while unconscious: Unless you explicitly deny care, e.g having a no-resuscitation order form signed and documented in advance, you still have to pay for the medical care you clearly benefited from.
- Continued work past a contract’s end date: A contractor keeps working, and you don’t explicitly state any change in agreement terms; you’re implying a contract on the old terms.
Why This Matters For Your Business
The fact that you didn’t explicitly sign a contract doesn’t mean the law doesn’t see it as an agreement if your conduct implies otherwise. Arguing that you didn’t agree to it isn’t a very strong defense when your actions show you agreed to the offer and benefited from it.
It can also work out in your favor and protect you from customers and clients that want to unjustly benefit from your work.
The best bet is having an express contract where you and the other parties state your offer and agree on your terms. This saves you time and resources you would have wasted on trying to settle legal disputes.
Frequently Asked Questions
Is An Implied Contract Legally Enforceable?
Yes. Both implied-in-fact and implied-in-law contracts can be enforced in court, even though neither was written or spoken, provided the required conditions are met.
What’s The Difference Between Implied-in-fact And Implied-in-law Contracts?
An implied-in-fact contract is created by the parties’ conduct showing they intended a deal. An implied-in-law contract is imposed by a court to prevent unjust enrichment, even when the parties never actually agreed.
Can An Implied Contract Override A Written One?
Generally, a clear written contract has more merit than an implied contract. However, your conduct after a written agreement ends can create new implied obligations.
How Do I Avoid Accidentally Forming An Implied Contract?
Be proactive about your contracts. Make sure to create and document your agreements. It’s also not just about writing a contract; leave no stone unturned and have an attorney review the arrangement.
Disclaimer: This article is for general informational and educational purposes only. It is not legal advice and does not create an attorney-client relationship. For personalized guidance, book a consultation with MCIS Law to speak with an experienced professional about your specific situation.
