Implied Contracts: Definition, Types, And Enforcement

What Is an Implied Contract?

An implied contract is a non-verbal and unwritten—yet still legally binding—contract that exists based on the behavior of the parties involved or on a set of circumstances. Unlike express contracts, which are formal written or oral agreements where parties explicitly articulate all terms and conditions, implied contracts form silently through the actions, conduct, and mutual understanding of the parties.

The distinguishing feature of an implied contract is that while there is no exchange of words—either orally or in writing—that specifies the agreement, it can be reasonably inferred from the parties’ behavior or surrounding circumstances that the parties have a tacit understanding of having formed an agreement. These contracts are just as legally binding and enforceable as express contracts, though enforcement can sometimes prove more challenging since the contract’s specific terms have not been explicitly expressed.

Implied Contracts vs. Express Contracts

Understanding the distinction between implied and express contracts is fundamental to contract law:

An express contract is a legally binding agreement—oral or written—between two parties, intentionally entered into and understood by both parties as an agreement to perform certain obligations. Most express contracts involve some exchange of benefits, with one party receiving goods or services and the other party receiving payment for the goods or services provided.

Types of Implied Contracts

Implied contracts fall into two distinct categories, each with unique characteristics and enforcement mechanisms:

Implied-in-Fact Contracts

An implied-in-fact contract is formed when parties’ promises are inferred from their intentional conduct, and one party knows or at least has reason to know the other party will interpret the conduct as assent or an agreement. This type of implied contract possesses most of the same characteristics as express contracts, including an offer by one party, acceptance by the other party, consideration (something of value exchanged), and the intention of both parties to enter into an agreement. The primary difference lies in how the terms are communicated—through actions rather than words.

Implied-in-fact contracts are often based on previous agreements or established patterns of conduct between parties. For example, if Company A has repeatedly ordered supplies from Company B and expressly agreed to pay the current market price, then one day orders the same supplies without discussing price, an implied-in-fact contract to pay the current market price will be recognized based on the prior agreements and established pattern.

Implied-in-Law Contracts

An implied-in-law contract, sometimes referred to as a quasi-contract, represents a fundamentally different concept. This type of contract may be recognized to exist even though neither party had the intention to enter into an agreement. Courts recognize implied-in-law contracts in situations where one party might otherwise be unjustly enriched at the expense of another party, making it essential to prevent unfair outcomes.

The key characteristic of implied-in-law contracts is that they are created by law rather than by the parties’ actions or intentions. These contracts serve as a remedy to prevent unjust enrichment and ensure equitable treatment in situations where no actual agreement was formed.

Elements Required for an Implied Contract

For an implied contract to hold legal weight and be enforceable, several critical elements must be present:

• Mutual Agreement: Even if not expressed explicitly, there must be a clear understanding between the parties that a contract exists. This understanding is often inferred from their actions, conduct, or the circumstances surrounding their interaction.
• Legal Obligation: The agreement inferred must create a legal obligation for the parties involved. The actions or circumstances must suggest that the parties intended to enter into a contractual relationship with binding obligations.
• Consideration: There must be an exchange of value or benefit between the parties. One party typically receives a benefit while the other incurs a detriment or provides something of value in return.
• Unjust Enrichment Prevention: To avoid one party unfairly benefiting at the expense of another, the law recognizes implied contracts. This element is especially relevant in implied-in-law contracts.
• Benefit and Detriment: The relationship between the parties’ actions should demonstrate that one party receives a benefit while the other incurs a detriment, further implying a contractual relationship exists.

Real-World Examples of Implied Contracts

Haircut at a Salon

One of the most common examples of an implied-in-fact contract occurs when someone enters a hair salon, sits down in a chair, and asks for a haircut. By requesting the haircut, the customer has implicitly agreed to pay for the service. By beginning to cut the hair, the hairdresser has implicitly agreed to provide that service in exchange for monetary compensation. No written contract or explicit verbal agreement stating the price exists, yet both parties understand their mutual obligations.

Medical Emergency Assistance

Consider a scenario involving a doctor and a neighbor. Bob, who is a doctor, happens to be walking by a neighbor’s house and sees the neighbor suddenly collapse on his front porch. Bob rushes to his neighbor’s aid, determines that he has suffered a stroke, and provides medical treatment until emergency services personnel arrive. This represents an implied-in-law contract—even though neither party intended to form a contract, the law recognizes one to prevent the neighbor from receiving free medical services that Bob provided, which would constitute unjust enrichment.

Accepting Benefits from Another Party

A general example of an implied contract occurs when one party accepts some benefit from another party, knowing that the providing party expects to be paid for the provided benefit. This mutual understanding of compensation creates an implied contract despite the absence of any written or verbal agreement specifying the terms.

Repeat Orders Without Price Discussion

When John prunes Joan’s roses on multiple occasions and Joan pays him each time, an implied-in-fact contract is established. When John prunes the roses for a third time and Joan does not pay, John has legal standing to seek compensation based on the established pattern and mutual understanding of their contractual relationship.

Legal Enforceability of Implied Contracts

Implied contracts are just as legally binding and enforceable as express contracts under the law. However, the enforcement of implied contracts presents unique challenges. Since the contract’s specific terms have not been expressed in writing or orally articulated, disputes may arise regarding what the parties actually agreed to, what consideration was exchanged, and what obligations each party assumed.

Additionally, the law in many jurisdictions requires a written contract for some agreements, such as land sales or contracts with an extremely high monetary value, to be enforceable. This requirement, known as the Statute of Frauds, may prevent implied contracts from being enforced in these categories, even if the other elements of a valid contract are present.

For an implied contract to gain legal enforceability, it must be evident that the parties involved had an unspoken understanding that a contract existed between them. Courts examine the parties’ conduct, previous dealings, and the circumstances surrounding their interaction to determine whether a reasonable person would infer that an agreement was formed.

Challenges in Enforcing Implied Contracts

The primary challenge in enforcing implied contracts lies in proving the contract’s existence and terms. Unlike express contracts, which contain explicit language defining obligations, implied contracts require evidence of the parties’ behavior and the circumstances that led to the formation of the contract. This evidence might include:

• Previous dealings between the parties
• Industry customs and practices
• The parties’ course of conduct
• Communications, whether written or oral, that suggest mutual understanding
• The nature and value of benefits exchanged

Courts must examine all available evidence to determine what a reasonable person would conclude about the parties’ intentions and the terms of their agreement. This interpretive process can be complex and may result in disputes about what the contract actually requires.

Frequently Asked Questions

What is the main difference between an implied contract and an express contract?

The main difference is in how the contract is formed and communicated. Express contracts feature clearly stated terms through written or oral communication, while implied contracts form through the conduct, actions, and circumstances of the parties. Both types are equally legally binding and enforceable.

Can implied contracts be enforced in court?

Yes, implied contracts can be enforced in court, though enforcement may be more challenging than with express contracts. The court must examine the parties’ conduct and circumstances to determine whether a contract existed and what its terms were. Certain types of implied contracts, particularly those involving real estate transactions or high-value agreements, may face enforceability issues if they violate the Statute of Frauds.

What is an implied-in-law contract?

An implied-in-law contract, also called a quasi-contract, is recognized by law to prevent unjust enrichment, even when the parties did not intend to form a contract. Courts impose these contracts as a matter of equity when one party would unfairly benefit at another’s expense without such recognition.

How do courts determine if an implied contract exists?

Courts examine the parties’ conduct, prior dealings, industry practices, communications, and the circumstances surrounding their interaction. If a reasonable person would infer from this evidence that the parties intended to enter into a contractual relationship with mutual obligations, a court may recognize an implied contract.

Are implied contracts valid in all jurisdictions?

Implied contracts are generally recognized across most jurisdictions as valid and enforceable. However, specific requirements and limitations may vary by jurisdiction, particularly regarding the Statute of Frauds and what types of agreements must be in writing to be enforceable.

What happens if one party refuses to pay under an implied contract?

If one party refuses to pay or perform their obligations under an implied contract, the other party may pursue legal action to enforce the contract. The non-breaching party would need to present evidence that a contract existed, what its terms were, and that the other party breached those terms.

This article is general information, not personal financial advice. Consider your own situation, or speak with a licensed adviser, before acting on it.