An implied contract is a legally enforceable agreement that is formed by the conduct or behavior of the parties rather than through specific words. Most legal contracts are written down, but those that are implied typically aren’t, and not only that they often don’t even involve direct communication between the parties. Judges infer them based on the specifics of the circumstances, the relationship of the parties, and any other factual surroundings. As such, there isn’t really a formula for creating this sort of contract. Not all judges agree as to when one has been created or should be enforced, either. In most cases they exist only when a court determines that enforcement is required for promoting “equity,” which is basically a general sense of fairness. When equity demands that an informal agreement be upheld it is often done so under this doctrine, though people are still usually safer to put their agreements in writing — particularly if there’s a lot of time or money involved.
Why They Exist
Implied contracts are judicial constructs inferred by courts to avoid injustice or unjust enrichment. The doctrine is most common in the English law system, which is used not only in the UK but also, in varying degrees, in the US, Canada, and India, to name a few. It is almost always rooted in theories of equity. Judges will usually rule that it applies in circumstances when one party voluntarily accepts benefits from someone else but then doesn’t want to pay for them since there was never a formalized contract for services.
The main idea is that a party who knowingly accepts a benefit that he or she knows isn’t a gift has an obligation to pay for the goods or services, even if there wasn’t ever a formal contract. The doctrine basically prohibits one party from acting in ways that lead others to understand that there has been an agreement, even if, from a technical standpoint, there never was. In this sense it works somewhat like consumer protection. The law is looking to protect the rights of the party who relied on the actions or inactions of the other.
A standard contract under English law typically has three key parts: an offer by one party, an acceptance of that offer by another party, and consideration or payment for services rendered or goods delivered. In an express or written contract, the offer will contain all the essential terms of the contract, which usually will include the price for services rendered or goods delivered and some indication of when the agreement will take place.
When courts find that an implied contract has been formed, the essential elements of an unequivocal offer and a binding acceptance are missing. The offer and acceptance are found from the conduct of the parties. This is usually true even though no terms or conditions of the agreement were explicitly communicated.
Equity in Action
Illustrations often make the concept easier to understand. Suppose that A knows that his neighbor, B, has contracted with a worker to have his roof repaired, but the contractor — by mistake — works on A’s house instead. If A does not object while the work is being performed, most courts will find that there was a contract created by implication.
What this means is that, through his silence, A has assented to or accepted the benefit of the work performed, and as a result he must pay the contractor. Under an implied contract theory of recovery A will not be able to deny the worker compensation just because they didn’t actually draw up a formal contract. Even though there was no agreement for the price of the services rendered, courts will usually find that the worker who conferred the benefit upon A is entitled to receive the fair value of his services since A both knew about the work and did nothing to stop it from being performed. The mistake was the contractor’s to be sure, but he still went to great expense to get the job done and A still benefited.