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What Is an Implied Contract?

People make implied contracts verbally.
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  • Written By: John Kinsellagh
  • Edited By: Michelle Arevalo
  • Last Modified Date: 13 April 2014
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An implied contract is an agreement that is formed by nature of the conduct or behavior of the parties, rather than through specific words. Under the principles of Anglo-American contract law, in order for a contract to be legally enforceable, there must be an offer by one party, an acceptance of that offer by the other party, and consideration or payment for services rendered or goods delivered. In an express 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 the time for performance of the contract.

When courts find that an implied contract has been formed, the essential elements of an unequivocal offer and a binding acceptance, necessary for the formation of an express contract, are missing. Under the judicial theory of implied contract, the offer and acceptance are found from the conduct of the parties, even though no terms or conditions of the agreement were explicitly communicated. Implied contracts are judicial constructs inferred by courts to avoid injustice or unjust enrichment. If one party voluntarily accepts the benefits conferred upon him by another, even though substantive terms of the contract may not have been expressed, most courts will find that there was a consensual agreement between the parties, and the person performing the services is entitled to compensation.

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An implied contract is generally based on principles of equity, which hold that a party who knowingly accepts a benefit that is not conferred upon him as a gift, has an obligation to pay for the fair value of services performed or goods delivered. For example, 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 an implied contract has been formed.

In other words, through his silence, A assented to or accepted the benefit of the work performed. Even though there was no offer and acceptance between A and the worker, under an implied contract theory of recovery, A will not be able to deny the worker compensation based on the fact that no express contract was formed. 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.

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Discuss this Article

SZapper
Post 6

@KaBoom - Written contracts definitely are better, I agree. I think that while in a perfect world every kind of contract should be enforceable, it's certainly easier to prove something if it's in writing!

However, I think that implied contracts are a bigger part of our lives then we think. For example, a doctors visit could be considered an implied contract. When the doctor walks into the room he doesn't say "You know you have to pay for this visit, right?" It's implied you're going to pay for the services when you accept them.

KaBoom
Post 5

I do think written contracts are generally better, but I'm glad to know that implied contracts are enforceable too. In my mind, a contract is a contract, implied, verbal, or written.

As in the example of the roofer, the person with the house knew he was at the wrong house and didn't stop him. He should definitely have to pay! He accepted the work, knowing good and well it wasn't free. I'm glad if something like this ever happened, the person who did the work has some type of legal recourse.

hamje32
Post 4

@MrMoody - I would tread very carefully with implied contract arrangements. Basically the thing that courts look for (judging from the article) is the conduct of both parties.

Sometimes it’s hard to quantify that. For example, I sometimes do some software development work on the side. In these situations there is no contractor laying down brick or concrete, no workers hauling trucks to a construction site.

In other words there is very little obvious conduct. I do get paid, but sometimes I do part of the work first before my first installment. Some programmers insist on a deposit, but I don’t work that way.

If I did part of the work and the client didn’t pay – and it was all verbal, which was the case with one client since they were a friend of a friend – I don’t think I’d have much recourse.

As a result, I always go with written contracts, even if I have to get a template off the Internet.

MrMoody
Post 3

@nony - What you describe is a verbal contract but not an implied contract. I don’t think that the courts would rule in favor of you in that case.

The employer is only committed to what’s written on paper, and even that is tentative. It’s considered an at will employment arrangement. They could hire you one week and let you go the next week; that’s in all the fine print as well.

Of course, you could file for wrongful termination, but courts rarely find in favor of the employee in wrongful termination cases.

The employer knew, however, that the verbal promises he made to you were not legally binding in any sense of the term. While I hate to say this, he probably knew you could quit and he might not have cared either way. That’s just how the job market works.

nony
Post 2

@Mammmood - One area where I’d avoid even the faintest notion of an implied contract is in employment promotion.

I once worked for a company under the agreement that after six months of working there my salary would be hiked ten percent. It was a specialized industry, and they wanted to see if I was really up to snuff.

The problem is that the employment contract didn’t spell out anything about a six month increase after the initial salary agreement. It only had the initial starting salary.

The increase part was verbal, but was it an implied contract? I don’t think so. Six months came and went, and I never got my increase.

I approached my boss and he talked about the bad economy and how buyers were tightening their belts, but at some future point they could revisit my pay. I didn’t even bother any further.

Mammmood
Post 1

I’ve always heard that a verbal contract isn’t worth the paper it’s written on. It appears that an implied contract, though unsigned, might indeed carry some weight in some circumstances.

While the article gives a good example of a contractor who worked on the wrong house, I personally believe that a good lawyer can argue well in favor of the wronged party in this case.

Any number of reasons could be given why that party didn’t speak up when the work was done, although I can’t say that he will necessarily win the case for his client.

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