Key Takeaways

  • Implied agreements can be legally binding even without a written contract, arising from conduct, actions, or circumstances.
  • There are two primary types: implied-in-fact contracts, based on the behavior of the parties, and implied-in-law contracts (quasi-contracts), imposed by courts to prevent unjust enrichment.
  • Oral contracts may also be enforceable but are harder to prove and may require written documentation in certain situations.
  • Courts consider factors like behavior patterns, fairness, and intent when determining if an implied agreement exists.
  • Implied agreements frequently arise in employment settings, service transactions, and business dealings where no formal contract exists.
  • Written contracts are still preferred because they offer clearer proof and legal protection.

An implied agreement is an obligation between two or more parties in the absence of a written contract, based on the interest of fairness implied by circumstance or conduct. In some cases, an implied warranty agreement is provided by law, such as the guarantee you receive that a new product you purchase will work as expected. In others, contracts are implied by fact because both parties assumed that an agreement existed and acted as such. Although it's beneficial to document an agreement with a written contract, implied agreements may also be legally binding.

Implied-in-Fact Contracts

One example of an implied-in-fact contract is when you take your pet to the veterinarian. The doctor's actions in establishing a practice imply that he or she will provide the best possible medical treatment of the animal in exchange for a fee. This contract is breached if he or she fails to do so or if you do not pay for the services rendered.

In another example, a neighborhood boy shovels an older man's walk each time it snows, and each time the man gives him $10. After this has occurred four or five times, the man stops paying. If the boy were to bring a case to court, the judge would likely rule in his favor because both parties implied a contract by the fact of their initial actions. Courts will look at the behavior pattern of both parties to determine whether an implied-in-fact contract exists.

If you sit down in a restaurant and order a meal, you have entered an implied-in-fact contract. Your actions indicate that you are purchasing food for the price indicated on the menu and will be responsible for paying the bill. This is legally binding even though you didn't sign anything.

Although this type of contract holds up in court, both parties must assent by their actions for it to be valid. What qualifies as assent varies depending on the circumstances. For example, if you are a freelance writer and your client mentions another component they want to add to the project, it's best to get the specifics and cost in writing. Otherwise, they may not be required to pay for it if you deliver it without clear assent. On the other hand, if you fail to deliver it, you may be seen as in breach of contract if the client believes you have agreed to complete the work in question.

Elements Required to Prove an Implied-in-Fact Contract

To successfully establish an implied-in-fact contract, courts generally look for the following elements:

  • Mutual intent to contract: Evidence that both parties intended to enter into an agreement through their conduct.
  • Offer and acceptance: Actions indicating that one party offered services or goods and the other party accepted them.
  • Consideration: Proof that something of value was exchanged between the parties (e.g., services performed in exchange for payment).
  • Reasonable certainty of terms: Although unwritten, the agreement's terms must be clear enough for a court to enforce.

Courts evaluate the behavior, circumstances, and course of dealing between the parties to determine whether these elements exist. For example, repeated payments for a service may establish a pattern that supports the existence of an implied-in-fact agreement.

Implied-in-Law Contracts

This type of contract is automatically established by the law imposed in a situation between two parties even if they don't intend to enter an agreement. If one party receives unjust benefits to another party's detriment, restitution must be paid for the goods, services, or other benefits in question.

Returning to the veterinarian example, let's assume you were walking your dog in the park when the animal began to choke. The vet, who happens to be nearby, performs the Heimlich maneuver and saves the dog. The vet then sends you a bill, which you are obligated to pay for services rendered under an implied-in-law contract.

When implied-in-law contracts are heard in court, the law will require an individual to uphold his or her end of the bargain even unwillingly. In the example above, you are unjustly enriched by the veterinarian's rescue of your dog and must make restitution for the services he or she provided.

A similar scenario occurred when a writer claimed that the NBC show Ghost Hunters used a script that he had submitted without paying him for the work. The courts found in his favor, noting that an implied contract exists between a writer submitting work with the expectation they would be paid for its use and the studio that uses it.

When Do Courts Impose an Implied-in-Law Contract?

Implied-in-law contracts, or quasi-contracts, are imposed by courts to prevent one party from being unjustly enriched at the expense of another. Unlike implied-in-fact contracts, these do not arise from mutual agreement but from the principle of fairness.

Common situations where courts may find an implied-in-law contract include:

  • A person unknowingly receives services or goods that provide a benefit and it would be unjust for them not to pay.
  • Emergency situations where a service is rendered (e.g., medical care provided by a doctor who happens to be present at the scene).
  • Acceptance of services with knowledge they were not provided gratuitously.

The goal is to ensure restitution, meaning the enriched party must pay a reasonable value for the benefit received.

Oral Contracts

In most cases, oral contracts are treated as valid by the courts. Although specific laws vary by state, in most cases the following types of contracts must be written:

  • Land or real estate sales
  • Promissory notes for significant debt
  • Projects that last longer than a year
  • Goods costing more than a specific amount
  • Sale of certain kinds of goods

However, if a dispute arises, a written contract has more weight than a spoken one. It can be difficult to capture specifics in an oral agreement.

Implied Agreements in Employment Relationships

Implied agreements are especially common in employment law, where they can fill gaps when no formal written contract exists. These may include:

  • Implied promises of continued employment: Such as verbal assurances or longstanding practices suggesting job security.
  • Employee handbooks and policies: If company documents suggest certain terms (like progressive discipline before termination), these may create implied contractual obligations.
  • Past conduct of the employer: A pattern of behavior such as granting bonuses or benefits consistently may suggest an implied agreement to continue those practices.

However, at-will employment rules in many states may limit the enforceability of such implied agreements unless there is clear evidence that the employer intended otherwise.

How Courts Determine the Existence of an Implied Agreement

When evaluating whether an implied agreement exists, courts typically consider several key factors:

  • The conduct of the parties: Did their actions suggest an agreement?
  • Reasonable expectations: Would a reasonable person believe there was an agreement based on the circumstances?
  • Previous dealings: Have the parties engaged in similar transactions before under similar terms?
  • Benefit received: Did one party receive a benefit that would be unfair to retain without compensation?

Courts may also look at custom and usage in the industry if the agreement concerns a business transaction.

Frequently Asked Questions

  1. What is an implied agreement?
    An implied agreement is a contract formed by the actions, conduct, or circumstances of the parties rather than through written or spoken words. It can be implied-in-fact or implied-in-law.
  2. How do I prove an implied agreement exists?
    To prove an implied agreement, you must show that both parties acted in a way that indicated mutual understanding, or that one party received a benefit and it would be unfair for them not to compensate the other.
  3. What is the difference between implied-in-fact and implied-in-law contracts?
    An implied-in-fact contract arises from the behavior and actions of the parties, showing mutual intent. An implied-in-law contract (quasi-contract) is imposed by the court to prevent unjust enrichment, even if no agreement was intended.
  4. Are implied agreements enforceable in court?
    Yes, implied agreements can be enforceable if the court finds sufficient evidence of mutual understanding or unjust enrichment. However, they can be harder to prove than written contracts.
  5. Can employment relationships be governed by implied agreements?
    Yes, in some cases, employment terms may be implied through verbal assurances, conduct, or company policies, though at-will employment rules may limit enforceability.

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