Implied Contracts: Everything You Need to Know
Implied contracts refer to contracts that are formed based on circumstances that imply a willingness to contract, not on a written agreement. Some contracts must be created in writing in order to be enforceable by law, while others can be valid with just an implication of mutual agreement. 3 min read
Implied contracts refer to contracts that are formed based on circumstances that imply a willingness to contract, not on a written agreement. Some contracts must be created in writing in order to be enforceable by law, while others can be valid with just an implication of mutual agreement. The law has provisions for protecting individuals and organizations that are involved in implied contracts.
What is an Implied Contract?
Contracts can be a tricky business. You may find yourself obligated to a contract without knowing it. An implied contract occurs when both parties mutually consent to an agreement without having a written contract or an agreement that has been expressed in words. The law determines whether such a contract is fair by looking at the conduct of the parties and the circumstances surrounding the contract.
An implied contract is formed when facts and circumstances show that the parties mutually intend to enter into an agreement. One example of an implied contract is the relationship between a doctor and a patient. The doctor is expected to provide the best care possible, while the patient is required to pay any required fee.
While it is good practice to have all contracts in writing, it is not always necessary to have a written contract to create a legally enforceable agreement between parties. However, certain kinds of contracts must be written in order to be legally binding. In most states, there is a law called “Statute of Frauds” that specifies the kinds of contracts that must be in written form. Although this law varies from one state to another, it usually requires the following types of contracts to be in writing:
- Sale of land contracts
- Contracts for answering for another's debt
- Contracts exceeding a certain amount of money
- Contracts involving certain sales of goods
A verbal contract, which has nothing documented on paper, can be regarded as an implied contract. When two parties act like they have entered into a contract, it can be concluded that an implied contract exists. Implied warranty, which is automatically provided by law, is another common kind of implied contract. It occurs when a customer buying a product assumes that it will be able to serve its intended function. For instance, someone purchasing a toaster can reasonably expect it to warm up bread.
Types of Implied Contract
There are basically two kinds of implied contracts: implied-in-fact and implied at-law.
An implied-in-fact contract occurs when two parties presumably enter into an unwritten contract, as can be deduced from their conduct or actions, or circumstances surrounding the agreement. The validity of the contract is based on a necessary condition called the “meeting of the minds,” which does not have to be documented on paper. Other than this, there are a number of things that must be evident in order to confirm that an implied-in-fact contract exists, including:
- An unambiguous offer
- An unambiguous acceptance
- A mutual intent to contract
Implied At-Law Contract
An implied at-law contract is created when the law obligates two parties to enter into a contract or even enforces a contract against a person's will when one party will unfairly benefit from the other party's action if such a remedy is not provided. In such a situation, one party has the right to seek compensation for the services that he or she has provided, even if both parties did not intend to enter into a contract.
For instance, someone chokes on his or her food while having dinner at a restaurant. A doctor present in the restaurant rushes over and saves his or her life. Later, the doctor sends the person a medical bill for the services provided. In this case, the customer has the obligation to pay the bill despite having no intention to contract with the doctor. Otherwise, he or she will unfairly benefit from the doctor's services. The law will enforce an implied-at-law contract to ensure that the customer will pay fair value for the services.
Avoiding an Implied Contract
Sometimes, it is possible to avoid an implied contract. In order to do this, you have to be aware of the circumstances under which an implied contract can be created and make your actions explicit when you are dealing with other people in personal and business situations.
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