Key Takeaways

  • The definition of implied contract refers to an agreement formed through conduct or circumstances, not explicit statements.
  • Implied in fact contracts are based on mutual intent inferred from behavior, while implied at law contracts prevent unjust enrichment.
  • Courts evaluate intent, reliance, and reasonable expectations to determine enforceability.
  • Common contexts include employment, service transactions, and professional dealings without written terms.
  • Breach remedies include restitution, quantum meruit, and compensatory damages.
  • Businesses can avoid accidental obligations by documenting terms and clarifying intent.
  • Individuals and companies should understand how implied agreements differ from oral or express contracts to protect their rights.

Implied Contract Definition

The definition of implied contract is a legal agreement that is formed out of conduct, assumptions, relationships, and common law practices, rather than a contract that is stated outright and, in many cases, written down and signed. Implied contracts occur by default when parties have dealings without explicitly stating their terms, with the law creating an obligation to fairness between the parties as a stand-in. An implied contract is legally enforceable, even though it is not put into writing. Implied contracts are more difficult to enforce than express contracts, but to some extent, this can be done. It arises from intentions that are assumed due to the relationship between the parties, or from the principle of equity — a party accepts an item or service of value that is not considered a gift. In that case, the accepting party is obligated to provide fair value for the benefit they received.

Implied in Fact Contract vs. Express Agreement

While express contracts are clearly stated—either verbally or in writing—an implied in fact contract arises from the parties’ behavior, industry norms, or prior dealings. The key distinction is that, despite the lack of explicit agreement, both parties’ actions demonstrate mutual assent and a shared understanding of their obligations.

For instance, if a client repeatedly accepts consulting services and pays invoices without a written agreement, the pattern of conduct establishes an implied in fact agreement. This principle is vital because it shows that enforceable obligations can exist even when formalities are absent, so long as mutual intent is evident.

Key Elements Courts Consider in Implied Contracts

When determining whether an implied contract exists, courts generally evaluate several factors:

  • Conduct of the Parties: Actions that indicate mutual understanding, such as regular provision and acceptance of services.
  • Established Relationship: Ongoing dealings that imply an expectation of continued obligations.
  • Industry Practices: Customary behaviors in a specific field that suggest certain terms are standard.
  • Circumstances Surrounding the Transaction: Context, such as urgency or prior history, that reasonably leads one party to expect compensation.
  • Reasonable Reliance: Whether one party reasonably relied on the other’s conduct to their detriment.

For example, if a consultant routinely provides monthly reports to a client who consistently pays without a formal agreement, a court may find an implied in-fact contract exists.

Legal Standards for Proving an Implied in Fact Contract

Courts carefully examine whether a party seeking to enforce an implied in fact contract can demonstrate three critical elements:

  1. Mutual Intent: Evidence must show that both parties intended to enter into an agreement, even if they never formalized it.
  2. Definiteness of Terms: The scope of services, compensation, and expectations must be reasonably clear from conduct or circumstances.
  3. Performance and Reliance: One party must have performed an act expecting compensation, and the other must have knowingly accepted the benefit under conditions implying payment.

Failing to prove these elements may result in dismissal of the claim, as courts will not infer contractual obligations where no mutual understanding exists.

Enforceability Challenges in Implied Contracts

Even when an implied contract seems clear from the parties’ conduct, proving enforceability can be difficult. Because there is no written document, courts must rely on circumstantial evidence to determine the intent to contract. Inconsistencies in behavior, vague expectations, or the absence of a consistent payment pattern can undermine the claim.

Courts generally require that the conduct clearly shows mutual assent—both parties acting in a way that would reasonably lead an observer to conclude that an agreement existed. Additionally, a lack of communication or documentation can weaken a plaintiff’s case. To strengthen enforceability, parties should:

  • Maintain detailed records of interactions and payments.
  • Confirm services or deliverables in writing, even informally.
  • Avoid accepting benefits without clarifying payment terms.

Judges are hesitant to infer obligations when the conduct can be interpreted as a mere favor, gift, or misunderstanding.

Types of Implied Contracts

Two types of implied contracts exist. Those are implied in-fact and implied at-law contracts. Contracts do not necessarily need to be put in writing in order to be legally binding, although it's a good idea to do so.

Implied In-Fact Contracts

Implied in-fact contracts are based on the situation's facts, which create an obligation between two parties. The facts, circumstances, or conduct of the parties may suggest that an agreement exists between them, and if so, the law may rule that an implied in-fact contract exists. If you are paid for something each week, such as babysitting, even though it's not in writing you may be able to claim to have a contract with the other party and a reasonable expectation that payment for your service will continue.

Implied At-Law Contracts

Implied at-law contracts are created when one party is entitled to payment for items or services provided to them even though neither party intended for the agreement to be made. This can arise from accidents or other unintentional occurrences. The only legal requirement is that one party is unfairly enriched by the action that took place, and therefore the other party is due some sort of restitution. This type of contract is also referred to as a quasi-contract.

Implied Contracts in Employment and Business Settings

In the workplace, the definition of implied contract often extends to situations where company policies, verbal assurances, or consistent practices imply continued employment or specific benefits. For example, an employee handbook that outlines disciplinary procedures or job security terms can create an implied contract if employees rely on it.

In business transactions, implied contracts arise when one party consistently provides goods or services and the other accepts them without a formal agreement. For instance, if a consultant is routinely paid for project work despite the absence of a signed contract, a court may find an implied contract based on the parties’ course of dealings.

To mitigate risks, employers and business owners should clearly communicate that certain documents or actions do not establish contractual obligations unless expressly stated.

How Implied in Fact Contracts Are Formed

Implied in fact contracts are formed through a combination of behavior and circumstances rather than explicit promises. Common ways they arise include:

  • Consistent Course of Dealings: Repeated transactions under similar terms can establish a contractual expectation.
  • Acceptance of Services: Receiving and benefiting from services with knowledge that compensation is expected.
  • Industry Practices: Following customary practices in a field that signal payment is standard.
  • Pre-Contractual Conduct: Negotiations and preparatory actions that reasonably imply agreement.

Even informal interactions—such as agreeing to collaborate on a project without discussing payment—can create legal obligations if the surrounding facts show mutual understanding.

Factors That Distinguish Implied in Fact from Implied in Law Agreements

While both forms of implied contracts are recognized under law, they differ in how they are created and enforced.

  • Implied in Fact: Based on the actions or conduct of the parties that indicate mutual intent. Both sides expect to receive a benefit in exchange for performance.
  • Implied at Law (Quasi-Contract): Created by courts to prevent one party from being unjustly enriched, regardless of intent. It’s a legal remedy, not a true contract.

For instance, if a contractor mistakenly repairs the wrong driveway and the homeowner knowingly benefits without objecting, the court may impose an implied at law obligation to pay. This ensures fairness even when no contract existed.

Common Situations Where Implied Contracts Arise

Implied contracts often occur in everyday and professional settings, including:

  • Employment: When an employer’s policies or actions suggest ongoing work conditions, benefits, or job security beyond what is written in a contract.
  • Professional Services: Accepting services like legal advice or accounting without a formal engagement letter but with an understanding of payment.
  • Creative Submissions: Providing ideas, designs, or proposals where industry norms dictate compensation if the ideas are used.
  • Medical Services: Receiving treatment in emergencies where consent is assumed and payment is expected.
  • Business Dealings: Regular supply of goods without a written agreement, but with a pattern of payment.

Recognizing these scenarios can help individuals and businesses avoid disputes over expectations and obligations.

Implied Contract Example

An excellent example of the kind of dispute that can arise from a contract being implied rather than expressed is the case involving Larry Montz and NBC. In it, Montz submitted multiple ideas to NBC for television shows, all of which were passed upon. However, a few years later, the network came out with a show called Ghost Hunters, which Montz believed bore a striking similarity to one of the ideas he pitched to NBC. Montz then sued NBC for copyright infringement, claiming that an implied contract existed between him and NBC through his submission, and that he deserved compensation as a result.

In the courts, Montz lost at the District level, but this decision was reversed on appeal by the 9th Circuit Court. In their ruling, they stated that they sided with Montz because even without a written contract there should have been an implied understanding by both sides that using the idea of another party would require fair compensation of that party.

This ruling had important implications in the realm of law insofar as it broadened how an implied contract could be interpreted. It also increased the protections individuals had for their intellectual property (IP) and changed how studios handled the submissions of screenwriters. After all, had terms regarding IP rights been stated openly, such a lengthy court battle could have been avoided in the first place.

Are Oral Contracts Enforceable?

Not all contracts need to be in writing to be enforceable, although some do. Individual states have laws specifying which kinds of contract must be in writing; this is commonly known as the Statute of Frauds. Most states require the following types of contract to be in writing, though there may be others:

  • Contracts for the sale of land.
  • Contracts for the repayment of debts.
  • Contracts that cannot be performed within one year.
  • Contracts over a certain dollar amount.
  • Contracts regarding the sale of certain goods, which are listed in the state statute.

Written agreements are always a good idea because they prevent possible disputes from occurring in the future. Most oral contracts are legally binding, however, and recognized by courts.

Relationship Between Oral and Implied Contracts

While oral contracts rely on spoken agreement, implied contracts arise from conduct or circumstances. In practice, the two often overlap. For instance, an oral agreement may be supported by a history of conduct that further solidifies the contractual relationship.

Courts may treat consistent performance under an oral agreement as evidence of an implied in-fact contract. However, both oral and implied agreements face similar challenges in enforcement due to the difficulty of proving terms without written documentation.

How Are Implied Contracts Enforced?

When an implied contract exists, one of the parties can sue the other in a court of law in order to demand that the other party fulfills their obligation.

For example, one real-life example included a screenwriter who had submitted ideas to a TV network, hoping that they would accept one and pay him for his work. Unfortunately, his ideas were rejected. But when they produced a successful show later that he claimed was similar to his idea, he sued them for restitution, claiming that the network had an implied contract with him. Although the initial case was lost, the decision was appealed and reversed, resulting in victory for the screenwriter.

The court ruled that when a writer submits work, an implied contract exists between the writer and producer or publisher that the work cannot be used unless the writer is paid. This set a precedent for other writers in similar circumstances, protecting them from having their submissions stolen. As a result, studios and publishers are careful about how submissions are handled.

Breach of an Implied in Fact Contract

A breach of an implied in fact contract occurs when one party fails to fulfill their obligations under the agreement, despite having benefited from the other party’s performance.

 Examples include:

  • Accepting services but refusing to pay.
  • Using proprietary information provided with an expectation of compensation.
  • Abruptly terminating an ongoing service relationship without notice or payment.

The legal remedies mirror those for express contracts. Courts may order restitution (to prevent unjust enrichment), compensatory damages (to place the injured party in the position they would have been in), or quantum meruit (reasonable value for services rendered). Plaintiffs must show that the defendant’s actions violated the implied agreement and that they suffered measurable harm as a result.

Defenses Against Breach Claims in Implied Contracts

When accused of breaching an implied contract, defendants may raise several defenses to challenge the validity or existence of the agreement:

  • Lack of Mutual Intent: Arguing that no reasonable person would interpret the conduct as a contract.
  • Unjust Enrichment Not Proven: Claiming the plaintiff did not suffer measurable harm or the defendant was not enriched.
  • Statute of Frauds: Certain contracts, such as those involving real estate or agreements exceeding one year, must be in writing to be enforceable.
  • Voluntary Benefit Acceptance: Asserting that the plaintiff provided services without expectation of payment.

Understanding these defenses is essential, as they often determine whether the implied contract claim will succeed in court.

Remedies for Breach of Implied Contracts

When a party breaches an implied contract, the court may order remedies such as:

  • Restitution: Returning any benefits wrongfully retained by the breaching party.
  • Compensatory Damages: Monetary awards to place the non-breaching party in the position they would have been in if the contract was honored.
  • Quantum Meruit: Payment for the value of work performed when no specific contractual amount was agreed upon.

The chosen remedy depends on the nature of the breach, the benefit conferred, and whether unjust enrichment occurred.

Avoiding Implied Contracts

Since an implied contract can arise from an unpredictable situation, you might be concerned about how a person can avoid creating one and entering into such an agreement. For example, if a person is choking in a restaurant and a doctor saves them with the Heimlich maneuver — and sends them a bill for his services — the patient couldn't tell the doctor not to help him and avoid payment.

The best you can do to avoid creating an implied contract is to be vigilant for situations that might result in one and be careful with your actions. Make sure to communicate your intentions when dealing with others, either in personal or business situations.

Best Practices to Minimize Risk of Unintended Obligations

To reduce the risk of forming unintended implied contracts:

  1. Document Agreements: Put terms in writing whenever possible, even for small transactions.
  2. Clarify Scope of Work: Specify what is and is not included in any service or delivery.
  3. State Payment Terms Clearly: Outline how and when payment will occur.
  4. Train Staff: Ensure employees understand actions that could create contractual obligations.
  5. Use Disclaimers: When appropriate, include written notices stating that certain actions do not constitute acceptance of contractual terms.

These practices can help prevent costly misunderstandings and legal disputes.

When to Seek Legal Advice About Implied Contracts

Because the definition of implied contract can vary by jurisdiction and circumstance, individuals and businesses should seek professional legal counsel when uncertainty arises. A contract attorney can:

  • Evaluate whether conduct or correspondence may have created binding obligations.
  • Draft clear disclaimers and communication templates to avoid unintended agreements.
  • Advise on documentation practices for recurring transactions or services.
  • Assist in resolving disputes over compensation or benefits implied by conduct.

If you believe an implied contract exists—or wish to prevent one from forming—you can find an experienced attorney on UpCounsel who can guide you through your rights and obligations under contract law.

Practical Tips for Businesses and Individuals

Because implied contracts can arise unintentionally, parties should proactively manage risk by:

  • Using Written Agreements: Even brief written terms clarify expectations and reduce ambiguity.
  • Sending Confirmations: Follow up verbal or implied agreements with written summaries.
  • Including Disclaimers: Clearly state when services are complimentary or exploratory.
  • Defining Payment Expectations: Outline pricing and billing terms before work begins.
  • Reviewing Ongoing Practices: Regularly audit business relationships to ensure no unintentional obligations have formed.

These precautions not only reduce litigation risk but also strengthen trust and transparency in business relationships.

Frequently Asked Questions

  1. What is the legal definition of implied contract?
    An implied contract is an agreement formed through the actions or conduct of parties rather than written or spoken words. The law recognizes the obligation based on fairness and mutual understanding.
  2. How do courts determine if an implied contract exists?
    Courts look for behavior that demonstrates mutual intent, such as consistent payment, acceptance of services, or reliance on previous dealings.
  3. Are implied contracts enforceable like written contracts?
    Yes, implied contracts are legally enforceable, but they can be harder to prove since there is no formal documentation of the terms.
  4. Can employment policies create implied contracts?
    Yes. Repeated company practices or written handbooks can sometimes form implied contracts if employees reasonably rely on them for job expectations.
  5. How can I avoid unintentional implied contracts?
    Clarify intentions in writing, include disclaimers in communications, and ensure that all agreements for payment or services are explicitly stated before performance begins.

If you need more information or help with an implied contract, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.