Implied in Fact Contract: Key Terms and Examples

Key Takeaways

• An implied in fact contract is created through conduct rather than explicit words and is enforceable like express contracts.
• These contracts rely on mutual agreement inferred from the parties’ behavior, not written or spoken terms.
• They differ from implied in law contracts, which courts impose to prevent unjust enrichment.
• Typical real-world examples include client-service provider arrangements and routine business dealings.
• Courts assess the parties’ actions, intent, and expectations to determine whether an implied in fact contract exists.
• Such contracts may still require evidence of consideration, legal capacity, and lawful purpose.

Two Types of Implied Contracts

Implied contracts can take two forms based on factual or non-factual circumstances.

Implied-In-Fact

• There are more than words or an oral agreement to assess.
• Acts like dealing/performance are important.
• There is intention, mutual agreement, and promise between parties.
• The duration can last for years, even after expiration.
• The effects of terms and obligations are similar to those of express contracts.

Implied-In-Law

• There is no oral or written agreement.
• There is no importance placed on acts.
• There is no intention, mutual agreement, or promise. These do not have to take place.
• The defendant cannot take advantage of/gain illegally through undeserved privileges.
• Obligation is based on justice.
• It has the power to go against people's will if necessary.
• It does not deal with the same subject matter present in other contracts.
• It is valid only for correction purposes.
• It is evaluated case by case.
• It favors the damaged party. As if from contracts (quasi ex contractu) require recompensation from the offender. The beneficiary pays fairly.

Distinguishing Implied-in-Fact from Implied-in-Law Contracts

While both implied in fact contracts and implied in law contracts arise without explicit written agreements, they differ significantly in origin and enforcement:

Implied in fact contracts depend on evidence of mutual intent, whereas implied in law contracts are used to create fairness where no true agreement existed.

Elements of Implied-In-Fact Contracts

There are specific aspects that are essential to note in this type of implied agreement.

• The plaintiff sells a product or idea.
• The plaintiff conditions the payment of the product or idea.
• The defendant is supposed to know or did know what the payment of the product or idea was about.
• The defendant approves voluntarily of the transaction matter regarding the product or idea.
• The defendant used the product or idea.
• The plaintiff's product or idea had value, even if little.
• The defendant impliedly assured to pay for the usage of the product or idea.

Legal Enforceability of Implied-in-Fact Contracts

Implied in fact contracts are fully enforceable under contract law, provided they meet the basic requirements of a valid contract:

• Mutual assent (inferred through actions)
• Consideration (exchange of value)
• Legal capacity of the parties
• Lawful purpose

Courts will examine whether a “meeting of the minds” can be reasonably inferred. If the parties' conduct indicates that they understood and accepted the terms of a working relationship—even without verbal or written communication—the agreement may be enforceable.

Examples of Real Life Implied-In-Fact Applications

• An individual infringes on the rights of another individual by trademarking his literature or idea.
• A store owner fails to compensate an employee after a mutually agreed discussion regarding the payment of his service, resulting in an unpaid service. The owner had an intention of paying the employee as discussed together, but he did not carry out this task successfully.

Industries Where Implied-in-Fact Contracts Commonly Arise

Implied in fact contracts frequently arise in these industries and scenarios:

• Freelancing & Consulting: A client pays a consultant based on their continued service, even if no formal agreement was signed.
• Hospitality: When a guest checks into a hotel, their use of services implies consent to pay the listed rates.
• Medical Services: A patient receiving emergency treatment implies consent to pay for care.
• Entertainment: Ideas pitched to producers without a contract may still trigger an implied agreement if the idea is used commercially.

These scenarios show how business relationships can operate under unspoken expectations that courts may interpret as contractual obligations.

Oral Contracts: Are They Enforceable

Not all contracts must be in writing. The State of Frauds, which are state laws, only require some contracts to be created by this method of communication. It is recommended though that promises be kept in writing.

Proving an Implied-in-Fact Contract in Court

Proving an implied in fact contract usually requires showing:

1. Pattern of behavior indicating mutual agreement
2. Expectation of compensation or performance
3. Past dealings or industry custom supporting the arrangement
4. Absence of express denial by either party

For example, repeated payments for services over time can support the existence of an implied contract. Courts often rely on witness testimony, business records, and the conduct of the parties to establish this.

The Significance of Writing

In general, there are essential instances where writing is significant for such transactions.

• The sales of particular goods.
• The sales of land.
• Matters of debt.
• Cases where more than a year's timing is needed.
• Imbalanced dollar amounts.

Limitations and Risks of Implied-in-Fact Contracts

While valid, implied in fact contracts come with several limitations:

• Lack of clarity: Terms are open to interpretation.
• Proof challenges: Harder to establish terms without documentation.
• Statute of frauds issues: Certain contracts (e.g., real estate, long-term agreements) may require writing to be enforceable.
• Dispute risk: Parties may disagree on obligations due to lack of formal agreement.

Using written contracts is always preferable to minimize ambiguity and legal risk.

Features of Express Contracts

• Are the most commonly seen in business transactions.
• Communications exist in oral or written form.
• They carry unquestionable terms and conditions.

Comparing Express vs. Implied-in-Fact Contracts

Here’s how express and implied in fact contracts compare:

While express contracts are clearer and easier to enforce, implied in fact contracts still carry the full weight of enforceable law when the parties’ conduct supports it.

Questions About Implied-In-Law Contracts

Contracts are involved between voluntary, competent parties. They place importance on the value of services. Once the offeror gives an offer, the next step is to have the offeree accept the offer. If the offer is not approved, the counter-offer ends the contract. Performance and consideration are main key factors where both parties can benefit from the transaction are enforced. There are not only expressed contracts, but also types of implied contracts as well.

When Courts Impose Implied-in-Law Contracts

Courts may impose an implied in law contract (quasi-contract) when:

• One party receives a benefit unjustly at another's expense.
• There is no valid contract, but fairness requires compensation.
• Restitution is necessary to prevent unjust enrichment.

For instance, if a person receives emergency medical aid while unconscious and later refuses to pay, a court may impose a quasi-contract requiring payment for the reasonable value of the services.

Frequently Asked Questions

1. What is an implied in fact contract?
   It is a contract formed by the conduct of the parties rather than written or spoken words, based on mutual intent and benefit.
2. How is an implied in fact contract different from an implied in law contract?
   Implied in fact contracts reflect mutual agreement, while implied in law contracts are imposed by courts to prevent unjust enrichment.
3. Can implied in fact contracts be legally enforced?
   Yes. As long as they meet basic contract elements—such as consideration and mutual assent—they are enforceable in court.
4. What evidence supports an implied in fact contract?
   Typical evidence includes repeated behavior, industry customs, and documentation showing an expectation of payment or performance.
5. When should I use a written contract instead?
   Always use a written contract when possible, especially for high-value or complex transactions, to avoid ambiguity and legal disputes.

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