Implied in Law Contract vs. Implied in Fact Explained

Key Takeaways

• Express contracts are clearly stated agreements, either written or verbal.
• Implied in fact contracts arise from the conduct of the parties and require mutual intent, even if not explicitly stated.
• Implied in law contracts (quasi-contracts) are imposed by courts to prevent unjust enrichment, regardless of intent.
• Implied in law contracts do not require mutual assent, unlike express and implied in fact contracts.
• Courts use implied in law contracts to enforce fairness when no formal agreement exists but one party benefits at the expense of another.

An implied in law contract vs. implied in fact is the difference between an agreement that must be inferred by the actions of each party (the latter) and one that must be made by the court to uphold justice and/or correct unjust enrichment (the former).

Express Contracts

Any binding agreement between two or more parties, either written or spoken, is called an express contract. Both parties agree to perform certain obligations and must understand the contract terms and intend to be legally bound by them. In the simplest type of contract, one party promises to provide goods or services to another party in exchange for payment. Express contracts must consist of an offer that is accepted by the other party by mutual intent, with consideration (an item of value) offered on both sides.

About Implied in Fact Contracts

This type of contract often hinges on common industry usage or an ongoing business relationship. With an implied in fact contract, the parties act in such a way that indicates they intend to be in an agreement with one another, even if an oral or written agreement has not been established. For example, if a company was doing business with a client under a contract that expired, but they continued to act as if the contract was in effect, this is considered an implied in fact contract.

Like an express contract, an implied in fact contract must consist of an offer, acceptance, consideration, and mutual intent. However, the terms are not stated outright and must be inferred by the parties' behavior in dealing with one another.

Case law that supports the idea of an implied in fact contract includes Baltimore & Ohio Railroad Co. vs. United States, in which the decision stated: “founded upon a meeting of minds, which, although not embodied in an express contract, is inferred, as a fact, from conduct of the parties showing, in the light of the surrounding circumstances, their tacit understanding.”

In Russell v. United States, the judge found that (“To give the Court of Claims jurisdiction the demand sued on must be founded on a convention between the parties — ‘a coming together of minds' ”). By contrast, an agreement implied in law is a “fiction of law” where “a promise is imputed to perform a legal duty, as to repay money obtained by fraud or duress.”

Key Differences Between Implied in Law and Implied in Fact Contracts

Although both implied in law and implied in fact contracts arise without a formal written agreement, they are fundamentally different in how they are created and enforced:

This distinction is critical because only implied in fact contracts require a "meeting of the minds," while implied in law contracts focus on equity and justice.

Infringement and Implied in Fact Contracts

If someone else uses your ideas, words, creative work, or intellectual property without permission, he or she could be in breach of an implied in fact contract. To successfully such for this breach, you must prove that:

• You sold the work in question to the defendant in exchange for payment.
• The defendant should have known or knew that payment was required.
• The defendant voluntarily accepted the work and used it.
• The work has inherent value.
• The defendant implied that he or she would pay for the work.

About Implied in Law Contracts

When the court is required to uphold justice, the law may call for the formation of an implied in law contract. For example, if one person benefits from another person without legal entitlement, this is called unjust enrichment. The law will require the enriched party to make restitution to the other party even if no oral or written contract to that effect exists.

Common Scenarios for Implied in Law Contracts

Courts may impose an implied in law contract in situations where allowing one party to retain a benefit without paying would be unjust. Typical examples include:

• Emergency Medical Services: When an unconscious person receives emergency treatment, they are generally required to compensate the provider, even though they did not agree beforehand.
• Overpayment Situations: If one person accidentally pays more than they owe or pays the wrong party, the law may require the recipient to return the excess payment.
• Unrequested Services Accepted: If one party knowingly accepts services that they could have refused but didn’t, and they benefit from those services, the court might require payment.

These contracts are not based on the intent of the parties but rather on the principle of fairness to prevent unjust enrichment.

Legal Principles Behind Implied in Law Contracts

The foundation of implied in law contracts rests on the doctrine of unjust enrichment. The key legal elements that courts typically consider include:

1. One party conferred a benefit on another.
2. The recipient appreciated or knew of the benefit.
3. It would be unjust for the recipient to retain the benefit without compensation.

Unlike traditional contract claims, recovery under an implied in law contract is often labeled as "quantum meruit" (reasonable value of services rendered) or "restitution."

Why Understanding Implied Contracts Matters for Businesses

For business owners and contractors, knowing the differences between implied in law contracts and implied in fact contracts helps manage risks and avoid disputes. Key reasons why this knowledge is important include:

• Clarity in Agreements: Prevents misunderstandings by encouraging written agreements.
• Litigation Preparedness: Helps identify when legal obligations may arise even without formal contracts.
• Protection from Unjust Claims: Understanding the criteria for unjust enrichment can protect businesses from unfair lawsuits.

If you're unsure whether your situation falls under implied in law or implied in fact contract principles, consider consulting with an experienced attorney. You can find qualified legal assistance through UpCounsel’s attorney network.

Frequently Asked Questions

1. What is an implied in law contract?
   An implied in law contract, also called a quasi-contract, is imposed by the court to prevent unjust enrichment when one party benefits unfairly at another’s expense, even if there was no agreement between the parties.
2. How does an implied in fact contract differ from an implied in law contract?
   An implied in fact contract arises from the conduct and mutual intent of the parties, while an implied in law contract is created by the court to promote fairness and equity, regardless of intent.
3. Can an implied in law contract exist without consideration?
   Yes. Unlike express or implied in fact contracts, consideration is not always required for implied in law contracts because their purpose is to prevent unjust enrichment, not to reflect an agreement.
4. What is an example of an implied in law contract?
   An example is when a hospital provides emergency medical care to an unconscious patient. The court may require the patient to pay for the services, even though there was no agreement.
5. Why is it important to distinguish between implied in law and implied in fact contracts?
   Understanding the difference helps determine your legal rights and obligations in situations where no written agreement exists. It also helps avoid unintended liability or missed opportunities for restitution.

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