Implied Contract Terms

What are 'Implied Contract Terms'

Implied contract terms are items that a court will assume are intended to be included in a contract, even though they are not expressly stated. Businesses and professionals generally do not want to rely upon a court's interpretation of implied terms. Their contracts will often be very extensive so that as many material items as possible are included in the contract. When it is not possible to cover every possible detail, a lawyer may appeal that such terms were implied in order to give force to the intent of the contract.

BREAKING DOWN 'Implied Contract Terms'

Contract terms can be implied in a number of ways. For example, in many transactions involving the purchase of goods or services, there is an implied warranty of merchantability. It is implied that what you are buying will serve the purpose that would be reasonably expected. This contract term is implied even when there is no written or oral contract. In other cases, contract terms may be implied where the intent of a contract obviously necessitates the inclusion of certain items. Even stating express terms to the contrary may not be sufficient to negate certain terms implied by the law.

Ways Implied Contract Terms Are Used to Enforce the Spirit of a Contract

One of the intents of implied contract terms is to prevent instances of fraud by omission. It is a form of fraud if one of the parties in a contract attempts to renege on or alter their responsibilities by not revealing relevant information. This could include failing to reveal fundamental flaws in a product or piece of property. A contract might not explicitly state that such information be made apparent. The implied contract terms would support the necessity to share information.

For example, the buyer of a product assumes it will be free of general defect upon purchase. If the seller is aware of a frequent mechanical issue with that product, implied contract terms would compel them to make those issues known.

Contracts between individuals can include implied terms based on the precedents set by their actions. If a neighbor agrees to pay another neighbor for the regular shoveling of snow in winter the implied contract terms mean they will pay each time their driveway and walkway are cleared. An incident may occur where the neighbor decides to withhold payment after a recent shoveling. They could still be held responsible for making that payment because of the prior arrangement. Even though there is no written contract to enforce these terms, there is an expectation of payment.