Implied Contract

What is an 'Implied Contract '

An implied contract is an agreement created by actions of the parties involved, but it is not written or spoken. An implied contract is a legal substitute for a contract that is assumed to have been drawn. In this case, there is no written record nor any actual verbal agreement.

A form of an implied contract is an implied warranty provided automatically by law. An implied warranty means that when a product is purchased, it is guaranteed to work for its ordinary purpose. For example, a refrigerator is fit to keep food cool.

BREAKING DOWN 'Implied Contract '

Basically, an implied contract is an unwritten agreement between two or more parties. There are two forms of implied contract – implied-in-fact and implied-in-law contracts. An implied-in-fact contract is formed by non-verbal conduct or actions between two parties. Even though no words were agreed upon, the actions of all parties involved is sufficient to initiate a contract. For example, an implied-in-fact contract exists when a client takes her dog to a veterinarian. The veterinarian’s actions suggest that he will do his/her best to examine and treat the animal in exchange for a fee, and the client’s actions indicate that she intends to receive treatment for her dog for a fee. In this case, a court will probably rule that an implied-in-fact contract was created from the actions of both parties. If the vet fails to attend to the animal or the client does not pay the fee, a breach of the contract would ensue.

An implied-in-law contract is a quasi-contract which is imposed by the law on both parties, even though neither party had no intention of entering into a contractual agreement. Where one party would have received unjust benefits at the expense of another party, the law imposes an obligation on the party that receives the entitlement to pay restitution for the services given, property transferred, or other benefits received through the actions of the other party. Following our example under implied-in-fact contractual agreements, what if the client did not bring her dog to the vet’s office for treatment? Say, the dog was in the park and the vet happened to be in the same park at the same time. The dog starts choking on some foreign object it swallowed, and the vet immediately performed the canine Heimlich maneuver to dislodge the object, saving the dog’s life. If the vet sends a bill to the dog owner for his services, the owner will be obligated to pay the fair value for the services even though she had no intention of entering into a contract with the vet and made no promise to make any payments.

An implied contract has the same legal force as an express contract, which is a contract that is voluntarily entered into and agreed on by two or more parties. However, the existence of implied contracts is more difficult to prove in court due to the absence of a written record of agreement. Some jurisdictions require certain contractual agreements to be entered into explicitly and as express contracts, such as contracts involving real estate.