What Is an Implied Contract?

An implied contract is a legally-binding obligation that derives from actions, conduct, or circumstances of one or more parties in an agreement. It has the same legal force as an express contract, which is a contract that is voluntarily entered into and agreed on verbally or in writing by two or more parties. The implied contract, on the other hand, is assumed to exist, but no written or verbal confirmation is necessary.

Key Takeaways

  • An implied contract is created by the actions, behavior, or circumstances of the people involved.
  • An implied contract has the same legal force as a written or verbal contract.
  • The implied contract, such as an implied warranty, is assumed to exist, and no confirmation is necessary.
  • Because of the lack of documentation, it is more difficult to enforce an implied contract in some circumstances.

Understanding Implied Contracts

The principles underlying an implied contract are that no person should receive unjust benefits at the expense of another person, and a written or verbal agreement is not needed to get fair play. For example, the implied warranty is a type of implied contract. When a product is purchased, it must be capable of fulfilling its function. A new refrigerator must keep food cool, or either the manufacturer or the seller has failed to meet the terms of an implied contract.

An implied contract is sometimes difficult to enforce because proving the justice of the claim is a matter for argument, not a simple matter of producing a signed document. In addition, some jurisdictions place limits on implied contracts. For example, a contract for a real estate transaction must be backed up by a written contract in some courts.

Implied-in-Fact vs. Implied-in-Law Contracts

There are two forms of implied contract, called implied-in-fact and implied-in-law contracts. An implied-in-fact contract is created by the circumstances and behavior of the parties involved. If a customer enters a restaurant and orders food, for example, an implied contract is created. The restaurant owner is obligated to serve the food, and the customer is obligated to pay the prices listed on the menu for it.

An implied-in-fact contract may also be created by the past conduct of the people involved. For example, a teenager offers to walk a neighbor's dog and is rewarded with two movie tickets. On three subsequent occasions, the teenager comes over to walk the dog and is given two movie tickets. But on the last occasion, the neighbor simply fails to produce the movie tickets. The teenager has a case for claiming that the neighbor created an implied-in-fact contract by regularly producing movie tickets in return for dog-walking services. It is a reasonable assumption.

An implied contract has the same legal force as a written contract but may be harder to enforce.

The other type of unwritten contract, the implied-in-law contract, can also be called a quasi-contract. It is a legally binding contract that neither party had the intention of creating. Say the same restaurant patron mentioned above chokes on a chicken bone, and a doctor dining at the next booth leaps to the rescue. The doctor is entitled to send a bill to the diner, and the diner is obligated to pay it.