Implied Contract

An implied contract refers to a legally binding agreement between multiple parties that are formed through their actions and behavior. There is no written basis or verbal confirmation for such contracts, yet they are legally valid. The purpose is to ensure that both parties get something out of the transaction.

Despite their legal validity, such contracts are difficult to enforce due to the absence of documentation. They are assumed to exist through reasonable inference. Also, some states mandate a written agreement, such as real estate, in some circumstances. The opposite of an implied contract is the express contract in which the terms are declared orally or in writing.

• An implied contract is a non-verbal or unwritten agreement between parties. They are implied or imaginary contracts in transactions, mostly between a buyer and seller.
• Their actions become legally binding, and it can be inferred that they have entered into a contract through their behavior.
• Such contracts exist because of the impossibility of entering into a written contract with every other person an individual meets every day.
• The two types of implied contracts are implied-in-fact and implied-in-law contracts.

Implied contract in business law is necessary in today's world, where there are billions of people, and every individual meets hundreds of others – cab drivers, café staff, lift operators, etc. Moreover, everyone can't carry a document stating rules and obligations. Thus, a non-verbal agreement is legally valid due to the impossibility of legal documentation everywhere.

But what counts as an implied contract? For example, suppose a flower vendor sells outside a mall. He takes the flowers to every person entering or exiting the mall and asks them if they want to buy his flowers. People can choose to buy from him or not. When they buy from him, a contract opens. It is implied that they will pay for the flowers. When they don't buy from him, there is no contract. Thus, as inferred by a normal person, the parties' behavior counts.

Thus an agreement is implied about the actions and circumstances of the deal, and both parties are aware of it. However, because of their implicit nature, these contracts cannot define the specific terms and conditions involved in the contract and are, therefore, pretty abstract. This makes them harder to enforce and sometimes leads to the exploitation of one party by another.

The two types of implied contracts in business law are implied-in-fact and implied-in-law. 

• Implied-in-fact: These contracts are entered into by the behavior and circumstances of the parties to the contract. For example, a man boards public transport. The driver agrees to take the man to his destination. The man pays the requisite charges for the service. Such a contract can also happen based on reasonable assumptions based on past scenarios.
• Implied-in-law: These contracts are also known as quasi-contracts. These contracts become legally recognizable even though the parties do not intend to create an agreement. For instance, an accident occurs on the street, and John, a nurse, gives first aid to the victim, Lana, and takes her to the hospital. John later charges Lana for the medical care.

Implied terms refer to the provisions the court considers contract terms. Terms are a part of the contract that highlights the rights and obligations of the parties. In an express contract, it is clearly stated. However, since implied contracts do not have a written form, one can only assume the possible obligations of each party.

Suppose a case is brought to the court of law; the court assumes the implied terms depending on the circumstances. For example, in the example of the man using public transport, both the man and the driver/ transport have some rights and obligations. The man has a right to receive safe transportation to his destination. The driver has the right to receive payment for their service. Also, the driver is responsible for driving carefully, and the man is responsible for paying for the service.

Courts consider multiple bases to arrive at the implied terms. Adherence to the law is one such basis. Customary business practice is another. For instance, when purchasing a good, there is an implied warranty that the good functions properly. Even though the customer doesn't receive a written warranty, the customer can claim damages or compensation if the product doesn't perform its basic function.

At-will employment refers to the ability of an employer to terminate the employee without any reason or warning. The only requirement is that it should not be on illegal grounds. However, there are exceptions to this.

For example, states like New Jersey maintain that an employer and employee share a non-verbal understanding; thus, firing the employee without any reason would breach the implied contract. Or, some clauses in the company's policies might hint at a possible contract. But, again, this can be used in a court of law.

In this digital era, data is everything. The company which collects and stores the most data is the richest. As the use of data in customizing user experiences increases, so do the concerns surrounding data privacy and security. 

Data breach cases are extremely sensitive. One, they exploit the customer's data. Two, an implied contract between the user and the company is breached. For example, when the customer uses a website and allows it to collect cookies, the website permits them to use the content. This is a non-verbal implied agreement. Thus, a data breach carries such a legal risk too.

Let's weigh the pros and cons of an implied contract.

Implied, express, and quasi-contracts are three different types of contracts. But first, let's analyze the points of difference:

• In an implied contract, parties enter into the arrangement through non-verbal consensus. In an express contract, written documentation reveals that the parties have entered into a contract. The terms are also clearly specified. Finally, a quasi-contract is created when the parties have no intention to agree. In such cases, a quasi-contract ensures that no party receives unfair treatment. Though technically not a contract, it can be enforced in court.
• Consent (offer and acceptance) is necessary for any agreement to become a legally valid contract. In implied and express contracts, the consent of both parties exists and continues throughout the contract's life. In a quasi-contract, however, the parties do not have any consent to participate.
• Quasi-contracts are created despite the parties not intending to enter into a contract. They do not satisfy the basic conditions of a contract. But they are sometimes necessary to ensure just treatment to all, especially in the absence of implied and express contracts. They are also known as implied-in-law contracts. This shows the legal significance of these contracts.

Examples

Now, let's discuss some examples of these to understand the difference.

• Jane walks into a store and starts shopping. She adds the items to her cart and arrives at the billing counter. The clerk produces the receipt and hands it over to Jane. She pays for the items and walks out of the store. Here, there is a non-verbal consensus between Jane and the store. This is an implied, specifically, an implied-in-fact contract.
• Steve wants to purchase a house. In this case, a formal written contract is necessary. Steve's realtor prepares the necessary documents. The buyer, Steve, and the seller, Lisa, both attest to the documents to show their consent. This is an express contract.
• Kate Wilson walks into a café and orders a vanilla latte. The staff asks for her name to deliver her order to the appropriate table. However, when the drink is prepared, they wrongly deliver it to Kate Dunham, who consumes it, thinking it is her order. Here, a quasi-contract is created between Kate Wilson and Kate Dunham. The latter will have to compensate the former.

This article has been a guide to what is Implied Contract. We explain its example, terms, exceptions, types, comparison with quasi & express contracts, pros & cons. You may also find some useful articles here -

• Oral Contract
• Voidable Contract
• Bilateral Contract