Implied Contract

Definition

An implied contract is a legally binding agreement that is not explicitly stated but is inferred from the actions, conduct, or circumstances of the parties involved. It arises when the intent to create a contractual relationship is demonstrated through the parties' behavior, even in the absence of a written or oral agreement.

5 Must Know Facts For Your Next Test

1. Implied contracts are formed based on the parties' actions, conduct, and the circumstances surrounding the transaction, rather than a written or verbal agreement.
2. The key element in an implied contract is the reasonable expectation that a contractual relationship exists, even without explicit terms.
3. Implied contracts are often used in situations where there is a long-standing business relationship or a course of dealing between the parties.
4. Courts will look at the totality of the circumstances to determine if an implied contract exists, including the parties' words, actions, and the industry customs.
5. Implied contracts can be used to enforce promises or obligations that are not explicitly stated, but are necessary to prevent unjust enrichment or to uphold the reasonable expectations of the parties.

Review Questions

• Explain how an implied contract differs from an express contract.
  • The main difference between an implied contract and an express contract is the way the agreement is formed. An express contract is explicitly stated and agreed upon by the parties, either in writing or orally. In contrast, an implied contract is not explicitly stated but is inferred from the actions, conduct, and circumstances of the parties involved. The intent to create a contractual relationship is demonstrated through the parties' behavior, even in the absence of a written or verbal agreement.
• Describe the role of industry customs and the parties' reasonable expectations in the formation of an implied contract.
  • When determining whether an implied contract exists, courts will look at the totality of the circumstances, including the parties' words, actions, and the industry customs. The key factor is the reasonable expectation that a contractual relationship exists, even without explicit terms. If the parties have a long-standing business relationship or a course of dealing, and their actions and conduct demonstrate an intent to create a contractual obligation, the court may find that an implied contract has been formed, based on the parties' reasonable expectations and the industry standards.
• Analyze how the doctrine of promissory estoppel relates to the concept of implied contracts.
  • The doctrine of promissory estoppel is closely related to the concept of implied contracts. Promissory estoppel enforces a promise made by one party that the other party reasonably relied on, even in the absence of a formal contract. Similarly, an implied contract arises when the intent to create a contractual relationship is demonstrated through the parties' actions, conduct, and circumstances, rather than an explicit written or oral agreement. Both doctrines are based on the principle of preventing unjust enrichment and upholding the reasonable expectations of the parties, even in the absence of a formal contractual agreement.

Related terms

Express Contract: A contract that is explicitly stated and agreed upon by the parties, either in writing or orally.

Quasi-Contract: A legal obligation that is imposed by the law, not by the agreement of the parties, to prevent unjust enrichment.

Promissory Estoppel: A doctrine that enforces a promise made by one party that the other party reasonably relied on, even in the absence of a formal contract.