What is an Implied Contract & It's Meaning Explained with an Example

source : adrtimes

Contracts do not always come in written format. They can be verbal, non-verbal or unwritten, yet still, be legally binding. Contracts can also be made based on typical or “implied” behaviour of those involved. So, what is an implied contract? It is one that requires no agreement and is based on the actions of the parties involved.

Read on to know the meaning of implied contract, its characteristics, types, and examples.

An implied contract is non-verbal and non-written, yet lawfully binding. This takes place with the mutual consent of both parties involved and is based on actions & behaviours of the same. Implied contracts are rare when compared to express contracts, which are verbally written and orally expressed too.

For example, when purchasing a movie ticket, you automatically agree to maintain the decorum and abide by the rules of the movie theatre. This is an example of an implied contract.

The terms and conditions of an implied contract are "implied" or “suggested but not directly expressed” and need not have any separate justification. Listed below are some of the unique characteristics of an implied contract:

• Fundamental details of the contract should be made clear between the two parties. Take the example mentioned earlier, for instance, where the price of the movie ticket is specific, and a contract comes along with it.
• One party should express their acceptance through some action or behaviour, and the other party cannot assume it based on anything. Referring to the example discussed above, when the customer takes ownership of the ticket, he/she is giving consent to the contract that comes along with it accordingly.
• There should be a mutual agreement between both parties about the contract.
• There should be a token of exchange between parties involved. This can be in the form of goods or services. Considering the previous example again, the ticket is the token of agreement which is being exchanged for money.

There are primarily two types of implied contracts that are discussed in brief below.

Implied-in-Law

Among two types of implied contracts, one is “implied-in-law.” In this contract, as the name suggests, the law is involved, and the contract forms under unintentional or accidental circumstances. Neither of the parties intended to get into such an agreement. Still, one party is liable for some kind of payment of goods or services offered to them.

It is only enforceable when the court has to step in; otherwise, one party would be unjustifiably enriched by the other’s actions. That party will be due to receive some type of restitution for the services accepted.

Let us understand this with the help of an example:

Suppose you are travelling on a train over a long distance. You suffer a cardiac arrest while on board. Fortunately, there was a doctor on board who treated you with emergency procedures until you reached a hospital. Later, the doctor sent a bill to you for the treatment received, which you paid on a later date.

Here, as a doctor, he did perform his duties, but if you had not paid the bill, you would be unjustifiably enriched by his services at the time of emergency. Also, neither of the parties involved intended to get into this contract, and it happened by accident.

Implied-in-Fact

Another type of implied contract is an "implied-in-fact" contract. In such a contract, both the parties are obligated to the services or goods offered & received even though the law is not necessarily involved. Both parties' actions and behaviours suggest that they have the implied contract, and the law also may find the same. You can say that this type of contract is based on expectations of the services put forward.

One good example of such a contract can be babysitting. When you offer your services for babysitting, you are conditionally expecting to get paid for your services even though there is no contract between the parties involved. Another good example would be the post-paid cabs. When you get into a cab and give the driver directions for your destination, you are bound to pay the fare at the end of the ride.

When an implied contract exists, one of the parties can sue the other in a court of law if the latter fails to fulfil his/her unwritten obligations.

Let’s understand this with the help of an implied contract case:

Suppose there is a screenwriter who had previously submitted his work to a movie house. They rejected his script, but the screenwriter later found that the production house released a movie that was based on his script.  

He can sue the production house for restitution. The screenwriter can win the case in terms of an implied contract that when a screenwriter submits his work to a production house, they cannot use or publish his work without paying him fairly.

An implied contract or agreement allows the parties involved to skip writing certain terms in the contract because they are legally assumed implicitly once the contract is entered into. Although there is no exchange of words orally or in writing, implied contracts are still legally binding because it is based on the understanding between two parties.