An implied contract is created when two or more parties have no written contract, but the law creates an obligation in the interest of fairness based on the parties’ conduct or circumstances. There are two types of implied contracts: contracts that are implied in-fact and contracts that are implied at-law. While it is always a good idea to put all contracts in writing, a writing is not always necessary to create an enforceable contract between parties.
An implied in-fact contract creates an obligation between the parties based on the facts of the situation. If the parties’ conduct or the circumstances suggests they had an agreement or understanding that created an obligation, then the law will find that they had an implied in-fact contract.
For example, assume your neighbor hires you to mow his lawn every Friday for the entire summer. You mow your neighbor’s lawn for the first three weekends of the summer and get paid on Saturday morning each time. The fourth Friday you mow the lawn and when you arrive at your neighbor’s house on Saturday morning, your neighbor refuses to pay you. The law will infer that there is a contract between you and your neighbor, even though you never put anything in writing. This is an implied in-fact contract. Your neighbor is obligated to pay you because you performed your part of the bargain, there was an agreement based on both parties' prior conduct, and your neighbor was enriched by your performance.
Courts will look at the course of conduct between the parties to determine if a contract exists. Given that your neighbor paid you for the three consecutive Saturdays of the summer, it can be inferred that you had an arrangement or an implied in-fact contract to continue to perform and get paid for those services.
With an implied at-law contract, the law imposes a duty to perform a contract, and will enforce a contract even against a person’s will, where circumstances are such that without this remedy one party would be unfairly enriched by another party’s action. In this situation, one party is entitled to restitution for the services provided, even if there was never any intent by either party to enter into an agreement.
For example, someone is eating dinner at a restaurant and chokes on his food. A doctor is seated at a table nearby and observes the person choking. The doctor rushes over to perform the Heimlich maneuver and saves the other customer’s life. He later sends a medical bill for services rendered to the diner he saved. The customer is obligated to pay the doctor even though he had no intent to enter into an agreement with him because otherwise he would be unfairly enriched by the doctor’s services. To avoid this outcome, the law will find an implied at-law contract and require the customer to pay fair value for the services he received.
This type of agreement is considered a quasi-contract. A quasi-contract is where the law imposes an obligation upon parties where in fact the parties did not intend to enter into a contract and made no promise to perform. However, because one party would be unjustly enriched by another party’s action, the beneficiary of those actions must make restitution or pay fair value for the services provided, even though there was never any intent to enter into an agreement.
Only certain contracts must be in writing to be enforceable. Most states have laws (known as the Statute of Frauds) that specify which types of contracts must be in writing. Although these vary by state, most require that contracts for the sale of land, to answer for the debts of another, that cannot be performed within one year, that are over a certain dollar amount, or involve certain sales of goods must be in writing.
Even though many types of contracts do not need to be in writing to be enforceable, it’s always a good idea to have a written agreement if you are entering into an arrangement with someone for services or a sale or anything where a dispute could arise later.
(To learn more about what goes into making a legally binding contract, check out Nolo’s book, Contracts.)