What is an Implied Contract?

Definition: An implied contract is a legal agreement that informally arises from the relationship between the parties involved. It is deduced by the actions and intentions involved in the situation.

What Does Implied Contract Mean?

Implied contracts emerge from the dynamics of a relationship. The parties normally assume the contract exists and they submit themselves to it without having a written or oral understanding. These contracts are normally caused by a recurring situation or an expected result.

The fact that a situation repeats itself many times may give birth to an implied contract. If one of the parties refuses at some point to deliver its part of the agreement there is a legal basis to argue that a contract existed, even if it was not explicitly drawn. These type of contracts can be applied to both individual and business situations. The most common place we can find this implied contracts is in business-to-customer relationships.

Normally a customer will pay for a service and to some extent, the contract between the parties is implied. The payment triggers the obligation for the business side to deliver a particular good or service but sometimes there’s no written document or verbal agreement about it. It is just a situation where the agreement is deduced by both parties because of the interactions involved.

Example

Here’s a practical example. Mr. Gordon works as a watch repairer in a small neighborhood. He normally receives clients at his store and the clients explain to him what the problem is. After doing that, Mr. Gordon normally gives them an estimate of how much it would cost to repair the watch and he also provides a time frame for the clients to know when the watch will be ready. As Mr. Gordon clients are normally trusted and they all live in the neighborhood he doesn’t issue a receipt or an invoice.

In this case there’s an implied contract between Mr. Gordon and his clients, since there’s no written or verbal agreement that states all the conditions of the watch repair service. For example, the clients expect Mr. Gordon delivers the watch in the same conditions he received it. They also expect Mr. Gordon to do its best to return the watches fully functional.