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What are “express contracts”, “implied-in-fact contracts”, and “implied-in-law contracts”?
Express Contract – An express contract arises from interactions in which parties actually discuss the agreement and the promised terms. The contract does not have to be formal or in writing, but it requires that the parties express their intentions in an agreement.
- Example: One person expressly offers to sell a widget to another person. The other person accepts the offer by saying the she will buy it. The parties have an expressed contract because they have stated an offer, stated an acceptance, and identified consideration. These expressions can be verbal, as in this situation, or written.
Implied-in-Fact Contract – An implied-in-fact contract arises from the conduct of the parties, rather than from words. That is, the parties interact in a manner that constitutes a legally enforceable contract. This means that all of the elements of an enforceable contract can be inferred from the actions of the parties.
- Example: Ellen asks Albert, an attorney, for professional advice. Ellen knows that Albert is an attorney and charges for his advice. Asking Albert for his professional advice implies a promise from Ellen to pay the going rate for that advice. This is true even though Ellen and Albert did not make an express promise to pay for it.
Implied-in-Law or Quasi-Contracts – An implied-in-law contract is a contractual relationship ordered by the court. It lacks the mutual asset element of a contract, but the court deems the interactions between parties to be a contract under the law. This court action is generally taken to avoid an unjust result, such as when one party is unjustly enriched at the expense of another. The court will hold that the law implies a duty on the first party to pay the second, even though the elements to find a legally enforceable contract between the two parties are absent.
- Example: Bell routinely rakes leave in the neighborhood for extra money. She rakes leaves for lots of houses and sometimes forgets which houses have requested her services. She begins raking James’s yard, having forgotten that she never worked out an agreement to do so. James often pays individuals to rake his yard and has plenty of money to do so. At the end of the job, Bell asks James for $20 for her effort. If James refuses to pay the court may hold that it would be unfair for James to receive this value and not pay something for it. As such, the court could hold that an implied-in-law contract to pay for Bell’s services.
Discussion: How do you feel about implied contracts? Should all contracts be required to be expressed? What are some arguments for and against this approach? What do you think is the justification for recognizing implied contracts?
Practice Question: Kyle agrees to purchase building material from Anna, a new employee of a construction materials company. Anna executes a contract but makes an error when pricing the material. Per the terms of the agreement, Kyle will pay far less than the cost of the material. Kyle realizes this, but he stays quiet. Kyle uses the material before Anna catches the error. She sends Kyle an additional bill to cover the cost of the material, but not profit. Kyle refuses to pay the additional amount. What might a court do in this situation?
- The court will consider the elements that created the legal contractual obligations between the parties in the dispute. There was an express contract between the seller and the buyer as of the cost of the goods. However, a small omission on quoting and billing the buyer put the seller and a disadvantage. To remedy this, the court will consider the facts upon which the original contract was formed. This is when the principle of the contract implied in law is applied. This principle creates an obligation which focuses on the original obligations of the parties towards each other. This is a legal obligation that seeks to provide that justice based on the relationship existing between the parties so as to avoid enabling one party to benefit from the relationship at the expense of the other. The court, being the instrument of justice, uses this principle to allow the plaintiff to recover a benefit conferred on the defendant. The other term of contract implied in law is “quasi contract” or “constructive contract”.