An ‘implied contract’ is established based on the two sides' circumstances, actions, and conduct. Despite being free of written documentation, it binds both sides by law. A verbal or documented contract outlines the various conditions that have to be abided by the two sides. In an implied contract, both sides express respect for the terms stated by their individual behaviours.
An ideal implied contract example is that of a salon service. You visit a salon for a haircut or a hair massage without signing on a dotted line. You express your action because you will be served well and pay for the services. Another example of the implied contract is enjoying a movie in a theatre. You buy a ticket to enter the cinema hall and view the movie. You do not sign a legal document with the ticket vendor, isn’t it? These are examples of everyday life and do not involve any action if, e.g., you are not satisfied with the haircut you received.
In the case of commercial enterprises, which involve transactions of high-value merchandise, if the recipient receives damaged or inferior quality goods, the person can press legal charges. This article gives an insight into the types of implied contracts and what they entail.
Did you know?
The implied contract law was established in India in 1872, and Section 9 of The Indian Contract Act still holds such contracts as legal and valid.
What Is An Implied Contract?
In an implied contract, the terms and conditions of the entire agreement are not spelt out, and they are simply implied. They are based on the actions, behaviour and conduct of the individuals or the two sides involved in the agreement. These are contracts which apply to everyday activities and operations of life. Section 9 of The Indian Contract Act clearly states that whenever two individuals or two specific groups enter into such contracts, the commitment is implied without making a verbal or written statement. It is understood and has to be honoured.
The essence of implied contracts is that neither side should be given an unfair deal at the cost of the other. The contract is understood to be active on the grounds of the prevailing circumstances and the behaviour of the individuals on both sides. In the world of law, this type of contract is also referred to as a Quasi-contract.
In simple words, you do not exchange a formal paper with its terms and conditions. You agree to avail of some services on the premise that you pay for them. You can term it as a type of compulsion which is legally binding as you receive the benefit of something in exchange for monetary payment. When a contract is established between the Founder of an enterprise and the government, it is always in the written format.
Implied contracts are not considered valid in any agreements related to government matters. When any contract is created in a court of law, it becomes legally enforceable and absolute, and the individuals involved cannot change the conditions stated therein.
Also Read: Impact Of GST On Works Contracts
Understanding Implied Contracts
Not everyone is familiar with what is an implied contract. Like any other contract that is signed and binding on the people involved, an implied contract is also binding without any documentation. Despite the absence of a written document, the parties involved are bound to its terms and honour the same.
The idea is that no one gets a raw deal but abides by what has been stated and understood by the actions of the two sides. Sometimes implied contracts also function based on actions made in the past by one of the two concerned individuals in the contract.
Let’s take the example of a Nurse who is asked to visit a senior citizen to give physiotherapy once a week for a certain fixed fee. The senior citizen’s son is on a business tour towards the end of the treatment, and the Nurse does not receive payment for the last few weeks. However, based on the implied contract, the Nurse has every right to claim the remaining fees due to her once the son returns.
The same applies to an eatery or restaurant. You walk into, e.g., a McDonald’s and make a payment on the premise that you will be served with the order. You don’t have to give it in writing as it is implied by way of actions.
Implied-In-Fact vs Implied-In-Law Contracts
Let us understand the difference between an Implied-in-Fact and an Implied-in-Law contract.
This type of contract is established between the two sides in a mentally agreeable and understanding manner. Suppose your neighbour, a single parent, comes down with the flu. She requests you to drop her 5-year-old at the bus stop until she is back on her feet. Each day she pays you a small amount for the assistance. Over the weekend, she regains her strength. On Monday, as you step outside your home, you see her with her 5-year-old and tell your neighbour that you will drop the child at the bus stop. She doesn’t pay you for it. She tells you that she thought you did it out of kindness when you asked her. She had requested your aid when she was ill, and there was no mention of payment.
It was an open-ended understanding. She had made an offer which you had accepted. Maybe you assumed she was paying you for your services, but she had done it of her own volition. You can’t press charges if she does not want to pay now, especially since she is fit enough to run her chores by herself.
Implied-in-Law Contracts play an important role in preventing the individuals on one side of the contract from being cheated by the other side.
Suppose you engage a domestic help to dust your home. The domestic help not only dusts but also wipes the other décor. You pay the person only for dusting, whereas domestic help demands more for the additional work done. In the court of law, the judge may ask you to pay the person for the additional tasks performed. You may argue that you had only asked for dusting services. The judge may ask you to pay a nominal amount. In these types of contracts, you can resort to the same means for a fair judgement as one does with a written contract. You can hire the services of a mediator. You can also file a lawsuit.
The contents of this article outline and detail the meaning of implied contracts. Unlike written contracts, these are entirely based on the actions of the two sides involved. There is no written document to affirm anything. Implied contracts are also honoured based on actions executed in the past. Everything is understood and abided by without having to read anything. However, it becomes imperative for some contracts to be written in detail to avoid any and all misunderstandings that could take place. Some situations and activities make written contracts absolutely necessary. Some of these include, e.g., the sale of commercial and individual land and property and even contracts which take more than 12 months to be completed. These could include the lease of some real estate or even a mortgage agreement of a personal or commercial vehicle. Written contracts help to build trust, and both sides become confident. They also help boost healthy relationships as none of the parties involved fails to live up to the contract terms.