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Implied-in-fact contract

In United States contract law, an implied-in-fact contract is a legally binding agreement formed by the mutual assent of parties, as inferred from their conduct and surrounding circumstances rather than from explicit oral or written words.^[1] These contracts arise when the actions of the parties demonstrate an intent to be bound, satisfying the essential elements of offer, acceptance, consideration, and mutual intent in the same manner as express contracts.^[1] Unlike express contracts, which rely on stated terms, implied-in-fact contracts are evidenced through behavior that objectively indicates agreement, such as a customer entering a barbershop and receiving a haircut without prior discussion of payment.^[2] The formation of an implied-in-fact contract requires that one party's intentional conduct be known or reasonably understood by the other as an offer or acceptance, creating enforceable obligations equivalent to those in written agreements.^[2] Courts recognize no substantive legal difference between express and implied-in-fact contracts; the distinction lies solely in the mode of manifestation, with both treated as true contracts under the law.^[3] For instance, when a person orders and consumes food at a restaurant, the implied agreement obligates payment of a reasonable price based on the established custom of such transactions.^[2] A key distinction exists between implied-in-fact contracts and implied-in-law contracts (also known as quasi-contracts), the latter being judicially imposed remedies to prevent unjust enrichment where no actual mutual assent occurred.^[4] Implied-in-fact contracts, by contrast, depend on genuine, inferred mutual intent and are not merely equitable fictions.^[1] This enforceability allows implied-in-fact contracts to modify or supersede express agreements on related subjects when the conduct clearly demonstrates subsequent intent.^[1] In practice, they commonly arise in everyday commercial interactions, such as using a vending machine, where inserting money and receiving a product implies a binding exchange.^[2]

Overview and Definitions

Definition

An implied-in-fact contract is a legally binding agreement inferred entirely from the circumstances and conduct of the parties involved, creating obligations as if the terms had been explicitly stated, though no oral or written words express the agreement.^[1] This type of contract arises when the parties' actions demonstrate a mutual intent to enter into a contractual relationship, treating the inferred agreement as equivalent in enforceability to an express contract.^[2] The core characteristics of an implied-in-fact contract center on objective manifestations of intent, where the parties' behavior—such as performance or acceptance—implies both offer and acceptance, effectively establishing a meeting of the minds through conduct rather than explicit communication.^[1] Under common law principles, as articulated in the Restatement (Second) of Contracts § 4, implied contracts differ from express ones only in the form of expression, with no variation in legal effect, emphasizing that assent is manifested by actions that a reasonable person would interpret as contractual commitment.^[3] Recognition of implied-in-fact contracts is grounded in common law and codified in statutes like the Uniform Commercial Code (UCC) § 2-204, which provides that a contract for the sale of goods may form in any manner sufficient to show agreement, including conduct by both parties that recognizes the existence of such a contract.^[5] The term "implied-in-fact" originated in common law jurisprudence to distinguish these true contracts, inferred from factual circumstances and acts of the parties, from implied-in-law contracts, which are fictitious obligations imposed by courts to prevent unjust enrichment rather than based on actual assent.^[6]

Historical Development

The concept of implied-in-fact contracts traces its origins to English common law in the late 18th and 19th centuries, evolving from doctrines of quasi-contracts and implied terms derived from the parties' conduct and custom.^[7] In the United States, the doctrine gained formal structure in 20th-century jurisprudence through the American Law Institute's Restatements of Contracts. The Restatement (First) of Contracts (1932), in Section 5, explicitly recognized that promises—and thus contracts—could be formed through conduct or other manifestations of assent, treating implied-in-fact agreements as equivalent in legal effect to express ones, differing only in evidentiary mode. This formalization reflected growing commercial needs for flexibility in inferring mutual intent from actions. The Restatement (Second) of Contracts (1981), Section 4, refined this by emphasizing that the express-implied distinction pertains solely to proof of assent, without altering enforceability, and integrated it into broader principles of bargain formation.^[7]^[3] The Uniform Commercial Code's promulgation in 1952 marked a significant evolution, standardizing implied-in-fact agreements in commercial sales by permitting contracts to arise from conduct recognizing their existence, as codified in UCC § 2-204. This provision facilitated enforcement of agreements in dynamic business settings where explicit terms might be absent, promoting uniformity across states and influencing broader contract law. Judicial decisions in the early 20th century further developed the doctrine by inferring contracts from partial performance and surrounding facts, solidifying its role in remedying incomplete but indicative dealings.^[8] As of 2025, implied-in-fact contracts retain vital relevance in digital contexts, with courts adapting the doctrine to infer assent from user interactions with online platforms and apps. For instance, in Regard v. University of Kentucky (Ky. 2023), the Kentucky Supreme Court affirmed that contracts implied in fact differ from express only in mode of proof, applying this to modern contexts including digital interactions. This ruling exemplifies ongoing judicial extension to virtual services, ensuring the doctrine addresses modern technological realities without requiring overt verbal or written consent.^[9]

Key Elements and Formation

Mutual Assent Through Conduct

In implied-in-fact contracts, mutual assent is established through the parties' conduct rather than explicit words, with courts applying the objective theory of contracts to determine whether a reasonable person would infer agreement from the observable actions.^[10] Under this theory, assent is not based on the parties' subjective intentions but on their outward manifestations, such as beginning performance or accepting benefits without objection, ensuring that the focus remains on what a reasonable observer would conclude.^[2] For instance, if one party performs services knowing the other expects payment and the recipient accepts those services without protest, this conduct objectively signals mutual agreement to the terms implied by the circumstances.^[11] Key indicators of assent include partial performance, which serves as strong evidence of intent to be bound, as well as silence or inaction in situations where the circumstances reasonably suggest acceptance.^[11] Partial performance might involve one party commencing work on a project after discussions, thereby recognizing the existence of a contractual relationship through actions alone.^[2] Silence can imply assent if the offeree receives and retains benefits with a reasonable opportunity to reject them, or if prior dealings between the parties establish that inaction constitutes agreement, though silence alone rarely suffices without such context.^[11] Continued use of services after becoming aware of applicable terms, without objection, further exemplifies how conduct can manifest assent, as seen in scenarios where a customer repeatedly patronizes a business and accepts implied payment obligations.^[2] The burden of proof rests on the plaintiff to demonstrate, by a preponderance of the evidence, that a reasonable person would infer mutual agreement from the facts and conduct presented.^[11] This civil standard requires clear evidence of the parties' actions, such as documented performance or acceptance, to overcome any ambiguity and establish the contract's existence.^[10] Courts evaluate whether the conduct is sufficiently definite to form an enforceable agreement, dismissing claims where the manifestations are too vague or open-ended to imply specific terms.^[11] Thus, mutual assent through conduct plays a pivotal role in contract formation by bridging the gap between informal interactions and legal obligations, provided the objective evidence supports a reasonably certain understanding of the parties' commitments.^[2]

Consideration and Other Requirements

In an implied-in-fact contract, consideration is the bargained-for exchange of value between the parties, inferred from their conduct rather than explicit promises, such as one party providing services in response to the other's request or knowingly accepting a benefit.^[1] This element ensures that the agreement is supported by something of legal value, mirroring the requirements for express contracts. For instance, if a customer enters a repair shop and allows work to begin on their vehicle without objection, the customer's conduct implies acceptance of the obligation to pay a reasonable fee, constituting consideration through the exchange of repair services for payment.^[2] The sufficiency of consideration in implied-in-fact contracts must be legally sufficient, involving a detriment to the promisee or a benefit to the promisor, but it need not be adequate in economic value—a principle known as the "peppercorn" rule, where even nominal consideration suffices if bargained for. Courts infer sufficiency from the parties' actions, such as a recipient paying for unsolicited goods after using them, which demonstrates recognition of the exchange's value. This test focuses on the presence of a mutual exchange rather than its fairness, as long as it is not illusory or preexisting. Beyond consideration, implied-in-fact contracts require the parties to have legal capacity, meaning they must be competent adults capable of understanding the agreement's implications, without which the contract is voidable. The purpose of the contract must also be legal, prohibiting agreements for illegal activities, and it must be free from duress, ensuring voluntary assent without coercion that vitiates consent. Additionally, the statute of frauds may apply if the implied contract cannot be performed within one year or involves certain categories like real estate transfers, requiring written evidence for enforceability. Oral implied-in-fact contracts are generally enforceable absent statute of frauds applicability, but partial performance—such as beginning services under the implied terms—can excuse the writing requirement and render the contract binding despite the statute.^[12] This exception promotes equity by recognizing substantial reliance on the agreement through conduct.^[12]

Versus Express Contracts

Express contracts and implied-in-fact contracts differ primarily in their mode of formation, with express contracts requiring explicit manifestation of mutual assent through oral or written words, while implied-in-fact contracts arise from the parties' conduct that demonstrates agreement without any verbal or written expression.^[2] Both types necessitate the core elements of a valid contract, including mutual assent, consideration, and capacity, but in implied-in-fact contracts, these elements are inferred from actions and surrounding circumstances rather than stated terms.^[1] For instance, delivering goods and accepting payment without objection can imply a contract in a commercial setting, contrasting with an express agreement where parties negotiate and document specific conditions. Evidentiary challenges are more pronounced for implied-in-fact contracts, as proving their existence relies on circumstantial evidence such as the parties' behavior and contextual factors, rather than direct documentation or testimony of explicit agreement found in express contracts. This reliance on inference increases the risk of disputes and litigation, as courts must evaluate whether conduct objectively shows intent to be bound, potentially leading to inconsistent outcomes based on the quality of surrounding evidence.^[13] In contrast, express contracts benefit from clearer proof through recordings, emails, or signed documents, reducing ambiguity in establishing the agreement's validity. The interpretation of terms also varies: in express contracts, the parties' stated language directly governs, providing precise control over obligations, whereas implied-in-fact contracts require courts to fill gaps using the parties' conduct, trade customs, or reasonable expectations. Under the Uniform Commercial Code (UCC) Section 2-207, applicable to goods sales, even when an acceptance introduces additional or different terms without explicit words, a contract may form based on conduct, with terms supplemented by gap-filling provisions like usage of trade if not materially altering the deal.^[14] This approach ensures enforceability but introduces flexibility that express contracts avoid through their explicit drafting. Courts generally prefer express contracts when they exist, as their clear documentation precludes implying an agreement on the same subject matter to avoid undermining the parties' manifested intent.^[15] This judicial stance promotes certainty and reduces reliance on subjective interpretations, resorting to implied-in-fact analysis only when no express terms cover the transaction but conduct clearly indicates mutual commitment.^[16]

Versus Implied-in-Law Contracts

Implied-in-fact contracts arise from the actual mutual assent of the parties, inferred from their conduct rather than explicit words, creating a genuine agreement enforceable under contract law.^[1] In contrast, implied-in-law contracts, also known as quasi-contracts, are not true contracts but obligations imposed by courts to prevent unjust enrichment, even in the absence of any intent to form an agreement.^[4] This fundamental difference underscores that implied-in-fact contracts reflect the parties' voluntary intentions, while implied-in-law contracts serve equitable purposes without requiring mutual consent. The purpose of an implied-in-fact contract is to enforce the obligations that the parties implicitly promised through their actions, typically awarding expectation damages to place the non-breaching party in the position they would have occupied had the agreement been performed. Conversely, implied-in-law contracts aim to provide restitution for benefits conferred under circumstances where fairness demands compensation, often through quantum meruit, which measures recovery by the reasonable value of services or goods provided rather than any promised performance.^[17] For instance, if one party mistakenly improves another's property without authorization, a court may impose an implied-in-law obligation to reimburse the value of the enhancement to avoid unjust enrichment.^[4] Legal tests for implied-in-fact contracts focus on evidence of factual agreement, including offer, acceptance, consideration, and mutual intent demonstrated by behavior, mirroring the requirements for express contracts.^[1] Implied-in-law contracts, however, apply only when no contract exists but equity requires liability, as articulated in the Restatement (Third) of Restitution and Unjust Enrichment § 1, which states that a person unjustly enriched at another's expense must make restitution.^[18] Courts avoid overlap by examining the evidence of the parties' intent: if conduct shows a true meeting of the minds, an implied-in-fact contract governs; otherwise, an implied-in-law remedy may be imposed.^[2] Misclassification can significantly affect outcomes, as implied-in-fact breaches yield expectation damages, while implied-in-law claims limit recovery to restitutionary measures.

Examples and Applications

Commercial Contexts

In commercial transactions involving the sale of goods, implied-in-fact contracts frequently arise under Article 2 of the Uniform Commercial Code (UCC), which governs such sales in the United States. Specifically, UCC § 2-204(1) provides that a contract for the sale of goods may be formed in any manner sufficient to show agreement, including conduct by both parties that recognizes the existence of a contract. This flexibility accommodates business practices where formal writings are absent, allowing mutual assent to be inferred from actions such as a buyer's acceptance of delivered goods. For instance, if a supplier ships items listed in a price quotation to a buyer, and the buyer receives, uses, and pays for the goods without rejection or negotiation, an implied-in-fact contract is formed on the terms of the quotation, binding the parties to those prices and quantities.^[5] In employment scenarios within commercial settings, implied-in-fact contracts often govern the terms of at-will employment when no formal agreement exists, drawing on industry standards and the parties' conduct to define expectations. Courts recognize that ongoing performance of work by an employee, coupled with the employer's provision of compensation and benefits consistent with sector norms, implies a contract incorporating those standards, such as standard wage rates or working conditions prevalent in the industry. This exception to the default at-will doctrine prevents arbitrary termination by establishing enforceable terms based on the implied mutual understanding, as seen in jurisdictions where employee handbooks or verbal assurances reinforce conduct-based implications. For example, an employee continuing to perform duties in a manufacturing firm without a written contract may claim implied terms like overtime pay aligned with industry practices if the employer has historically adhered to them.^[19] Partnerships in commercial operations can also form through implied-in-fact agreements when parties engage in shared business activities without a written document, leading to inferred profit-sharing arrangements based on their contributions. Under the Revised Uniform Partnership Act (RUPA), adopted in most states, a partnership exists if two or more persons carry on as co-owners a business for profit, with intent inferred from conduct such as joint management, shared resources, and division of revenues. Absent explicit terms, profits and losses are shared equally, but courts may imply allocations proportional to contributions like capital investment or labor, as evidenced by the parties' ongoing collaboration in operations. A classic illustration involves two entrepreneurs jointly operating a retail venture, pooling funds and efforts to generate sales, which implies a partnership entitling each to a share of profits commensurate with their inputs. In digital commerce as of 2025, implied-in-fact contracts are commonly inferred in subscription-based services where users maintain continued access and payment after renewal periods, signaling acceptance of ongoing terms. This application aligns with evolving case law on online agreements, where a user's failure to cancel despite notice of auto-renewal constitutes conduct manifesting assent to the renewed contract, including pricing and service obligations. For example, courts have examined subscriber behaviors in digital rental and streaming services, reinforcing that persistent use implies agreement to standard terms. Although the FTC proposed a Negative Option Rule in 2024 to require clear disclosures for auto-renewals, it was vacated by the U.S. Court of Appeals for the Eighth Circuit in July 2025 due to procedural issues; state consumer protection laws continue to support implied assent through continued engagement post-disclosure in e-commerce platforms.^[20]

Personal and Service Contexts

In personal and service contexts, implied-in-fact contracts often arise from everyday interactions where the parties' conduct demonstrates mutual assent to an exchange without explicit verbal or written agreement. For instance, when an individual hails a taxi and accepts a ride to a destination without negotiating the fare in advance, the passenger's actions imply agreement to pay the standard metered rate upon arrival, while the driver's provision of the service indicates expectation of compensation.^[1] This mutual understanding forms a binding contract based on the circumstances, ensuring the passenger cannot refuse payment after benefiting from the ride.^[21] Similar principles apply in informal family or social arrangements, such as babysitting for neighbors. If a teenager regularly babysits a neighbor's child and receives payment based on prior instances—such as $15 per hour for evening care—the continued acceptance of the service by the parents and performance by the sitter establish an implied-in-fact contract for compensation, unless evidence shows the arrangement was intended to be gratuitous, like a favor among friends.^[22] Courts infer the terms from the pattern of conduct, focusing on the reasonable value of the services provided to prevent unjust enrichment.^[1] In rental scenarios, occupying an apartment and consistently paying rent on a monthly basis can imply a tenancy agreement incorporating standard local customs, even without a formal lease document. For example, a tenant moving into a unit and tendering rent implies acceptance of implied terms like quiet enjoyment and maintenance obligations derived from community norms, with the landlord's acceptance of payment signifying mutual assent to the ongoing arrangement.^[1] This conduct-based formation is common in short-term or informal residencies, where the parties' actions demonstrate an expectation of continued occupancy in exchange for rent.^[21] Healthcare provides another clear illustration, particularly in emergencies where a conscious patient receives treatment without prior discussion of fees. Accepting emergency medical care, such as stabilization in a hospital after an accident, implies an agreement to pay reasonable charges for the services rendered, absent evidence of contrary intent. In cases involving incapacity, such as unconscious patients or minors, courts typically allow recovery under quasi-contracts (implied-in-law) based on necessity and to prevent unjust enrichment, rather than implied-in-fact contracts requiring mutual assent. For example, under the doctrine of necessaries, liability for a minor's medical services may be imposed upon reaching adulthood, as in disputes over hospital bills for urgent interventions.^[1]

Legal Implications and Remedies

Enforcement and Proof

To enforce an implied-in-fact contract, courts require proof of the contract's existence through the parties' conduct demonstrating mutual assent, as these agreements lack explicit terms but are inferred from actions that a reasonable person would interpret as agreement.^[2] Proving existence typically relies on extrinsic evidence, including oral statements or other indications of the parties' intentions, witness testimony regarding observed behaviors, and documentation such as emails, receipts, or records of performance that illustrate the implied terms.^[2] In commercial contexts, courts often apply the "course of dealing" concept under Uniform Commercial Code (UCC) § 1-303, which defines it as a sequence of conduct in previous transactions between the parties that establishes a common basis for understanding their expressions and actions, thereby supporting the inference of implied obligations.^[23] Breach of an implied-in-fact contract is determined by one party's failure to perform the duties reasonably inferred from the surrounding circumstances and the parties' conduct, such as neglecting to deliver expected services or goods in line with the implied agreement.^[24] Upon finding a breach, remedies generally include expectation damages to place the non-breaching party in the position they would have been in had the contract been performed, or reliance damages to compensate for expenditures made in reasonable reliance on the implied promise.^[25] A landmark case illustrating enforcement is Wood v. Lucy, Lady Duff-Gordon (1917), where the New York Court of Appeals implied a promise of "best efforts" by the plaintiff's agent to market the defendant's fashion endorsements, despite the absence of an explicit commitment, because the exclusive agency agreement and profit-sharing structure made such a duty essential to avoid rendering the contract illusory.^[26] Enforcement of implied-in-fact contracts is generally uniform across U.S. common law states, rooted in the Restatement (Second) of Contracts and state precedents that recognize them as binding based on inferred mutual assent from conduct, though specialized areas like federal government procurement may imply additional duties as of 2025.^[2] In civil law jurisdictions like France, similar concepts are recognized as "tacit contracts," where agreements arise from silent consent inferred from actions under the general definition of a contract as a concordance of wills in Civil Code Article 1101, allowing courts to enforce implied obligations without formal expression.^[27]

Common Challenges and Defenses

One of the primary challenges in enforcing implied-in-fact contracts stems from the lack of formal documentation, which often results in factual disputes over the parties' conduct and intentions. Without written records, courts must rely on circumstantial evidence such as emails, witness testimony, or patterns of behavior to infer mutual assent, leading to protracted litigation and increased costs for proving the contract's existence.^[28] In cases involving ambiguity in the parties' conduct, courts frequently deny motions for summary judgment, as these ambiguities raise genuine issues of material fact that require resolution by a trier of fact rather than dismissal at the pleading stage.^[29] Defendants commonly invoke the statute of frauds as a defense to bar enforcement of implied-in-fact contracts that fall within its scope, such as agreements not performable within one year or those involving interests in land. Under statutes like New York's General Obligations Law § 5-701, an implied-in-fact contract for services exceeding one year may be unenforceable if no writing memorializes the essential terms, even if conduct suggests renewal, unless the implied term is limited to one year or less.^[12] Similarly, unconscionability serves as a potent defense when the terms implied from the parties' conduct are so grossly unfair as to shock the conscience, particularly in scenarios involving procedural unconscionability like unequal bargaining power combined with substantive unfairness in the implied obligations.^[30] Courts assess both procedural and substantive elements, refusing enforcement if the implied agreement effectively deprives one party of meaningful choice.^[31] Beyond these defenses, vagueness in the implied terms poses another significant challenge, as courts must engage in gap-filling to determine the parties' presumed intentions, often applying tests like business efficacy or the officious bystander to imply reasonable terms. This judicial intervention can lead to unpredictable outcomes, as gaps arising from unaddressed issues or mistaken assumptions require courts to balance fidelity to the parties' conduct against broader commercial reasonableness, sometimes resulting in terms that neither party explicitly contemplated.^[32] During the COVID-19 era (2020-2023), disrupted conduct in ongoing relationships complicated implied-in-fact contract enforcement, with some rulings interpreting pandemic-related interruptions as affecting the continuity of implied obligations, though courts rarely implied force majeure absent express provisions, instead relying on doctrines like impossibility to excuse non-performance in affected implied agreements.^[33] Parties may mitigate these challenges by documenting relevant conduct through contemporaneous notes, emails, or internal records that capture the context of interactions, thereby providing evidentiary support to clarify intentions and reduce the risk of disputes escalating to litigation.^[34] Such measures can facilitate enforcement procedures by establishing a clearer factual basis for the implied terms.^[35]

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