By: Diana Adjadj, Esq.

June 20, 2022

What is an Implied Contract?

Implied contract, also known as an implied in law contract, is an enforceable agreement created by conduct and behavior. Party behavior manifests the existence of this implied agreement, and the contract terms are likewise extracted from the conduct of the parties. This definition of an implied contract is outlined in California Civil Code of Procedure § 1621.

CCP § 1621 states: “[a]n implied contract is one, the existence and terms of which are manifested by conduct.”

An implied contract exists when individuals behave in a manner which establishes a contract. The terms of an implied agreement are manifested in the parties’ actions, behavior, and conduct. Implied in law contracts, are actual enforceable agreements between two parties. As clarified in California Civil Code of Procedure § 1619, “[a] contract is either express or implied”; as such there can be an enforceable contract between two parties absent an expressed oral agreement or written document.

Implied in Law Contract versus Quasi Contract

Implied-in-law contracts are not to be confused with quasi contracts.  Quasi contracts that arise from quantum meruit theory, are equitable claims and not a legal cause of action. Quasi contracts, or recovery in quantum meruit, is an equitable claim in which a damaged plaintiff is entitled to recover the reasonable value of thier services rendered, or reasonable value of their contribution when a contract does not exist between the parties. In this instance the court will impose a quasi-contract and will imply the existence of a contract, to prevent unjust enrichment.

As expressed in the precedent case, “[u]nlike the ‘quasi-contractual’ quantum meruit theory which operates without an actual agreement of the parties, an implied-in-fact contract entails an actual contract, but one manifested in conduct rather than expressed in words.” (Maglica v. Maglica (1998) 66 Cal.App.4th 442, 455 [78 Cal.Rptr.2d 101].)

Implied contracts, also known as contracts implied-in-law, are enforceable agreements between two parties. Quasi contracts address situations in which the parties do not have an enforceable agreement between each other. In these instances, the court will imply a contract in fact to prevent unjust enrichment. A court will imply a promise so the recipient of the services or goods will have to pay the value or benefit they received.

Implied Contracts Defined

Implied contracts can best be defined as enforceable agreements based on conduct, circumstances, and mutual consent between the parties. In this instance the behavior affirms mutual consent to be bound to certain obligations and duties.

Implied-in-fact contract: CACI: California Civil Jury Instructions 305 defines Implied-In-Fact Contract as follow:

“In deciding whether a contract was created, you should consider the conduct and relationship of the parties as well as all the circumstances of the case.

Contracts can be created by the conduct of the parties, without spoken or written words. Contracts created by conduct are just as valid as contracts formed with words.

Conduct will create a contract if the conduct of both parties is intentional and each knows, or has reason to know, that the other party will interpret the conduct as an agreement to enter into a contract.”

– California Civil Jury Instructions; CACI No. 305 Implied-in-Fact Contract.

Implied contracts are legally enforceable in court, with the same force and effect as a written agreement. Contracts without writings are enforceable when there is proof of mutual consent to be bound to an agreement which is evidenced by the parties’ actions, conduct and circumstances.

Example of an Implied Contract – A Case Study of an Implied Contract

A prominent real estate developer, with a diversified real estate development, sales and marketing firm, was in the business of forming joint ventures with prominent investors. For these joint ventures the real estate developer would contribute his “know how” and the investor would contribute the necessary funds to develop the proposed project.

In this pending action the Investor had become a multi-millionaire after selling a chain of video stores to Blockbuster in 1987. As a means of investing his funds he sought out business opportunities, including a joint venture with the real estate developer.

Investor Partnership Agreement Formed and Preformed

To pursue their joint venture effectively the investor and real estate developer formed a partnership, Coral Ridge Partnership. A partnership was formed so that neither party would be easily identified, and to efficiently acquire parcels without creating unnecessary suspicion or undesirable price escalation. As agreed, the investor would contribute the necessary funds and capital, while the developer would design, rebuild, and market the homes. Per the parties’ agreement they would split the profits equally. The partnership was profitably, and the parties sold three luxury properties splitting the profits as agreed.

Subsequent Joint Venture created an Implied Contract

Following their success with the partnership the investor and developer went on to form a Joint Venture, Staniel Cay Venture. During this venture the developer constructed homes on some of the lots.  During the performance of the joint venture, the investor sent a letter to the developer advising that the investor will assume full management of some of the remaining lots. Further the investor proposed a construction management contract to complete construction on the remaining lots. Essentially the investor attempted to oust the developer from the joint venture and acquire full control of the land parcels and their development.

The investor attempted to material alter the parties’ rights and obligations under the joint venture agreement, specifically relinquishing the developer’s rights under the Staniel Cay Joint Venture. This repudiation of the implied joint venture agreement was completed by the joint venture lawyer who sent a letter to the developer claiming that there was no joint venture agreement between the parties.

Award for Breach of Implied Contract

In response the developer filed a claim in court against the investor alleging breach of contract, unjust enrichment, breach of implied in fact contract, and breach of fiduciary duty. Following a prolonged jury trial in September of 2011 the jury came back with a mixed verdict, where they found in favor of the developer on the claims for breach of joint venture agreement, unjust enrichment and breach of fiduciary duty. The developer was awarded $ 4,310,789, in the action alleging breach of joint venture agreement and unjust enrichment

BLAKE v. ELLIS, 2012 FL Cir. Ct. Pleadings LEXIS 1981; CASE NO.: 21 09036447; September 08, 2011; Causes of Action: breach of contract, unjust enrichment, breach of implied in fact contract, breach of fiduciary duty, breach of joint venture agreement, legal malpractice; Filing Court: IN THE CIRCUIT COURT OF THE 17th JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA

When is a Contract Implied?

In this pending action the jury found that an implied contract existed when the parties continued to invest and collaborate as a joint venture. The joint venture agreement was not in writing and the terms of the agreement were not orally stated; however, the parties continued to operate, act, behave and invest as they did in their first partnership agreement. Once the first partnership was successfully complete, they continued and purchase additional plots of land as a joint venture. The jury concluded based on their behaviors, conduct and circumstances that there was an enforceable agreement between the parties. The implied contract was manifested through the parties’ conduct and further the terms of that implied contract were the same as the terms in the previous partnership agreement as the parties operated in the same fashion.

Implied-in-fact contracts and Breach of Contract claims are further discussed below:

Implied contracts and Breach of Contract Case Results are further discussed below:

Implied-in-fact contract damages are further discussed below:

Implied Contract or Implied-in-fact Contract Questions?

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