By: Diana Adjadj, Esq.
March 17, 2022
Implied-in-Fact contract is an agreement between two parties, contract formation is based on conduct as opposed to expressed terms. Often times implied contracts are inappropriately described as a “contract no agreement”, however implied contracts are agreements between two parties that are legally enforceable. The only difference with an implied contract and an expressed agreement is that the terms of the agreement are established by party behavior as opposed to oral words or written terms.
Contract formation and establishing the terms of an implied contract, is a prerequisite for filing a breach of contract claim. The first step in contract formation is establishing that the parties to the implied contract had contractual intent to enter an agreement. Formation of an implied contract requires: (1) each party to the contract has a clear understanding as to their obligations and/or performance under the parties agreement; (2) the parties, and each of them, agree to provide a something of value to the other party or otherwise refrain from doing something; and (3) the parties mutual agree to these terms. Contract formation and the essential elements required to establish the enforceable agreement are outlined in CACI: California Civil Jury Instructions 302:
“[Name of plaintiff] claims that the parties entered into a contract. To prove that a contract was created, [name of plaintiff] must prove all of the following:
[When you examine whether the parties agreed to the terms of the contract, ask yourself if, under the circumstances, a reasonable person would conclude, from the words and conduct of each party, that there was an agreement. You may not consider the parties’ hidden intentions.]
If [name of plaintiff] did not prove all of the above, then a contract was not created.” – California Civil Jury Instructions; CACI No. 302 Contract Formation.
Oral contracts, unlike implied contracts, are expressed contracts, because verbal words are utilized to establish the terms of the agreement between the parties. An oral agreement also known as an oral contract is equally as valid as a written agreement and enforceable in court. In both instances, a written agreement or an oral contract, the terms of the contract are definite, defined, agreed to and some something of value has been exchanged between the parties.
Implied contracts are enforceable agreements where the promises have not been expressed in words. In an implied contract promises are based on party actions, conduct and circumstances where there is mutual consent between the parties to be bound to certain obligations. In this instance there is a legally enforceable agreement among the parties to the implied-in-fact contract. The formation of implied contracts and the essential elements required to establish these enforceable agreements are outlined in CACI: California Civil Jury Instructions 305:
“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 a proof of mutual consent to be bound between the parties to such terms of the agreement which is evidenced by the parties’ actions, conduct and circumstances.
Implied contracts, unlike oral contracts, are formed by the conduct of the parties. In other words, in an implied-in-fact contract, the parties have not discussed nor agreed to the terms of the contract directly; however, the behavior of the parties have created an unspoken agreement, that is enforceable. Party behavior in implied contracts, confirm contractual intent to be bound and an agreement is implied by such behavior. An implied contract is enforceable even in the absence of a writing or oral agreement. Implied-in-fact contracts are generally no less legally binding than expressed oral agreement.
For an implied contract, California Code of Civil Procedure section 339(1) states, that the statute of limitations, or otherwise the time to file a lawsuit for breach of an implied-in-fact contract is two years.
SOL for Breach of Implied Contract: California Code of Civil Procedure section 339(1) “The Time of Commencing Actions Other Than for the Recovery of Real Property 339. Within two years: 1. An action upon a contract, obligation or liability not founded upon an instrument of writing …”
|Cause of Action||Statute of Limitations [SOL]|
|Breach of Written Contract||A written contract is an expressed agreement between two or more parties in which duties, obligations, benefits and other key and material terms to the contract, has been outlined in writing and most often executed by the parties.||4|
four-year statute of limitation for breach of a written contract
|Breach of Oral Contract||In an oral contract two or more parties have discussed and agreed to what is expected of all parties, the rights of each party, and other material terms to the transaction.||2|
two-year statute of limitation for breach of an oral contract
|Breach of Implied-In-Fact Contract||Implied contracts are formed by the conduct of the parties. The behavior of the parties has created an unspoken agreement, that is enforceable.||2|
two-year statute of limitation for breach of an Implied-In-Fact contract
Implied Contract or Implied-in-fact Contract Questions?
Implied-in-fact contracts without writings or signed written agreements are enforceable. If you believe you have a breach of contract claim however have not pursued any actions because there is no written agreement, you may have an enforceable implied contract. Discuss your implied contract case and potential breach of implied-in-fact contract claim with an attorney to understand your options.