Implied Contract

What Is an Implied Contract?

An implied contract is an agreement that the law recognizes even though no one explicitly said "I agree" or signed a document setting out the terms. Instead, a court looks at how the parties acted, what they communicated in other ways, and the context of their dealings, and concludes that they intended to be bound. It sits alongside the express contract, where the terms are spelled out in words. Both can be enforced when their required elements are present.

How Implied Contracts Work

Lawyers commonly distinguish two types. An implied-in-fact contract is based on the actual conduct of the parties. A diner who sits down, orders a meal, and eats it has implicitly agreed to pay, even though no written contract exists. Courts still generally look for consideration, meaning something of value exchanged, and a shared intent to be bound.

An implied-in-law contract, often called a quasi-contract, is different. It is not based on any real agreement. Courts create it to prevent unjust enrichment, such as when one party receives a benefit that would be unfair to keep without payment.

Implied terms can also be read into written contracts. Many jurisdictions apply an implied covenant of good faith and fair dealing, meaning neither party may deliberately undermine the other's reasonable expectations, even if the document does not say so.

Where Implied Contracts Matter for Investors

Implied contracts can affect investors indirectly, especially through employment. An employer's policies, handbooks, or long-standing practices may sometimes be argued to create implied promises, such as about job security or the terms of a bonus or equity compensation award, even without a formal agreement. Whether such arguments succeed depends heavily on the jurisdiction and the facts. In many places, employment is presumed to be at-will employment unless a contract says otherwise.

Implied arrangements can also arise in informal business partnerships, where profit sharing or decision-making roles are understood through conduct rather than documented. Because the terms are not written down, disputes often turn on evidence of what the parties actually did and said, which can make implied contracts harder to prove than express ones.