Most business owners would agree that unwritten agreements can create confusing legal situations.
But there are clear differences between implied contracts and quasi-contracts that can help clarify the legal implications of verbal agreements.
In this article, we'll differentiate these two types of unwritten contracts, examine real-world examples, and summarize key considerations around enforcing informal business arrangements.
Introduction to Quasi-Contracts and Implied Contracts
Quasi-contracts and implied contracts are two types of unwritten agreements in law that establish obligations between parties. While they share some similarities, there are key differences:
Quasi-Contracts
A quasi-contract is an unwritten agreement imposed by law to prevent unfairness or unjust enrichment. For example, if a doctor provides medical care to an unconscious patient, there is no written contract. But the law may impose a quasi-contract requiring the patient to pay the fair value for services rendered.
Quasi-contracts do not require mutual assent or consideration. They are obligations created by law to achieve justice between parties. Common examples include unjust enrichment and quantum meruit claims.
Implied Contracts
An implied contract is an unwritten agreement established by the conduct, actions, or relationship between parties. For instance, when a customer orders food in a restaurant, there is an implied contract to pay for the meal even without a written document.
Unlike quasi-contracts, implied contracts have offer, acceptance, mutual assent, and consideration. The terms are inferred from the parties' conduct and customs. Implied contracts include implied-in-fact contracts and implied-in-law contracts.
So in summary, quasi-contracts are unwritten obligations imposed by law, while implied contracts are unwritten agreements established by the parties' conduct and relationship. Both serve to formalize unwritten understandings between parties.
What is the difference between implied in law and quasi-contract?
A quasi-contract, also known as a contract implied in law, is a legal obligation created by a judge between parties who do not have a contract. The key differences between an implied in law contract and other types of contracts are:
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No actual agreement exists - Unlike an express contract or a contract implied in fact, there is no offer and acceptance between the parties in a quasi-contract. The obligation is imposed by law, regardless of the intent of the parties.
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Prevents unjust enrichment - Quasi-contracts aim to prevent one party from unfairly benefiting from the goods or services of another party without proper compensation. The plaintiff receives compensation to prevent unjust enrichment of the defendant.
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Based on equitable principles - Quasi-contracts rely on principles of equity and fairness rather than formal contractual agreements between parties. Judges construct remedies aimed at serving justice.
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Plaintiff only entitled to reasonable value - In a quasi-contract claim, the plaintiff is only entitled to the reasonable value of the goods or services they provided, not expectation damages that could be higher.
So in summary, an implied in law contract differs fundamentally from actual contracts because it is an equitable remedy imposed by judges - not a consensual agreement between parties. Its purpose is to prevent unjust enrichment that would result from one party benefiting from another's goods or services without payment.
What is an unwritten contract called?
An unwritten contract is often referred to as an "implied contract" or a "quasi-contract".
An implied contract exists when there is no explicitly written or verbal agreement, but the conduct of the parties implies that a contract exists between them. For example, when you go to a restaurant and order food, there is an implied contract that you will pay for the meal even though no formal agreement was made.
A quasi-contract, also known as a constructive contract, is created by the courts in order to avoid unjust enrichment. For example, if someone mows your lawn without asking, you still have to pay them a reasonable price for their work so that you are not unjustly enriched. Quasi-contracts are treated legally as valid and binding contracts even though the parties never formally agreed to anything.
The key difference between an implied contract and a quasi-contract is that an implied contract depends on the parties' conduct suggesting mutual assent, while a quasi-contract is imposed regardless of any implied agreement in order to serve justice. But in both cases, there is no written document with explicitly defined terms.
Some other key things to know about unwritten agreements in law:
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They can be legally enforced like normal contracts if the required elements are met such as offer, acceptance, consideration etc.
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The statute of frauds requires certain types of contracts to be in writing to be enforceable like contracts involving interests in land, agreements that cannot be performed within one year etc.
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Parol evidence rule may limit the ability to introduce external evidence to supplement or explain the terms of an unwritten agreement.
So in summary, the two main types of legally binding unwritten contracts are implied contracts and quasi-contracts. They differ in origin but have similar legal effects.
What are the two different kinds of implied contracts?
There are two main types of implied contracts in business law:
Implied-in-Fact Contracts
An implied-in-fact contract is created based on the conduct of the parties involved, even though there is no written or verbal agreement. For example, when a patient receives medical care from a doctor, there is an implied-in-fact contract that the patient will pay the reasonable value of the services.
Some key traits of implied-in-fact contracts:
- Not expressly stated, but actions imply an agreement
- Valid and enforceable like express contracts
- Based on mutual agreement and intent
Implied-in-Law Contracts
An implied-in-law contract (also called quasi-contract) is created by law to avoid unfairness. For example, if someone mows your lawn without asking, you still have to pay them a reasonable fee for their work.
Some key traits of implied-in-law contracts:
- Not based on mutual agreement, but rather a legal obligation
- Used to prevent unjust enrichment when one party benefits at the other's expense
- Awards reasonable compensation for the work or services rendered
So in summary, implied-in-fact contracts have an unwritten mutual agreement, while implied-in-law contracts have no agreement but are enforced to serve justice. Both types help fill gaps when no formal contract exists between parties.
What is the difference between a quasi-contract and a traditional contract?
A quasi-contract, also known as an implied-in-law contract, is a legal obligation that arises even without an explicit agreement between parties. It aims to prevent unjust enrichment when one party benefits at the expense of another without proper compensation.
On the other hand, a traditional or express contract is an agreement with clearly defined terms that is willingly entered into by both parties. It outlines the explicit obligations each party has agreed to.
Some key differences:
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Formation: Quasi-contracts do not require mutual assent or formal offer and acceptance between parties. Traditional contracts require a voluntary "meeting of the minds" and agreement on terms.
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Enforceability: Quasi-contracts are enforced to avoid unjust enrichment, not because parties agreed. Traditional contracts are enforced because parties consented to the obligations.
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Remedies: The remedy for a quasi-contract dispute is usually restitution or reimbursement. For breached contracts, it may be monetary damages.
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Statute of Frauds: Quasi-contracts may be oral or unwritten. Many traditional contracts must be in writing under the Statute of Frauds.
So in summary, quasi-contracts are unwritten obligations imposed by law, while traditional contracts are written agreements made by choice between parties. Both establish legally enforceable duties.
Understanding the Legal Framework of Unwritten Agreements
Unwritten agreements play an important role in business law. While written contracts are preferred for legal clarity, situations arise where parties enter into implied contracts without expressly documenting terms. Understanding the nuances helps transaction participants.
The Role of Unwritten Agreements in Business Contracts
Unwritten agreements bind parties in business arrangements lacking formal documentation. Two types seen are:
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Implied contracts - Agreements with unstated terms established through parties' conduct, circumstances of transaction, industry norms, prior dealings, etc.
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Quasi-contracts - Equitable agreements created by courts to prevent unfairness when parties did not mutually consent. Also called contracts "implied-in-law".
Though risky without written terms, unwritten agreements have legal validity in commerce. Familiarity helps parties evaluate dealings.
Establishing the Terms of Implied Contracts
Implied contract terms originate from:
- Verbal discussions, emails, texts showing intent
- Conduct demonstrating agreement
- Trade customs in the business
- Past dealings indicating standard terms
- Actions proceeding as if contract exists
Establishing specifics often requires evidence like emails, records of performance, and testimony. Ambiguous details can prompt disputes.
Legal Effect of Quasi-Contractual Agreements
Quasi-contracts have binding legal effect, despite lacking formal assent. Courts construct them to prevent unjust enrichment and unfairness.
Scenario examples:
- Services provided without finalizing engagement terms
- Benefits conferred under defective agreements
- Payments made by mistake
Normal contract remedies apply. The plaintiff receives the value of benefit conferred when quantifiable.
When Contracts Must Be in Writing Under the UCC
Under the Uniform Commercial Code (UCC), certain contracts mandating written terms include:
- Sale of goods over $500
- Sale of specially manufactured goods
- Agreements not performable within one year
Written documentation helps parties expressly define responsibilities, recourse for breach, and other facets. Statute of frauds may also necessitate formal contracts in state law.
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Key Elements of a Legally Binding Contract
Offer and Acceptance
For a contract to be legally binding, there must be an offer made by one party and an acceptance of that offer by the other party. The offer demonstrates a willingness to enter into a contract under specified terms, while the acceptance signals agreement to those terms. There must be a meeting of the minds between the parties on the essential elements of the contract.
For example, if Company A offers to buy 1,000 units of a product from Company B at $5 per unit, and Company B communicates their agreement to sell 1,000 units at that price, there is an offer and acceptance establishing the basic framework for a contract.
Consideration
Consideration refers to something of legal value exchanged between parties entering a contract. This can be money, physical goods, services, or even promises to perform or not perform certain actions. There must be consideration present for a contract to be legally enforceable.
For instance, Company A's promise to pay $5,000 for 1,000 units of product from Company B constitutes consideration, as does Company B's promise to deliver those 1,000 units. These mutual exchanges of value form the consideration that makes their contract binding.
Competent Parties
The parties entering into a contract must have the legal capacity and competence to understand the agreement they are entering. Those deemed unable to comprehend the contract's meaning and implications due to age, medical condition, or other issues rendering them legally incompetent may invalidate the contract.
As an example, contracts entered into with minors are often considered void or voidable. Therefore, it is essential that parties have the legal ability to appreciate the contract terms and consent to them for it to be enforceable.
Required Elements as Defined by Business Law
In summary, business law outlines several vital elements to create an enforceable, legally binding contract:
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Offer - One party signaling willingness to enter into a contract under defined terms
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Acceptance - The other party agreeing to the proposed offer and terms
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Consideration - Something of legal value exchanged between parties
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Competent Parties - Legal age and competence to consent to the contract
When these essential ingredients come together through mutual agreement, an enforceable legal contract is created. Understanding these fundamental building blocks of contracts is important for parties wishing to transact business and have legal recourse should either side fail to uphold their contractual obligations.
Differentiating Types of Contracts in Business Law
Express and Implied Contracts
Express contracts are written agreements with clearly defined terms that are voluntarily entered into by both parties. These contracts explicitly state the obligations and rights of the involved parties.
In contrast, implied contracts are not expressly written but inferred from the conduct, actions, or relationship between the parties. For example, when a patient receives medical care, there is an implied contract between the patient and the healthcare provider, even without a written agreement.
Implied-in-Fact Contracts
Implied-in-fact contracts are a type of implied contract where a court infers the existence of a contract from the reasonable expectations of the parties and their conduct. For instance, when a homeowner hires a gardening service to maintain their lawn every week, there is an implied-in-fact contract for that service, even without a written agreement.
The key distinction is that there is still evidence of mutual agreement and intent between the parties, even if the terms were not expressly stated. This sets implied-in-fact contracts apart from quasi-contracts.
Implied-in-Law Contracts (Quasi-Contracts)
Quasi-contracts, also known as implied-in-law contracts, are obligations created by courts, not by mutual agreement between parties. The goal is to prevent unjust enrichment when one party benefits at the other's expense without proper compensation.
For example, if a doctor provides emergency medical treatment to an unconscious patient, there is a quasi-contract created by law requiring the patient to pay a reasonable fee for those services. This prevents the patient from unfairly benefiting without payment.
Types of Quasi-Contracts
Some common types of quasi-contracts include:
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Unjust enrichment - When one party passively receives a benefit that would be unjust for them to retain without payment.
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Quantum meruit - Reimbursement for the reasonable value of services rendered when there was no actual contract set.
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Implied warranty - An unwritten promise regarding the condition or quality of goods sold, created by statute or common law.
Ultimately, quasi-contracts aim to reach equitable resolutions when there are gaps or disputes resulting from parties' unwritten agreements and transactions.
Key Characteristics of Quasi-Contracts in Business Law
Lack of Actual Agreement
Quasi-contracts, unlike regular contracts, lack an actual agreement between the parties. They are obligations imposed by law, not by mutual consent. For example, if a doctor provides emergency medical care to an unconscious patient, there is no chance to establish consent. However, the law may impose a quasi-contractual duty on the patient to pay a reasonable fee for the services.
Preventing Unjust Enrichment
The purpose of quasi-contracts is to prevent unjust enrichment, not execute the intent of the parties. If one party receives a benefit at the expense of another without payment, it leads to unfair gain. Quasi-contracts aim to remedy this by requiring restitution to the providing party.
Equitable Remedies for Quasi-Contracts
The remedies provided for quasi-contracts are equitable in nature rather than legal. This means courts have discretion to tailor relief based on fairness, such as ordering restitution of the amount by which one party was unjustly enriched. Money damages are also commonly awarded.
Unilateral Contracts and Quasi-Contracts
There can be overlap between unilateral contracts and quasi-contracts. In a unilateral contract, only one party makes a promise while the other accepts by performance. If that performance occurs without knowledge of the offer, a quasi-contract may be imposed to prevent unjust enrichment of the offering party.
Real-World Examples of Unwritten Agreements
Example of Implied Contract in Healthcare
When a patient receives emergency medical care, there is often no written contract between the patient and the hospital. However, an implied contract exists - the hospital provides lifesaving services with the expectation of payment, while the patient expects to receive urgent care. Even without expressly agreeing to terms, the patient has a legal duty to pay the reasonable costs of services rendered.
This demonstrates an implied-in-fact contract. The conduct between parties shows mutual assent to the agreement. The hospital's provision of medical services indicates a promise to treat the patient. By accepting the treatment, the patient manifests intent to pay. Thus, an enforceable implied contract is formed.
Home Renovations and Implied Agreements
A homeowner hires a contractor for kitchen renovations without signing a formal written contract. The contractor completes the project, but a dispute arises over payment terms. This exemplifies an implied-in-fact contract - while terms weren't expressly documented, the conduct establishes an agreement.
If the contractor sues for nonpayment, the court examines the communications, conduct, industry norms, and prior dealings to construct the implied contractual terms. This determines each party's rights and obligations.
Overpayment Errors and Quasi-Contractual Remedies
A company mistakenly overpays a vendor $5,000 beyond the contract price for services rendered. Realizing the error, they promptly request a refund of the excess amount.
Here, no express contract covers the overpayment - but under quasi-contract doctrine, the vendor has a duty to return the funds. Since they were unjustly enriched by the extra money, principles of equity require restitution. The company can recover it through equitable quasi-contractual remedies.
Key Differences Between Quasi and Implied Contracts
Implied contracts and quasi-contracts, while similar in name, have some important distinctions in business law. Understanding these key differences can help legal professionals determine the appropriate legal remedies when disputes arise.
Presence of Mutual Agreement in Implied Contracts
The key element that distinguishes implied contracts from quasi-contracts is the presence of mutual agreement between the parties.
With implied contracts, there is an inferred intent to enter into a contractual relationship, even if the agreement is not expressly written or verbalized. The actions and conduct between the two parties imply a contractual understanding.
Quasi-contracts, on the other hand, lack mutual assent between parties. There is no implied offer and acceptance. Rather, quasi-contracts are created by courts to prevent unjust enrichment when one party confers an unsolicited benefit to another.
Remedies for Disputes: Quantum Meruit vs. Contract Damages
The remedies available under quasi-contracts differ substantially from those under implied contracts:
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Implied contracts allow for standard contract damages - compensation for losses suffered due to a breach. The non-breaching party can claim direct, incidental, or consequential damages.
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Quasi-contracts utilize the equitable remedy of quantum meruit - reimbursement for the reasonable value of goods or services rendered. There are no contract damages since no contract exists.
So while implied contracts offer contractual remedies, quasi-contracts offer restitution to restore fairness and prevent undue gain.
Focus on Unjust Enrichment in Quasi-Contracts
The very purpose of quasi-contracts is to prevent unjust enrichment that would result if one party retained the unrequested benefits conferred by another without payment.
For example, if a doctor provides emergency medical aid to an unconscious car crash victim without their knowledge or consent, the doctor is entitled to reasonable payment under a quasi-contract theory. This prevents the victim from unfairly benefiting from the doctor's services without compensation.
Implied contracts do not share this focus on unjust enrichment - the mutual agreement negates claims of unrequested benefits. The contract remedies aim to make the non-breaching party whole, not necessarily prevent undue gain.
In summary, while implied and quasi-contracts may seem similar due to their unwritten nature, the presence or absence of mutual agreement creates substantially different legal treatments regarding remedies available for disputes. Legal professionals would be prudent to correctly ascertain which type of unwritten agreement exists when pursuing claims.
Practical Implications and Legal Considerations
Navigating the Statute of Frauds with Unwritten Agreements
The Statute of Frauds outlines certain types of contracts that must be in writing to be enforceable. This includes contracts for the sale of goods over $500, contracts that cannot be performed within one year, contracts involving interests in land, contracts by executors to pay estate debts personally, contracts for marriage, and contracts for the sale of securities.
If an unwritten agreement falls into one of these categories, it may not be enforceable in court. However, partial performance of the agreement or admissions made in court may sometimes allow the court to enforce an unwritten contract despite the Statute of Frauds.
Limitation Periods for Implied and Quasi-Contract Claims
The limitation period for bringing an implied or quasi-contract claim varies by jurisdiction. However, it is often between two to six years from the date of breach. The exact deadline depends on whether the claim is based on a written or oral agreement.
It is important to bring an implied or quasi-contract case in a timely manner before the limitation period expires. Otherwise, the claim may be dismissed regardless of its merits.
Burden of Proof in Establishing Unwritten Agreements
The burden of proof lies with the plaintiff to establish the existence and terms of an implied or quasi-contract by a preponderance of evidence. This requires producing sufficient evidence to demonstrate that it is more likely than not that a contract existed.
Factors courts may consider include the conduct of the parties, industry custom, prior dealings between parties, partial performance, and any admissions about the existence of an agreement.
Seeking Equitable Relief Through Quasi-Contractual Remedies
If an implied or quasi-contract is breached, common remedies pursued are:
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Quantum meruit - Payment for the reasonable value of goods or services provided. This prevents unjust enrichment.
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Promissory estoppel - Compensates a party who relied on a promise that induced action even if the agreement is unenforceable.
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Unjust enrichment - Restores any benefit unfairly obtained by the breaching party to the non-breaching party.
These remedies all provide equitable relief through implied or quasi-contract principles to provide compensation where warranted by the circumstances.
Conclusion and Key Takeaways on Unwritten Agreements
Quasi-contracts and implied contracts are two types of unwritten agreements in law that can establish obligations between parties. The key differences include:
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Basis of the agreement: Quasi-contracts are obligations created by law to prevent injustice, while implied contracts are based on the apparent intentions of the parties.
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Enforceability: Quasi-contracts allow a plaintiff to recover payment for services rendered to prevent unjust enrichment. Implied contracts rely on evidence of mutual agreement between parties.
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Remedies: Plaintiffs can seek equitable relief through restitution for quasi-contracts. Implied contract disputes may allow plaintiffs to recover expectation damages.
When dealing with unwritten agreements, legal professionals should carefully evaluate the basis of the obligation, available remedies, and evidence needed to demonstrate mutual consent or prevent unjust outcomes. Understanding these distinctions can help effectively establish, dispute or defend against unwritten contracts.
Key takeaways:
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Quasi-contracts have an equitable basis to prevent unjust enrichment, while implied contracts rely on apparent mutual consent
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Quasi-contracts allow restitution to recover payment for services rendered, implied contracts may enable collecting expectation damages
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Unwritten agreements have complex legal implications that necessitate careful evaluation of remedies and available evidence
