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Implied Contracts: When What You Do Legally Binds You

By Anna WangLegal Researcher at Shake

You may have heard that it’s possible to create a legally binding contract without actually writing anything down. Is that true?

Yes — in fact, you do it every day. It happens, for example, every time you order food at a restaurant. In sitting down and ordering the food, your actions indicate that you agree to pay for that food at the end of your meal. On the basis of that agreement, the restaurant is fine with bringing you the food before you pay for it. Once the restaurant has brought you the food–holding up its end of the agreement–your obligation to pay is legally binding, even though you didn’t sign anything when you sat down, and never actually said to the waiter at any point, “I will pay for this food.” Your actions made the agreement for you.

The law has a term for contracts that arise through conduct — implied contracts.1 Implied contracts are legally binding. However, they can be problematic when you’re dealing with situations that are more complicated than ordering at a restaurant. That’s because, in order for there to be an implied contract, there must be clear assent on both sides, and what constitutes clear assent can be open to interpretation.

For example, if you’re a freelancer, a client may call you up, saying, “I think this extra component would make the project better.” You complete the project with the extra component and deliver it to the client, expecting to be paid for it. The client objects–where you saw clear assent for you to deliver that extra component, she saw an offhanded remark. She says she was just “thinking out loud.” Or the reverse might happen–you interpret her statement as an offhanded remark, and, when you deliver the project, she tells you it’s incomplete without that extra component.

Ultimately, assent can be open to interpretation. Clear assent for one person is not necessarily so clear for another person (see the dispute over Ghosthunters, where part of the claim was that there was an implied contract).

The takeaway? Always get your agreements in writing.

  1.  Implied contracts may be implied-in-law contracts, an obligation created as an equitable remedy, or implied-in-fact contracts. Black’s Law Dictionary (9th. ed. 2009). In this instance, we’re referring to implied-in-fact contracts, “contract(s) that the parties presumably intended as their tacit understanding, as inferred from their conduct and other circumstances.” Black’s Law Dictionary (9th. ed. 2009), implied-in-fact contract.