THE DOCTRINE OF IMPLIED CONTRACTS

This article is written by Ritika Srivastava of Symbiosis Law School, Hyderabad, an intern under Legal Vidhiya

ABSTRACT

A key aspect of contract law, the idea of implied contracts, negotiates the difficult space between formal agreements and tacit understandings. Implied contracts arise from the actions and situations of the persons concerned, and can provide legal answers in instances when formal agreements may be missing. This article dives into the “two primary categories of implied contracts: implied-in-fact and implied-in-law (quasi-contracts)” and defines the legal rules that govern their formation. The idea of implicit contracts manifests itself in a variety of real-world settings, ranging from service-based transactions to unintended delivery, with an emphasis on mutual agreement and the prohibition of unjust enrichment. It is a dynamic legal notion that reflects the law’s adaptation to the complexities of human interactions, [1]providing fairness and justice in contractual partnerships.

KEYWORDS

Implied, Contracts, Indian Contract Act, Agreements, Negotiate, Quasi, Parties, Mutual

INTRODUCTION

Contract regulations in India are governed by the Indian Contract Act of 1872 (herein to be said as to ICA), the provisions of which are founded on common law principles. Legitimacy of implicit contracts has been recognized by common law standards, and this has been complied with in India. As a result, Section 9 of ICA concedes implicit contract as like valid and legal, stating that, commitment is implied when any proposal or any acceptance has been made in such a manner other than in words. Implied contract are of much importance since all contracts can not be made in written, particularly in  course of daily things. The Indian Contract Act, 1872, makes no mention of the term implicit contract. Nonetheless, an attempt at explanation has been made on the pretext of implied assurances in section 9 of the same Act.

Section 9 of the Indian Contract Act can be interpreted as an inferred contract is a kind of agreement whereby the offeror makes a proposal and the other party accepts it by action rather than spoken or written communication. The concept of implicit contracts pertains to a legal tenet in the field of contract law that states that a contract can be inferred or assumed from the behaviour, situation, or actions of the parties concerned, without having to be expressly expressed in written or spoken language. Even when an agreement is not clearly stated, implied contracts are nevertheless recognized provided there is a reasonable assumption of mutual consent between the parties.

However, because implicit contract are evaluated on the basis of conduct as well as actions, as it poses a number of concerns. The goal of this research is to examine the various legal concerns surrounding implicit contract. This research been done will explore firstly the concept and sorts of implicit contracts, followed by difficulties about the existence of implied contracts.

IMPLIED CONTRACT

“An implied contract emerges when two or more parties lack a legally binding written contract, but legal obligations are established to maintain fairness based on their conduct or situation.”. It can be said that the implicit contracts are of two kinds and that is: those implied in actuality and those implied in law.”[2]

“Implied contract” is no clearly or explicitly mentioned in the ICA, even so has been embedded by Section 9, which therefore states, “implied contract” as contract that occurs when, proposal as well as acceptance of a contract which is implied through means in spite of in writing. Let’s site an example- a person taking and sitting in cab, would never enter in written contract, but this can be understood by driver of cab and that person, that driver of a cab would have to drive the person sitting in car to his destination and the person that has boarded should have to pay certain amount of money. As a result, they are bound by an implicit contract.

IMPLIED CONTRACT IN FACT:

Implied contract where, existent contract is determined by conduct as well as actions of contracting party also about circumstances or conditions under which the contract got entered upon into. Let’s example, one passenger who is boarding car to travel would not engage into any kind of express contract with that cab driver get any service in exchange for money, but it has been suggested that, person must pay certain amount or certain fare for service of the cab which has been given by that cab driver. As a result of the current circumstances and the parties’ actions, any implied contract exists among them. There is never mentioning of any explicit provisions in the ICA regarding the existence of these kind of contracts. These contracts presence should have to be determinate based on the conduct as well as the actions of the parties and the conditions that exist.

In Haji Mohd. Ishaq vs. Mohd. Iqbal and Mohd. Ali & Co.[3], the plaintiff supplied some commodities to the defendant through an intermediary. The defendant unambiguously accepted the items and paid a portion of the plaintiff’s claim. As a result, a legal responsibility to pay the unpaid sum was established. In its decision, the Supreme Court concluded that the defendant’s acts, including the acceptance of goods and the lack of repudiation in response to several letters and telegrams from the plaintiff requesting payment, constituted a direct contract. The defendant’s behaviour and acceptance of the goods constituted this contractual arrangement, known in law as an implied contract by conduct.

IMPLIED CONTRACT IN LAW

In the absence of a contract, either of the parties will be unfairly enriched. For example, if a person had heart attack inside any cab, then if any doctor was summoned on spot, there at the moment, saving life of that person. In mentioned scenario, doctor has a right for payment under implicit contract since that individual would be unfairly enriched if the doctor was not compensated for their services. In law, an implied contract is often referred to as a quasi-contract. Under Indian Contract Act, Section 68 (incompetency for contract), Section 69 (reimbursement of money payment that has been paid by claimant because of defendant’s use), Section 70 (obligation on regards of beneficiary for an act done non-gratuitously of paying the person who has performed that act), Section 71 (finder of goods’s obligation towards true owner), Section 72 (individual’s responsibility of paying back money that has delivered to person by any mistake as well as in coercion)[4].

A fire broke out at the defendant’s home in Upton-upon-Seven RDC vs. Powel[5] case, the defendant requested the help of the Upton Fire Brigade, believing he was entitled to it. The fire department effectively doused the flames. As a result of the discovery that the defendant’s residence did not belong within Upton’s free services zone, Upton sought remuneration for the services given. Desire of defendant for Upton’s services, his expressly made request regarding services, as well as Upton’s succeeding provisions of such like services in response to requests that was highlighted by the court in its ruling. As a result, the court determined that the services were rendered in exchange for an implied promise to pay.

FEATURES OF IMPLIED CONTRACT

 1. Offer has to be made by one party and that offer has to be accepted by the other party;

2. Consideration, that has to be lawful and it can be said as some legal interest which has been provided by each party;

 3. Mutuality of intent, meeting of minds that has been mentioned in terms of the Contract.

 Here, certain terms can also deduced by any of the contracting parties.

PRINCIPLE OF UNJUST ENRICHMENT AND QUANTUM MERUIT:

Unjust enrichment is one of among factors behind existent of quasi-contracts. According to this idea, no one should unjustly be profited at expense of other. According to mentioned idea, beneficiary must pay the one who bestowed benefit on him. Generally, rules of a contract states, consideration is one of the key components of contract creation and must be mutual. In the preceding scenario, if any doctor prescribes any person in any restaurant who going through a heart ache, then doctor should get reimbursement if he has prescribed that person. But, if the doctor has not been prescribed that patient who is going through a heart ache then the doctor should not be able to receive reimbursement for their services as per current “Quantum Meruit” regulation principle which states, person has a right of compensation as well as reimbursement only if other person receives any kind of benefit; howsoever, as per case herein, the other person has not obtained any kind of advantage, hence therefore doctor has no right of any payment. Howsoever, if this been a regular case where, patient was being treated, prescribed or transferred to hospital, then doctor should have right of reimbursement in spite of whether that patient get survival or dies. Therefore, standards of implied contracts might or might not reward any person delivering any service, certainly in situation of quasi-contracts.

ADVANTAGES OF IMPLIED CONTRACT:

1. Implied contracts offer for greater negotiation flexibility because they are not bound by rigidly defined terms and conditions. This adaptability can help you solve creative problems and adjust to shifting situations.
2. Implied contracts can enforce agreements made orally or in person. This is especially beneficial in instances when conventional written contracts, such as informal business transactions or personal arrangements, are neither viable or feasible.
3. The opposite party has legal remedies when one party fails to meet their responsibilities under an implied contract. They have the right to sue for breach of contract and demand restitution or damages for their losses.

DISADVANTAGES OF IMPLIED CONTRACT:

1. In a court of law, proving the existence of an implied contract can be difficult. Because the agreement is not expressly stated, proving its presence may be challenging, particularly if one side rejects its existence.
2. In the lack of explicitly stated terms and conditions in an implied contract, ambiguity and potential disagreement between the parties can arise. Misunderstandings can occur when concepts are not defined clearly, potentially leading to arguments and legal problems.
3. Implied contracts are not written, making it easier for either side to ignore or dispute the agreed-upon provisions. This can increase the risk of contract violations and make it more difficult to enforce the agreement.

CASE LAWS

Narandas Sunderlal Rathi vs. Ghanshyam Lal and Others

The important issue, if there was any implied contract. Here, the Judge didn’t question the existence of an inferred contract but believed that an implied contract should suffice. The crucial question is whether such an arrangement was tacitly understood. It is reasonable to suppose that in business partnerships, verbal contracts may have purposely excluded some terms. If verbal contracts are permissible, there is no obvious reason why an inferred contract should not be recognized.

Shaboo Majee et al. vs. Noraai Mollha

When one person asks another for money, there is an implicit agreement to refund the amount. Similarly, if one person begs that another function as a caretaker and the later agrees, an implied contract is formed. In such instances, the requester is required to indemnify and refund the custodian for any payments paid.

Achhaibar Singh v. Rajamti and Others

If person who is lending has a conditional contract, it may not bind transferor in future of redemnting equity. The scenario in question does not require significant discussion because the responsibility of paying public charges emerging after mortgage. Implied contract permitting borrower to sell the mortgaged property for benefit of the mortgagee shall be exercised by any successor of interest. It is emphasized that if only the mortgage agent was there, this condition would have no effect.

Sariatulla vs. Sheikh Meherulla

The Defendant had expressed an agreement to pay Complainant’s bond of bail. On other side, has been made out, bond of bail is not on record. Nonetheless, believe there was implied obligation of reimbursement on regards Plaintiff and Plaintiff has right of success on basis of such implied contract. It was contended in favour that there was nothing such like inferred contract, also it could not be properly imposed even if there was an implied contract.

ANALYSIS

This form of agreement is referred to as quasi-contract. Generally, it occurs when any statute imposes any kind of obligation regards parties who has not been necessarily agreed in concluding contract and has not made any promise for implementing it. Howsoever as one party might unjustly be rewarded by another party’s actions, recipient of such kind of actions should make pay or restitution or fair value for services that has been supplied, even if there has not been made for purpose of entering into a contract[6].

Contracts that are oral in nature are enforceable, also such kind of contracts must be in written to be enforceable. Some states have also made legislation (likely known as ‘Fraud Statute’) requiring certain types of contracts to be in written. While they vary by state, mostly need contracts of and sale whether in written in order to respond to another debts that cannot be completed within one year, exceed specified amount, as well as contain some commodity sale. While many types of contracts don’t have to be in written to be enforceable, it’s still a good idea to have documented agreement if you are getting service or selling any service with any other or some other thing with whom you may have a disagreement.

CONCLUSION

Contracts give a formal contract that thoroughly outlines the business connection and area of work, preventing misunderstandings in the future. They specify which rights you will buy and which you will keep. They are legally binding and enforceable. The parties’ actions result in an inferred contract. The contract describes the legally enforceable responsibilities of the parties. There is no written or oral agreement between the parties that supports the contract. A contract formed as a result of the acquisition of goods is known as an implicit contract. As the name implies, contract which are implied in nature are one that can be referred from parties’ conduct as well as behaviour. Words, whether written or spoken, are not used. After the contract’s parties have determined on their objective, the contract enters into effect. Let’s site example of an inferred contract will be a quasi-contract. “Those relationships that mimic those created by contract” are referred to as quasi-contracts on basis of the principle of maximum equality, which states that no individual can enjoy uneven benefits at expense of another, regardless of where any contract exists.

REFERENCES

1. https://www.thelextimes.com/doctrine-of-caveat-emptor-and-implied-contract/#Implied-contract
2. https://blog.ipleaders.in/implied-contracts-in-India/
3. https://llbmania.com/business-law/doctrines-under-indian-contract-law/
4. https://thelegallock.com/know-about-doctrine-of-implied-contract/

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[1] Legal Match Law Library, https://www.legalmatch.com/law-library/article/what-is-an-implied-contract.html

[2] Lex life India, https://lexlife.in/2020/05/11/law-of-contract-doctrine-of-implied-contract/

[3] Haji Mohd. Ishaq vs. Mohd. Iqbal and Mohd. Ali & Co, 1978, 2, SSC 493: AIR 1978 SC 798.

[4] Law, Lawyers and Legal Resources, https://www.legalserviceindia.com/legal/article-7526-implied-terms-in-a-contract.html 

[5] Upton-upon-Seven RDC vs. Powel in 1942 (1) All ER 220

[6] Lex life India, https://lexlife.in/2020/05/11/law-of-contract-doctrine-of-implied-contract/ 

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