Implied Contract

What is an Implied Contract?

An **implied contract** is a contract that comes into existence not through express words (written or spoken) but through the **conduct, actions, behaviour, or circumstances** of the parties. The terms are not explicitly stated but are inferred from what the parties did or from the situation in which they find themselves. Despite the absence of explicit words, an implied contract is just as legally binding and enforceable as an express contract.

In everyday terms, when you board a public bus, you do not sign a contract or verbally agree to pay the fare. But by the very act of boarding, you and the bus operator have entered into an implied contract — you agree to pay the fare, and the bus operator agrees to take you to your destination safely. No words are exchanged, but both sides understand and are bound by the arrangement.

Legal Framework in India

Indian Contract Act, 1872

**Section 9** is the key provision: *"In so far as the proposal or acceptance of any promise is made in words, the promise is said to be express. In so far as such proposal or acceptance is otherwise than in words, the promise is said to be implied."*

This section recognises that a valid offer and acceptance can be communicated through **conduct** rather than words. An implied contract satisfies all the essential elements of a contract under Section 10 — free consent, competent parties, lawful consideration, and lawful object — but these elements are inferred from conduct rather than stated in words.

Types of Implied Contracts

Indian law recognises two categories:

#### 1. Implied-in-Fact Contracts

These are true contracts where the agreement is **inferred from the conduct** of the parties. The parties actually intended to create a contractual relationship, but they communicated their intention through actions rather than words.

**Example:** A customer enters a self-service restaurant, fills their plate, eats, and approaches the counter to pay. No words were spoken, but the conduct of both parties — the restaurant offering food for sale and the customer taking and consuming it — creates an implied contract.

#### 2. Quasi-Contracts (Implied-in-Law)

These are **not true contracts** but are obligations imposed by law to prevent **unjust enrichment**. The Indian Contract Act addresses quasi-contracts in **Sections 68-72** (Chapter V — "Of Certain Relations Resembling Those Created by Contract").

Key quasi-contractual obligations:

- **Section 68:** If a person incapable of contracting (such as a minor) is supplied with necessaries, the person who supplied them can recover from the incapable person's estate.

- **Section 69:** A person who pays money that another is obligated to pay may recover it.

- **Section 70:** Where a person lawfully does anything for another person or delivers anything to them, not intending to do so gratuitously, and the other person enjoys the benefit, the latter must compensate the former.

- **Section 71:** A person who finds goods belonging to another must take reasonable care of them — the obligation of a finder.

- **Section 72:** A person to whom money is paid or a thing delivered by mistake or under coercion must repay or return it.

How Implied Contracts Are Formed

1. Conduct of the Parties

The most common way an implied contract arises. When parties act in a way that demonstrates mutual consent and understanding of obligations, a contract is implied. The conduct must be such that a **reasonable person** would conclude that an agreement exists.

**Example:** A daily wager shows up at a construction site every morning, works the full day, and is paid at the end of each day. After doing this consistently for months, an implied contract of employment exists even though no formal agreement was signed.

2. Course of Dealing

When parties have dealt with each other repeatedly in the same manner, a course of dealing may give rise to implied terms. If a supplier has delivered goods on 30-day credit terms for years without a formal agreement, the credit term is an implied term of their contract.

3. Trade Usage and Custom

In certain trades and professions, implied terms arise from **established customs and usages**. Under **Section 1** of the Indian Contract Act, the Act does not affect any usage or custom of trade, and under **Section 92 (proviso 4)** of the Indian Evidence Act, evidence of trade usage is admissible to show implied terms.

**Example:** In the diamond trade in Surat, certain customary practices regarding payment terms and return policies are implied into every transaction between traders, even without explicit agreement.

4. Circumstances of the Transaction

Sometimes the circumstances create an implied obligation. If a doctor treats an unconscious accident victim, the patient did not expressly agree to pay. But an implied contract (or quasi-contract under Section 70) arises obligating the patient to pay reasonable charges for services rendered.

When Does This Term Matter?

Employment and Labour Relations

Many employment relationships, particularly in the unorganised sector, are based on implied contracts. Workers who have been employed for years without formal contracts can rely on implied contractual terms established through the conduct of both parties — regular work patterns, customary wages, and established working conditions.

The Supreme Court in **Secretary, State of Karnataka v. Umadevi (2006)** and subsequent cases has examined the rights of workers engaged without formal contracts, recognising that long-standing work arrangements create implied obligations.

Service Providers and Consumers

Implied contracts are the basis of most consumer transactions — from hiring an auto-rickshaw to getting a haircut to staying at a hotel. The terms (fare, price, service quality) are implied from the circumstances, trade practice, or statutory requirements. Consumer protection law supplements implied contracts by imposing minimum standards.

Emergency Medical Services

When a patient is brought to a hospital in an emergency and is unable to consent to treatment, an implied contract arises. The hospital provides treatment, and the patient (or their estate) is obligated to pay reasonable charges. The Supreme Court in **Parmanand Katara v. Union of India (1989)** held that hospitals have a duty to provide emergency treatment, and a quasi-contractual obligation to pay arises.

Unjust Enrichment Claims

Quasi-contracts (implied-in-law) are the basis for **unjust enrichment claims** — situations where one person has been enriched at the expense of another without a legal basis. The court imposes an obligation to return the benefit or compensate the other party.

Government and Public Contracts

When a government entity accepts work or services from a contractor without a formal written contract, an implied contract may arise. Courts have held that the government cannot benefit from work done and then refuse to pay on the ground that there was no formal contract.

Practical Significance

- **Implied contracts are fully enforceable.** An implied contract has the same legal force as an express contract. The party can sue for breach and claim damages, specific performance, or other relief.

- **Proving implied contracts is more difficult.** Since there are no written terms, proving the existence and terms of an implied contract requires **circumstantial evidence** — the conduct of the parties, their communications, trade customs, and the overall context. Documentary evidence (emails, invoices, payment records) can help establish implied terms.

- **Courts will not imply a contract where parties intended none.** An implied contract arises only where the circumstances show that both parties **intended to be bound**. Gratuitous acts or social arrangements do not give rise to implied contracts.

- **Implied terms supplement express terms.** Even in express contracts, certain terms may be implied — such as a duty of good faith, reasonable quality, or fitness for purpose. The Sale of Goods Act, 1930, implies conditions and warranties into every sale (Sections 14-17).

- **Quantum meruit and implied contracts.** When a person performs work or provides services under an implied contract but the amount of payment was not agreed, the court will award **quantum meruit** — a reasonable amount for the work done.

Frequently Asked Questions

What is the difference between an implied contract and an express contract?

An **express contract** is formed through explicit words — written or spoken — where the parties clearly state their terms. An **implied contract** is formed through the **conduct or circumstances** of the parties without explicit verbal or written terms. Under Section 9 of the Indian Contract Act, both are valid and enforceable. The key difference is in how the agreement is communicated — by words (express) or by actions and context (implied).

What is the difference between an implied-in-fact contract and a quasi-contract?

An **implied-in-fact contract** is a true contract — the parties actually intended to enter into an agreement, but communicated their consent through conduct rather than words. A **quasi-contract** (implied-in-law) is not a true contract at all — it is an obligation imposed by law to prevent unjust enrichment, regardless of the parties' intentions. Under Sections 68-72 of the Indian Contract Act, quasi-contractual obligations arise by operation of law, not by agreement.

Can an implied contract override an express contract?

Generally, no. If the parties have entered into an **express contract** that covers the subject matter, an implied contract on the same terms cannot override or contradict it. However, implied terms can **supplement** express terms where the express contract is silent on a particular matter. Under the parol evidence rule (Sections 91-92, Evidence Act), if a written contract is the complete agreement, implied terms contradicting it will not be given effect.

How does one prove an implied contract in court?

Proving an implied contract requires demonstrating through **circumstantial evidence** that both parties intended to be bound by an agreement. Relevant evidence includes: (a) the **conduct** of the parties (regular dealings, acceptance of goods or services, payment patterns); (b) **communications** (emails, messages, invoices) that reflect the understanding; (c) **trade customs** and industry practices; and (d) the **surrounding circumstances** from which a reasonable person would conclude that an agreement existed. The burden of proof lies on the party asserting the implied contract.