Implied Contract Term

An Implied Contract Term is a Contractual Term that is not explicitly stated within a contractual agreement but is assumed either through the conduct of the parties, the nature of the engagement, or legal necessities.

• AKA: Constructive Term, Inferred Term.
• Context:
  • It can derive from Business Norms or the necessity to fulfill the contract effectively, even when not explicitly documented.
  • It can range from being a Legally Implied Term (implied by statute or court decision to ensure fairness or due to precedent) to a Customarily Implied Term (implied from trade practices or past dealings between the parties).
  • It can be crucial for filling in gaps in contracts where not all terms needed for the practical execution of the contract are explicitly mentioned.
  • It can cover aspects like quality standards, performance measures, or employee benefits that are customary in a specific industry but not detailed in the written contract.
  • It can have lower Contract Term Enforceability than an Express Contract Term (due to the need for interpretation and proving the implied stipulations were a mutually understood part of the agreement).
  • ...
• Example(s):
  • an Employee Contract Implied Contract Term, customary in a specific industry but not detailed in the written contract.
  • the assumption that a leased property will be maintained to a livable standard, even if not specified in the lease agreement.
  • a long-standing business relationship where timely delivery has always been crucial might imply a term that goods be delivered on a set schedule, despite no explicit mention.
  • a Sales Contract Implied Contract Term, such as that goods will be of satisfactory quality and fit for their purpose.
  • ...
• Counter-Example(s):
  • Express Contract Terms.
• See: Legally Implied Term, Customarily Implied Term, Contractual Fairness.

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References

2024

• (Halton, 2021) ⇒ Clay Halton. (2021). "Implied Contract Terms: Definition and How Terms Are Set.” In: Investopedia. Reviewed by Charles Potters, Fact checked by Timothy Li. https://www.investopedia.com
  • NOTES: Here are seven bullet points based on the content about implied contract terms:
    • An Implied Contract Term is assumed to be included in a contract even if it is not expressly stated, as courts often consider what is reasonably expected in the contract even without explicit agreement.
    • Implied Contract Terms arise due to the inherent incompleteness of contracts, where it's not feasible or cost-effective to specify every potential condition or scenario.
    • Implied Contract Terms can be established through common law, statutory law, or by customary business practices, which help fill gaps in contracts by introducing standard assumptions.
    • An Implied Contract Term often includes warranties such as the expectation that purchased goods are free from defects, which is a standard assumption under the warranty of merchantability.
    • Implied Contract Terms economize on the transaction costs of contracting, allowing parties to focus on other aspects of their agreement by assuming certain standard conditions are automatically included.
    • Implied Contract Terms support societal and economic efficiency by reducing the transaction costs associated with overly detailed contracts, thus facilitating more economically efficient transactions.
    • Implied Contract Terms may still hold parties accountable even in the absence of explicit agreement, such as requiring disclosure of known defects or conflicts of interest, thereby preventing fraud and ensuring fairness in contractual relationships.

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