Which term describes a contract in which the parties have met all agreement terms?

An implied contract is a legally-binding obligation that derives from actions, conduct, or circumstances of one or more parties in an agreement. It has the same legal force as an express contract, which is a contract that is voluntarily entered into and agreed on verbally or in writing by two or more parties. The implied contract, on the other hand, is assumed to exist, but no written or verbal confirmation is necessary.

Key Takeaways

• An implied contract is created by the actions, behavior, or circumstances of the people involved.
• An implied contract has the same legal force as a written or verbal contract.
• The implied contract, such as an implied warranty, is assumed to exist, and no confirmation is necessary.
• Because of the lack of documentation, it is more difficult to enforce an implied contract in some circumstances.

Understanding Implied Contracts

The principles underlying an implied contract are that no person should receive unjust benefits at the expense of another person, and a written or verbal agreement is not needed to get fair play. For example, the implied warranty is a type of implied contract. When a product is purchased, it must be capable of fulfilling its function. A new refrigerator must keep food cool, or either the manufacturer or the seller has failed to meet the terms of an implied contract.

An implied contract is sometimes difficult to enforce because proving the justice of the claim is a matter for argument, not a simple matter of producing a signed document. In addition, some jurisdictions place limits on implied contracts. For example, a contract for a real estate transaction must be backed up by a written contract in some courts.

Implied-in-Fact vs. Implied-in-Law Contracts

There are two forms of implied contract, called implied-in-fact and implied-in-law contracts. An implied-in-fact contract is created by the circumstances and behavior of the parties involved. If a customer enters a restaurant and orders food, for example, an implied contract is created. The restaurant owner is obligated to serve the food, and the customer is obligated to pay the prices listed on the menu for it.

An implied-in-fact contract may also be created by the past conduct of the people involved. For example, a teenager offers to walk a neighbor's dog and is rewarded with two movie tickets. On three subsequent occasions, the teenager comes over to walk the dog and is given two movie tickets. But on the last occasion, the neighbor simply fails to produce the movie tickets. The teenager has a case for claiming that the neighbor created an implied-in-fact contract by regularly producing movie tickets in return for dog-walking services. It is a reasonable assumption.

An implied contract has the same legal force as a written contract but may be harder to enforce.

The other type of unwritten contract, the implied-in-law contract, can also be called a quasi-contract. It is a legally binding contract that neither party had the intention of creating. Say the same restaurant patron mentioned above chokes on a chicken bone, and a doctor dining at the next booth leaps to the rescue. The doctor is entitled to send a bill to the diner, and the diner is obligated to pay it.

A bilateral contract is an agreement between two parties in which each side agrees to fulfill their side of the bargain. Typically, bilateral contracts involve an equal obligation or consideration from the offeror and the offeree, although this need not always be the case.

In more complex situations, such as multinational trade negotiations, a bilateral contract can be a so-called "side deal." That is, both parties are involved in the general negotiations but may also see the need for a separate contract relevant only to their shared interests.

Key Takeaways:

• A bilateral contract is the most common type of binding agreement, which involves concessions or obligations owed by both sides of the contract.
• Any sales agreement, lease, or employment contract are common examples of a bilateral contract.
• A unilateral agreement, in contrast, requires only one party to commit to an obligation.

How a Bilateral Contract Works

The bilateral contract is the most common kind of binding agreement. Each party is both an obligor (a person who is bound to another) to its own promise, and an obligee (a person to whom another is obligated or bound) on the other party's promise. A contract is signed so that the agreement is clear and legally enforceable.

Any sales agreement is an example of a bilateral contract. A car buyer may agree to pay the seller a certain amount of money in exchange for the title to the car. The seller agrees to deliver the car title in exchange for the specified sale amount. If either party fails to complete one end of the bargain, a breach of contract has occurred.

In that sense, virtually all of our daily routine transactions are bilateral contracts, sometimes with a signed agreement and often without one.

Business contracts are almost always bilateral. Businesses provide a product or service in exchange for financial compensation, so most businesses are constantly entering into bilateral contracts with customers or suppliers. An employment agreement, in which a company promises to pay an applicant a certain rate for completing specified tasks, is also a bilateral contract.

When determining whether a contract is unilateral or bilateral in nature, courts will often consider whether both parties offered something specific of value—in which case, the contract is bilateral.

Bilateral vs. Unilateral Contracts

As noted, a bilateral contract by definition has reciprocal obligations. That makes it distinct from a unilateral contract. In a unilateral contract, one party is obligated to fulfill its obligation only if and when the other party completes a specified task. A unilateral contract typically involves the first party issuing a payment only on completion of the second party's task.

In legal terms, that second party in a unilateral contract is not obliged to actually perform the task, and may not be found in breach of contract for not doing so. If it were a bilateral contract, both parties would have a legal obligation.

An example of a unilateral contract might be a contest to find a buried treasure to win $1 million. No one is obligated to hunt for the treasure, but if someone finds it, the contest creator is obliged to pay $1 million to that person. If the nature of a contract is disputed, a court will judge the merits of the claim against the content of the contract, determining if one or both parties maintain an obligation or concession.

What do we call a contract that has been fully performed by both parties?

What is unilateral and bilateral contract?

What type of contract is an agreement between the parties in which the agreement has been inferred?

Which term refers to a type of contract where all terms and conditions are not fully expressed?