§ 1.19 Express and Implied Contracts

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Contractual duty is imposed by reason of a promissory expression. As to this, there is no difference between an express contract and an implied contract. All contracts are express contracts, subject to the rules of contract law. Thus, where a party is incompetentn1 to make an express contract or lacks the authority to bind the principal, such incompetency or lack of authorityn2 is equally fatal to any theory of an implied in fact contract.n3 There are different modes of expressing assent. Expression may be by the tongue, the eye, the hand or by all of them at once.n4 It may be by language, by words in any language, by words written or spoken. Yet there is also ''sign language'' which may consist of signs that are mere translations from a language of words, or of signs that convey ideas independently of any word language. A contract made by sign language is an express contract.

The language used to express assent, whether of words or of other signs and symbols, may be one invented by the parties themselves for their own private communications, or indeed for one communication only. They may use code words instead of English words or their own code, or the Morse code, or the Western Union telegraphic code. They may twist ordinary English words into code words, so that man signifies dog and tree signifies a thousand bushels of wheat. A contract made by a code communication is an express contract. Throwing up one's hat is usually an expression of joy; but it may be made to express assent to an agreement to sell land for ten thousand dollars.

From the above, it appears that, not only are all contracts express contracts, but also that all contracts are implied contracts.n5 The meaning to be given to any and all of these modes of expression is found by a process of implication and inference.n6 There are implications in English words as well as in other signs and symbols. What your words imply is also what your words express.n7 Assent may be expressed by acts that have no antecedent agreed meaning, although often no meaning can be attributed to them except in relation to the previous usage and conduct of humanity. The inference to be drawn from the acts is determined by what others reasonably understand them to express.n8

The distinction between an express and an implied contract, therefore, is of little importance, if it can be said to exist at all. The matter that is of importance is the degree of effectiveness of the expression used.n9 Clarity of expression determines the reasonableness of understanding and eases the court's problem in case of dispute. The character of the evidence to be presented to the court depends on the mode of expression used.n10 The more variant and obscure the mode, the more difficult the court's problem. Nowhere is accomplished artistry worth more than in the drafting of an important contract. It may be an exaggeration to say that nowhere is it less often to be found.

When an expression of agreement is put into words that are frequently used with more than one meaning, it is difficult, and sometimes impossible, to decide that an express contract exists. Likewise, when conduct other than words is such as persons frequently perform with different meanings, it is difficult, and sometimes impossible to decide that an implied contract exists.

It is well understood that a contract may be unilateral; that is, that only one party makes a promise. The consideration for the promise is some non-promissory performance rendered by the promisee or the promise is binding without consideration. In such cases, it is nearly always the promisor who makes an offer of a promise and requests action or forbearance in return. If such is the offer that has been made, it is usually unreasonable to infer that the offeree has made a promise to render the requested performance. Generally, therefore, the implication of a return promise is directly bound up with the interpretation of the terms of the offer. If the offeror has not asked for a promise, the normal result is that the offeror doesn't get one; but if the offeror does ask for a promise and the conduct of the offeree makes the offeror believe reasonably that the requested promise has been made, the court will generally find that it has been made, by implication if not expressly. This will be true, whether the plaintiff is trying to prove that the defendant made such an implied promise in order to maintain an action for its enforcement,n11 or whether the plaintiff is trying to show that the plaintiff made such an implied promise in order to establish a consideration for the express promise of the defendant.n12

Parties who have made an express contract to be in effect for one year (or any other stated time) frequently proceed with performance after expiration of the year without making any new express agreement, of extension or otherwise. From such continued action a court may infer that the parties have agreed in fact to renew the one-year contract for another similar period. Illustrations can be found in leaseholds, employment transactions, and contracts for a continuing supply of a commodity.n13 Some of the cases finding an implied renewal, particularly of leasehold tenancies, base the renewal on a rule of law that the tenancy is automatically renewed, irrespective of the tenant's intention, at the option of the landlord.n14 To be distinguished are contracts which contain clauses that provide for automatic renewal unless notice of non-renewal is given by one party to another.n15 Because such clauses in contracts of adhesion may be abused, as where a tenant has not read the lease to which he or she has adhered, some statutes regulate such provisions, for example, by requiring the propounding party to notify the adhering party of an impending renewal.n16

In the field of illegal bargains the parties often take pains not to put in express words, either oral or written, a promise that is illegal but is in fact included by tacit understanding. Thus, where one party has a civil claim for damages or restitution against another by reason of the latter's embezzlement or other crime, in making an otherwise proper settlement of the civil claim, the injured party may make an illegal promise not to prosecute criminally. Such a promise may not be provable by evidence of express words; and it may be difficult to determine whether or not it was made tacitly and should be inferred from conduct and circumstances. As between two inferences equally probable, the court should prefer the lawful rather than the unlawful one, but if the illegal promise is found by implication it has the same effect upon the bargain as if made in express words.n17

Legal Topics:

For related research and practice materials, see the following legal topics:

Contracts LawContract InterpretationGeneral OverviewContracts LawTypes of ContractsImplied-in-Law ContractsContracts LawTypes of ContractsImplied-in-Fact ContractsContracts LawTypes of ContractsExpress Contracts

FOOTNOTES:

(n1)Footnote 1.

U.S. - Curved Electrotype Plate Co. v. United States, 50 Ct.Cl. 258 (1915) .

Ala. - Ex parte Watts, 209 Ala. 115, 95 So. 502 (1923) , affirming Board of Education v. Watts, 19 Ala.App. 7, 95 So. 498 (1922) .

(n2)Footnote 2. Haws & Garrett General Contractors, Inc. v. Gorbett Brothers Welding Co., 480 S.W.2d 607 (Tex.1972) ; Vahlsing Christina Corp. v. Ryman Well Service, 512 S.W.2d 803 (Tex.Civ.App.1974 writ refused n.r.e.) .

(n3)Footnote 3.

U.S. - Curved Electrotype Plate Co. v. United States, 50 Ct.Cl. 258 (1915) .

Ala. - Ex parte Watts, 209 Ala. 115, 95 So. 502 (1923) , affirming Board of Education v. Watts, 19 Ala.App. 7, 95 So. 498 (1922) .

(n4)Footnote 4. According to the Restatement (Second) of Contracts § 19(1): ''The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act.'' See Ubysz v. DiPietro, 185 Conn. 47, 440 A.2d 830 (1981) .

(n5)Footnote 5. Thus an implied contract can be shown under a complaint alleging an express contract. First Security Bank & Trust Co. v. Merriman, 440 S.W.2d 256, 257 (Ky.1969) .

(n6)Footnote 6. An extended discussion of ''Implication'' and its relation to Interpretation and Construction is found in Chapters 24 and 25 on Interpretation. It is there that will be found the discussion of implied promises, whether the the ''implication'' is made for the purpose of showing that an offer was made or was accepted or for the purpose of determining the legal operation of a written instrument. Special sections are devoted to implication of promises in commercial transactions in service and agency transactions, and in hindering performance by another party.

See also § 144, chapter on consideration, for illustrations of the implication of a promise as consideration for a return promise. For briefer treatment, see § 1.17 above.

(n7)Footnote 7.

U.S. -Where a coal company promised to ship its coal by a carrier's ships for three years, the court found an implied promise by the carrier to continue running the ships. The court said: ''Defendant contends that the obligation to carry coal westward is conditioned solely upon the Transportation Company's uncontrollable willingness to run the boats on Lake Ontario... The obligation to carry coal on all west-bound trips, fairly interpreted in the light of the context and of the relations of the parties ... carries with it the further implied obligation to run the boats in a reasonable manner continuously... Precedent can throw little light on the sound interpretation of such contracts, especially as to implying unexpressed obligations; each has its own individuality, its own background and surrounding circumstances. Words are only symbols, and at times, even the most formal agreement, but elliptical expressions of the mutual understanding.'' Great Lakes & St. Lawrence Transp. Co. v. Scranton Coal Co., 239 Fed. 603 (7th Cir.1917) .

Implied promises were similarly found in Leventhal v. Stratford, 121 Conn. 290, 184 A. 587 (1936) ; Diamond Alkali Co. v. Tomson & Co., 35 F.2d 117 (3d Cir.1929) : Newark Publishers' Ass'n v. Newark Typo. Union, 22 N.J. 419, 126 A.2d 348 (1956) (quoting text).

Such a finding was refused in Hudson Canal Co. v. Pennsylvania Coal Co. 75 U.S. 276, 19 L.Ed. 349 (1868) ; Buzzelle's Estate v. Colorado State Hospital, 176 Colo. 554, 491 P.2d 1369 (1971) ; Ives v. Willimantic, 121 Conn. 408, 185 A. 427 (1936) ; McGarrigle v. Green, 76 Conn. 398, 56 A. 609 (1904) .

(n8)Footnote 8. That a mutual contract to marry can be made tacitly, by a course of conduct not including any express promissory words, see Homan v. Earle, 53 N.Y. 267 (1873) , stating in detail the conduct of the defendant from which a promise was inferred. Today, in many jurisdictions, such promises have been made unenforceable by legislation. Yet there is a current wave of litigation concerning implied contracts between parties who live together. In a leading case, Marvin v. Marvin, 18 Cal.3d 660, 665, 134 Cal.Rptr. 815, 819, 557 P.2d 106, 122 (1976) , appeal after remand, 122 Cal.App.3d 871, 176 Cal.Rptr. 555 , the court stated: ''In the absence of an express contract, the courts should inquire into the conduct of the parties to determine whether that conduct demonstrates an implied contract, agreement of partnership or joint venture, or some other tacit understanding between the parties. The courts may also employ the doctrine of quantum meruit, or equitable remedies such as a constructive or resulting trusts, when warranted by the facts of the case.'' In Kinkenon v. Hue, 207 Neb. 698, 301 N.W.2d 77 (1981) , words and conduct were considered in granting a cohabitant the value of a life estate and half the value of three cars. A leading case to the contrary, on grounds of public policy, is Hewitt v. Hewitt, 77 Ill.2d 49, 31 Ill.Dec. 827, 394 N.E.2d 1204 (1979) . The public policy question is explored in § 1476 post.

(n9)Footnote 9.

Alaska - Martens v. Metzgar, 591 P.2d 541 (Alaska 1979) . Defendant purchased unimproved land from a developer who was in the process of obtaining subdivision approval. The seller's price, he thought, did not include the costs of expenses for the installation of street, sewers, drains, and water mains. The seller expected to assess the purchasers for their pro rata share of these costs, but the selling broker apparently did not communicate this to the purchasers and the contract was silent as to improvements. The trial judge ruled against the plaintiffs, finding that the purchasers believed that the purchase price included the cost of utility improvements and such belief was reasonable. On appeal, the court stated it had a definite and firm conviction that the trial court was mistaken in this finding and plaintiff should recover. In a twist of logic, the appellate court characterized this recovery as quasi-contractual. The distinction between contracts implied in law and in fact is well drawn in Nordin Constr. Co. v. City of Nome, 489 P.2d 455, 464 n. 9 (Alaska 1971) .

Girves v. Kenai Peninsula Borough, 536 P.2d 1221 (Alaska 1975) . The court cited this section in a trespass case to show by way of analogy how acceptance of a grant can be implied from acts or conduct.

Ariz. - Swingle v. Myerson, 19 Ariz.App. 607, 509 P.2d 738, 740 (1973) . ''Swingle sat by idly, accepting Myerson's efforts, and never indicated to Myerson rejection of his proposal.'' A similar case is Turnkey Corp. v. Rappeport, 149 Ariz. 514, 720 P.2d 115 (1986) .

Barmat v. John and Jane Doe Partners A-D, 155 Ariz. 519, 747 P.2d 1218 (1987) . Does an attorney's liability to a client arise out of a contract? If so, the malpractice award carries with it, under an Arizona Statute, a right to attorneys' fees. The court concludes that the duty of care is imposed by law rather than implied in fact.

Ill. - Gaslite Illinois, Inc. v. Northern Illinois Gas Co., 46 Ill.App.3d 917, 6 Ill.Dec. 90, 362 N.E.2d 725 (1977) . The jury could find an implied contract where there had been an exclusive relationship for ten years and informal discussions took place with respect to the next year's campaign.

Iowa - Newman v. City of Indianola, 232 N.W.2d 568 (Iowa 1975) . A request for extension of electrical service an additional 500 feet implies a promise to pay for the extension.

Mass. - Anisgard v. Bray, 11 Mass.App.Ct. 726, 419 N.E.2d 315 (1981) . Plaintiff performed services for a partnership not yet formed. His co-venturers formed a partnership without him, appropriating plaintiff's ideas and preparatory work.

Nev. - Southdown, Inc. v. McGinnis, 89 Nev. 184, 510 P.2d 636 (1973) (implied promise to pay interest to minority shareholders pending appraisal).

N.H. - Morgenroth & Associates, Inc. v. Town of Northfield, 121 N.H. 511, 431 A.2d 770 (1981) makes two points. First, a jurisdictional statute allowing actions for ''implied contracts'' did not grant jurisdiction over quasi-contractual claims. Second, when a town asks for engineering services and gets them it must pay on the resulting implied in fact contract.

Tex. - Kosher Zion Sausage Co. v. Roodman's, Inc., 442 S.W.2d 543, 546 (Mo.App.1969) . Jury properly found an implied contract where there was a twenty year relationship between the corporations and the corporate agents who originally set up the deal were not available to testify. Emmer v. Phillips Petroleum Co., 668 S.W.2d 487 (Tex.Civ.App.1984) is noted at § 17 above.

Wis. - In re Stromsted's Estate, 99 Wis.2d 136, 299 N.W.2d 226 (1980) is a conceptual mess. A married woman was admitted to a hospital. In an action by the hospital against her estate for the hospital bill, the estate defended on the ground that her husband alone was liable for the deceased's necessaries. The hospital claims an implied contract, without specifying whether the claim is for an implied in fact or an implied in law claim. Although this is the simplest of all examples of an implied in fact contract, the court proceeds to assume the claim is for quasi-contractual liability, and also forges some new family law. The dissent by Shirley Abrahamson is on target.

Schwartz v. Federated Realty Group, Inc., 148 Wis.2d 419, 436 N.W.2d 34 (App.1988) is also on target. The Schwartzes submitted a loan application to a potential mortgage lender, which assured the Schwartzes that all information necessary to process the application had been received. The lender was aware of the projected closing date. Near the closing date, the lender required more financial information, and the closing never took place, the Schwartzes forfeiting their $2500 earnest money deposit. In the Schwartzes' action, the trial court dismissed the contract cause of action, relying principally on the fact that the lender did not agree to make a loan to the Schwartzes. The Court of Appeals reversed, holding that the Schwartzes had stated a cause of action for breach of an implied contract to process the application in timely fashion.

(n10)Footnote 10. ''Contracts may be express or implied. These terms however do not denote different kinds of contracts, but have reference to the evidence by which the agreement between the parties is shown. If the agreement is shown by the direct words of the parties, spoken or written, the contract is said to be an express one. But if such agreement can only be shown by the acts and conduct of the parties, interpreted in the light of the subject matter and of the surrounding circumstances, then the contract is an implied one.'' Shelly v. Bristol Sav. Bank, 63 Conn. 83, 26 A. 474 (1893) .

It is said in Peters v. Poro's Estate, 96 Vt. 95, 117 A. 244, 25 A.L.R. 615 (1922) : ''The terms 'express contract' and 'contract implied in fact' indicate a difference only in the mode of proof. A contract implied in fact is implied only in that it is to be inferred from the circumstances, the conduct, acts, or relation of the parties, rather than from their spoken words.''

To the same effect, see Trincia v. Testardi, 30 Del.Ch. 182, 57 A.2d 638 (1948) .

In Desny v. Wilder, 46 Cal.2d 715, 299 P.2d 257 (1956) , the court said: ''If it were not for precedent we should hesitate to speak of an implied-in-fact contract. In truth, contracts are either made in fact or the obligation is implied in law. If made in fact, contracts may be established by direct evidence. The only difference is in the method of proof. In either case they would appear to be express contracts.'' This case is noted at various places in this treatise.

See Van Rensselaer v. General Motors Corp., 223 F.Supp. 323 (E.D.Mich.1962) , aff'd, 324 F.2d 354 (6th Cir.) , cert. denied, 379 U.S. 874 , reh'g denied, 379 U.S. 951 , holding that the plaintiff who had submitted ''ideas'' for use in the interior of automobiles had alleged no facts showing either a promise by the defendant ''implied in fact'' or a quasi-contractual duty to pay for benefits received. Desny is distinguished.

(n11)Footnote 11. Illustrative cases of this kind are:

U.S. - Sylvan Crest Sand & Gravel Co. v. United States, 150 F.2d 642 (2d Cir.1945) ; Mills-Morris Co. v. Champion Spark Plug Co., 7 F.2d 38 (6th Cir.1925) . Also, New York Cas. Co. v. Sinclair Refining Co., 108 F.2d 65 (10th Cir.1938), where a surety company's assent to withdraw its reservation of a right to deny liability was, by implication, a promise to pay the judgment if it should be affirmed on appeal.

Minn. - American Druggists Ins. v. Thompson Lumber Co., 349 N.W.2d 569 (Minn.App.1984) A contractor bought lumber on credit. Monthly statements sent by the lumber supplier stated that all statements not paid within 10 days would be charged interest at a specified rate. The contractor was held to have impliedly agreed to pay interest. See also Butler Mfg. Co. v. Miranowski, 390 N.W.2d 380 (Minn.App.1986) (late charges). And see Rotzien-Furber Lumber Co. v. Franson, 123 Minn. 122, 143 N.W. 253 (1913) .

Mo. - Wright v. Fuel Oil Co., 342 Mo. 173, 114 S.W.2d 959 (1938) , where the plaintiff's effort failed to convince the court that the defendant had made the promise.

Pa.Super.-In Cohen v. Marian, 171 Pa.Super. 431, 90 A.2d 373 (1952) , a bank honored a long series of overdrafts, at the depositor's request, at the same time notifying him of a service charge. The court found that the depositor had impliedly promised to pay such charges, justifying the charges against his account.

See Chapter 25 ''Interpretation-The Process Called Implication,'' especially §§ 561, 562, and cases discussed in notes thereto.

(n12)Footnote 12. See § 1.17 above and § 144 below.

(n13)Footnote 13.

Ark. - Steed v. Busby, 268 Ark. 1, 593 S.W.2d 34 (1980) . The court looks at the possibility of a tacit renewal from the perspective of a course of dealing and then states: ''When an agreement expires by it's own terms, if without more the parties continue to perform as before, an implication arises that they have mutually assented to a new contract containing the same provisions as the old, and the existence of the new contract is determined by an ''objective'' test, i.e. whether a reasonable man would think from the actions, that they intended to make a new binding agreement... In such a case, when the parties continue to do business together, their conduct may permit, or even constrain a finding that they impliedly agree that their rights and obligations should continue to be measured as provided in the old contract.''

Cal. - British Motor Car Distributors, Ltd. v. New Motor Vehicle Bd., 194 Cal.App.3d 81, 239 Cal.Rptr. 280 (1987) . The court found an implicit extension of a Maserati dealership. Consequently, a clause of the dealership agreement that provided an automatic termination date could not be invoked and California's statutory termination procedure had to be followed.

Mass. - Steranko v. Inforex, Inc., 5 Mass.App.Ct. 253, 362 N.E.2d 222 (1977) , appeal after remand, 8 Mass.App.Ct. 523, 395 N.E.2d 1303 . The court, applying N.Y. law, states that when an employment relationship continues after the expiration of a contract, there is a presumption of renewal on a year to year basis, even where the original contract term was 18 months. Cf. Restatement of Contracts (Second) § 33 Ill. 6.

N.Y. -This section is cited in Cinefot International Corp. v. Hudson Photographic Industries, 13 N.Y.2d 249, 246 N.Y.S.2d 395, 196 N.E.2d 54, 6 A.L.R.3d 1347 (1963) . In November, 1957, the defendant contracted orally to employ the plaintiff as ''export manager'' on a commission basis for one year to begin January 1, 1958. This contract was fully performed and performance continued through 1959 and into 1960, when the plaintiff was discharged. The court held that the conduct of the parties was admissible to support an implication of a renewed contract for another year at the same terms, even though there had been no new agreement in words and even though the original contract made in 1957 was within the statute of frauds and unenforceable while executory.

N.C. - Smith v. Central Soya of Athens, Inc., 604 F.Supp. 518 (E.D.N.C.1985) (year to year chicken raising contract).

If the contract originally made is within the Statute of Frauds, the enforceability of its implied renewal or extension will be affected in some measure by that Statute. Where there was a written contract for two years' employment, a renewal for another two years would also require a written memorandum, whether made in express words or by implication. Jenkins v. King, 224 Ind. 164, 65 N.E.2d 121 (1946) .

(n14)Footnote 14. 2 Formation of Contracts: A Study of the Common Core of Legal Systems 1587-1589 (Rudoph B. Schlesinger ed. 1968); Holding Over after Expiration of a Tenancy, 1959 N.Y.L. Revision Commission Report 149.

(n15)Footnote 15. See the authorities in the previous footnote. An interesting case is First Capital Institutional Real Estate, Ltd. v. Pennington, 186 Ga.App. 617, 368 S.E.2d 165 (1988) . The lease did not provide for automatic renewal but contained a provision requiring the payment of double rent in the event that the tenants remained in possession of the premises beyond the original lease period without entering a new lease. The majority rejected the contention that the clause was an unlawful penalty.

(n16)Footnote 16. McKinney's-N.Y.Gen.Oblig.L. § 5-903.

(n17)Footnote 17.

U.S. -''An implied agreement like an express one, must be based on the evidence. The difference between an express and an implied contract is largely in the manner of establishing that there was a manifestation of assent. Although an agreement to compound a felony or settle a prosecution may be implied from the facts and circumstances, yet the law will not impute a promise where it would be unjust to the party to whom it would be imputed and where, as in the instant case, it would imply a promise to do not only an illegal but a criminal act... The mere expectation of the robbers that a criminal prosecution would not follow if the property were turned over, is not sufficient in itself to show either an express or an implied agreement to that effect.'' Fidelity & Dep. Co. v. Grand N. Bank, 69 F.2d 177 (8th Cir.1934) .

Mo. -This paragraph is quoted in State on Inf. of Dalton v. Miles Laboratory, 365 Mo. 350, 282 S.W.2d 564 (1955) , holding that a manufacturer and its distributor made an illegal contract (in the form of an ''understanding'') for resale price maintenance.