If you’ve ever visited a salon for a hair appointment and then headed into a bank to open a savings account — congrats!

By doing so, you have executed two types of everyday contracts, one implied and one express, by the time you leave the bank.

The main difference between the two is how they are formed: Express contracts are explicit, created verbally or in writing, whereas implied contracts are understood, defined by the actions of both parties.

Let’s dig in further to understand these two specific types.

Key takeaways

  • Express contracts are agreements where all the terms and conditions are clearly stated: written, spoken and/or electronic in nature.
  • Implied contracts are formed by behavior, conduct, or circumstance.
  • Express and implied contracts have legal weight when they meet a specific set of rules; however, it may be harder to enforce an implied contract in some circumstances.
  • Using contract management software and eSignatures are a reliable way to streamline express contract creation, execution, and avoid any misunderstandings by all parties.

What is an express contract?

An express contract is an agreement that is acknowledged verbally or signed.

Within this type of agreement, parties clearly communicate agreed-upon terms and conditions.

A real-life example of an express contract:

You decide to buy a car and have contacted a seller.

You like the new ride and verbally agree to an offer made by a seller.

While this could qualify as an express contract, you formalize things further by writing it down or, better yet, by using a car purchase agreement template to easily document the transaction.

An express contract is now formed and — if meeting necessary conditions — considered valid.

Regardless of whether the terms of the contract were spoken or written, an express agreement must adhere to certain specific elements in order for it to be legally binding.

These include:

  • Offer. One of the parties must make an offer for the contract to start forming.
  • Acceptance. The other party agrees and accepts the offer.
  • Object. The contract should be for a specific subject or object; otherwise, there is no contractual basis.
  • Consideration. Terms of the agreement should be clearly defined and agreed upon by both parties.
  • The intention of the parties to be legally bound. Each party must agree on the legal validity of the contract.
  • Contractual capacity. Both parties must be able to legally enter into the contract — conditions apply, and must be met, in order for the agreement to be upheld.
  • Awareness. Both parties understand that signing the contract means making the agreement legally binding. It must also be signed or agreed upon willingly — failure to do so may render the contract invalid.
  • Legality. Finally, contracts must also be compliant with all local and federal laws to be considered valid.

Do express contracts need to be in writing?

Express contracts do not necessarily need to be agreed upon in writing.

While verbal contracts can be legally binding when they meet regular elements of a contract, putting contract terms and conditions in writing is almost always a best practice.

When is an express contract unenforceable?

An express contract will not be enforceable if one or more of the criteria mentioned above aren’t met.

In addition, the contract would not be considered valid in the following cases:

  • Unconscionability: When one of the parties manipulates or misrepresents the information, forcing the other party to agree on terms.
  • Illegal subject matter: Express contracts containing illegal subjects / illicit subject matter are unenforceable.
  • Mistake: If a contract contains an honest mistake made by one or both parties that leads to an outcome different from the one being agreed on.
  • Force majeure: When unexpected circumstances, sometimes called “Acts of God” in contract language, make it impossible for parties to follow agreed-upon terms and conditions.

What is an implied contract?

An implied contract is an agreement defined by the actions of all parties — instead of being explicit like a verbal or written contract.

Both parties’ behavior or circumstances allow for a tacit understanding of forming an agreement.

A real-life example of an implied contract:

You order dinner in a restaurant.

And while you don’t actually sign something before you’re allowed to start eating, you are agreeing to receive food in exchange for payment after.

Implied contracts are as legally valid and enforceable as express ones.

For these contracts to hold legal weight, there must be clear evidence that the parties had an unspoken understanding and agreement that a contract had been formed.

Implied-in-fact contract

This type of implied contract is mostly defined by the behavior that signifies that both parties have an unspoken agreement.

For implied-in-fact contracts to be valid, they should have the following:

  • An offer and its acceptance;
  • Mutual agreement;
  • Consideration.

Implied-in-law contract

Such contracts — also known as quasi-contracts — are usually defined by a set of circumstances rather than by the behavior of the involved parties.

The key characteristic of this type of agreement is that it can be formed and valid even though neither party had the intention of creating it.

For example, a doctor is sitting at our same hypothetical restaurant.

A person at a nearby table suffers a medical event, and the doctor administers care to help support the person’s life until the paramedics arrive.

At a later date, that doctor submits a bill for his medical services to this person since, as a doctor, he should receive compensation even though the person didn’t ask for these services — and the doctor wasn’t planning on performing them at dinner.

What are the main differences between expressed and implied contracts?


 Express contracts Implied contracts
Body of an agreement A written or oral agreement with clearly defined terms and conditions Unwritten mutual assent inferred from circumstances or conduct of the parties
Validity and enforceability Valid when meets a specific set of rules and both parties agree verbally or in writing Valid when both parties understand and silently consent (can be valid even when neither party intended to create it)
Formation Can be formed through a clear offer and its acceptance Can be formed in an unspoken manner based on actions and behaviors alone

Use a contract management solution for all your contracting needs

PandaDoc’s contract management software acts as a one digital document repository, simplifying document organization, retrieval and helping you oversee contract workflow.

Once you go electronic, keeping all parties on the same page while e-signing and sharing contracts becomes a breeze.

With a vast choice of customizable contract templates and a library of pre-approved clauses, PandaDoc allows for streamlined and error-free contract creation, saving both time and effort.

Disclaimer

PandaDoc is not a law firm, or a substitute for an attorney or law firm. This page is not intended to and does not provide legal advice. Should you have legal questions on the validity of e-signatures or digital signatures and the enforceability thereof, please consult with an attorney or law firm. Use of PandaDoc services are governed by our Terms of Use and Privacy Policy.