Avoid Handshake Deals: Implied Contracts & Breach of Terms

Defining Implied Contract

Implied contracts are agreements that exist between two parties for which there is no written documentation. Many people worry that, without documentation, a verbal agreement is not legally binding. However, under California contract law, oral contracts are just as legally binding as written contracts.

There are two general types of implied contracts:

  • Implied-in-fact contracts
  • Implied-in-law contracts

As defined by Cornell Law School, a contract implied in fact is a contract in which both parties have an obligation to each other, which arises from a mutual agreement and intent to promise. Implied-in-fact contracts do not need to be expressed in words to exist and be legally binding. Instead, the contract is implied based on the facts and circumstances of the parties' behavior regarding the deal.

Meanwhile, a contract implied in law (also referred to as a quasi-contract) is a contract or obligation imposed by the law as a remedy to prevent unjust enrichment. When there is no true contract in place (written or implied in fact), but the court determines that one party owes a legal responsibility to the other, the courts will consider it a contract implied in law.

What About Oral Contracts & Handshake Deals?

Oral (or verbal) contracts and handshake deals are implied contracts. In fact, most implied contracts are oral or verbal in nature. With an oral contract, the involved parties agree to an exchange of services and compensation but do not have a written contract outlining their terms. When someone breaches a verbal agreement, the injured party may be able to hold them accountable in court. The first step in doing so is proving that the oral contract existed in the first place.

Oral contracts are generally proved in court based on:

  • The behavior of both parties
  • Other communications between the two parties, including email, text messages, etc.
  • Whether any part of the contract was fulfilled
  • Witness testimony

Proving a verbal contract in court can be very difficult, and doing business this way is not recommended. If you have entered into an oral contract, you should collect as much documentation about that agreement as possible.

Review our recent blog for more information on proving implied contracts in court.

Is a Gentlemen's Agreement Legally Binding?

The term “gentlemen's agreement”typically refers to a casual or informal understanding between two parties. Much like an oral contract, there is no written contract for a gentlemen's agreement. However, unlike a verbal contract, a gentlemen's agreement is generally not legally binding and remains informal in nature. Instead, societal norms and social pressures encourage people to uphold their end of the bargain. Gentlemen's agreements only become legally binding when they can be classified as a true contract.

What to Do When an Implied or Oral Contract is Breached

When an implied contract is breached, you may have the option to bring a suit in court. However, you should contact an experienced attorney like ours at Polaris Law Group before doing so. Attorney Bill Marder has over 25 years of experience and has recovered millions of dollars for his clients.

You may wish to file a breach of implied contract suit in court if:

  • You suffered a financial loss
  • Your career was negatively affected
  • You were otherwise detrimentally affected

Most implied contracts exist in the workplace. Consequently, you may need to bring a suit against your employer if an implied contract was broken. This can feel overwhelming, but you do not have to go through this alone.

Reach out to Polaris Law Group online to schedule a consultation with an employment law attorney familiar with handling implied contract cases in California.