Implied Contract

Definition

An implied contract is an agreement created by the actions, behavior, or circumstances of the parties involved, rather than through explicit verbal or written communication. These contracts often arise in employment situations where an employer's conduct or statements can lead an employee to reasonably believe they have job security or specific terms of employment that are not formally documented.

5 Must Know Facts For Your Next Test

1. Implied contracts can arise from employee handbooks or company policies that suggest job security and specific procedures for termination.
2. Courts may enforce implied contracts when the employee can demonstrate reliance on an employer's actions or statements that suggest job permanence.
3. In many states, an implied contract can create exceptions to the at-will employment doctrine, limiting an employer's ability to terminate employees without cause.
4. When assessing implied contracts, courts often consider the overall relationship dynamics, including verbal assurances and customary practices within the organization.
5. Promissory estoppel may come into play when an implied contract leads an employee to make significant life changes based on expectations set by their employer.

Review Questions

• How can actions or statements from employers contribute to the formation of an implied contract?
  • Actions or statements from employers can contribute to the formation of an implied contract by creating expectations of job security or specific employment terms. For example, if an employer frequently praises an employee's performance and suggests long-term employment during informal discussions, this may lead the employee to believe they have a secure position. Courts can recognize these circumstances as forming an implied contract if it can be shown that the employee relied on those assurances in their career decisions.
• What role does promissory estoppel play in protecting employees who rely on implied contracts?
  • Promissory estoppel plays a critical role in protecting employees who rely on implied contracts by preventing employers from denying those expectations once significant reliance has occurred. If an employee takes actions based on promises or assurances made by their employer—like moving for a job or turning down other offers—they may seek relief under promissory estoppel if they face negative consequences as a result of that reliance. This principle reinforces the importance of clear communication in employment relationships and holds employers accountable for their implied commitments.
• Evaluate the implications of implied contracts in the context of wrongful termination claims and constructive discharge scenarios.
  • Implied contracts significantly impact wrongful termination claims and constructive discharge scenarios by establishing expectations between employees and employers that may not be explicitly documented. If an employee can demonstrate that their termination violated an implied contract—such as being let go without following stated procedures in a handbook—they may have grounds for a wrongful termination claim. Similarly, if the work environment becomes intolerable due to breaches of those implied terms, leading to constructive discharge, employees may assert claims based on the premise that their expectations were unfairly undermined. This evaluation highlights how implied contracts serve as a safeguard for employees' rights and help maintain fair employment practices.

Related terms

At-Will Employment: A type of employment relationship where either the employer or employee can terminate the relationship at any time, for any lawful reason, without prior notice.

Promissory Estoppel: A legal principle that prevents a party from withdrawing a promise made to another party when the latter has relied on that promise to their detriment.

Constructive Discharge: A situation where an employee resigns due to an employer creating a hostile work environment, making it intolerable for the employee to continue working there.