What is a Contract?

In its simplest form, a contract is simply a promise.  It’s when one party makes a promise, generally in exchange for the other party’s bargained-for promise.   What is a contract? The U.S. Supreme Court has stated: “A contract is defined to be an agreement between two or more persons to do or not to do a particular thing.”  Charles River Bridge v. Warren Bridge, 36 U.S. 420 (1837). A contract can be “express,” a contract can be “implied in fact,” meaning implied from the actions of the parties themselves, and there is also an “implied in law” contract, which is really an equitable remedy, and not a contract at all.  Let’s look at some Florida cases that discuss the question “what is a contract?”

What is a Contract? Express vs. Oral Contract

Express Contract

An express contract is the most common type of contract. In an express contract, you don’t really need to ask “what is a contract,” because the parties’ own words form the contract. The parties’ words can be either written or they can be spoken (oral). So an express contract means a written contract and express contract also means an oral contract.

Before an express contract can be formed, however, there must be an offer, an acceptance of the offer, and consideration.  Additionally, the terms of the contract must be sufficiently definite.  There are many Florida contract law cases that discuss the requisites to form a contract or that otherwise address the question, what is a contract.

Oral Contract

Oral contracts (a type of express contract) are enforceable contracts under Florida law.  The party asserting that an oral contract exists bears the burden of proving the terms of the contract.  What is a contract in this case?  The rules governing oral contracts are generally the same as the rules governing written contracts, as the Florida Supreme Court stated in St. Joe Corp. v. McIver, 875 So.2d 375 (Fla. 2004):

An oral contract, such as the one in this case, is subject to the basic requirements of contract law such as offer, acceptance, consideration and sufficient specification of essential terms.

What is a Contract? Implied In Fact Contract

An implied in fact contract is a contract that is shown to exist solely by the facts of the particular case and the course of conduct of the parties.  Implied in fact contracts can only arise in situations in which the parties have dealings with one another, so that there are “facts” on which to imply a contractual relationship.  What is a contract in this situation?  The most common implied in fact contract is where one person supplies services or goods to another person and no price is specified.  To prevail on an implied in fact contract theory, you must show that 1) the other party accepted the services or products, 2) the other party was aware that the provider of the services or products expected to be paid, and 3) the recipient was unjustly enriched.  Hermanowski v. Naranja Lakes Condominium No. Five, Inc., 421 So. 2d 558 (Fla. 3d DCA 1982).

For example, a painting company and a homeowner speak on the phone about a new paint job, but don’t finalize a deal. The painting company arrives the next day while the homeowner is home and proceeds to paint the entire home while the homeowner watches.  After they finish painting, the homeowner refuses to pay, saying they don’t have a contract. In this case, an implied in fact contract arises because 1) the homeowner voluntarily accepted the services, 2) the homeowner knew the painters expected to be paid for their work, and 3) the homeowner was unjustly enriched as he received a new paint job free of charge, at the expense of the painting company.

So how much can you get for breach of an implied in fact contract?

Quantum Meruit Recovery

A party who proves an implied in fact contract exists can recover monetary damages for breach that are measured in “quantum meruit.” (Latin for “how much he deserves”).  Quantum meruit simply means the reasonable value of the services provided and the market value of the materials provided.  Moore v. Spanish River Land Co., 159 So. 673, 674 (Fla. 1935).

For example, an unlicensed construction contractor who is not paid cannot sue to enforce the contract (Florida law prohibits unlicensed contractors from suing), but can recover under quantum meruit for the reasonable value of the services and the market value of the products supplied.  Similarly, a party to a contract that is barred under the statute of frauds may be able to recover under a quantum meruit theory.  Instead of just asking, “What is a contract? The law does the right thing and supplies the missing contract price by asking what a reasonable person would pay to obtain the same services and materials on the open market.

 What is a Contract? Implied in law contract

An implied in law contract, or “quasi contract” as it is sometimes called, is really more of an equitable remedy rather than a breach of contract action.  It is a court imposed remedy that allows a damaged party

For example, in a famous Florida case, Tipper v. Great Lakes Chemical Co., 281 So. 2d 10 (Fla. 1973), a police chief received a 911 call about a tractor trailer crash that caused a chemical spill, so he called in a local chemical expert to help.  The expert worked 5-6 hours in extremely dangerous conditions, helped resolve the chemical spill, then had to go to the hospital the following day, where he was admitted for 3 weeks and was in critical condition part of the time.  The expert demanded worker’s compensation coverage from the chemical company (the owner of the truck and spilled chemicals), but the company denied any liability because it never met the expert, did not hire the expert, and in fact, did not know anything about the expert responding to the accident.

The Florida Supreme Court held that that there was a contract between the chemical company and the expert, which was implied in law, because of the emergency service and great benefit the expert conferred upon the chemical company.  The company’s office was in Arkansas, and it had nobody in Florida who could have possibly responded to the accident to help contain the spill and reduce the chance of injuring members of the public, or doing damage to the environment.  Thus, the expert received worker’s compensation to pay for his injuries, or as the court stated, “A contract of employment, implied in law, arose out of this performance and the claimant is now entitled to workmen’s compensation.”  Great Lakes Chemical was certainly wondering after this decision, what is a contract?

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