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Understanding the Nature of Implied and Oral Contracts

By Edited Jan 9, 2016 1 0

An implied contract is an agreement between two parties that is not found or put into a formal contract. This kind of contract often happens between seller and buyer and employer and employee. While an implied contract is not put on paper, the fact that both parties have agreed to it is enough to make it a binding agreement.

In a company, implied contracts are forged when an employer offers something related to employment and the employee accepts it. Another scenario is when an employer tells his worker that he would not be terminated as long as he performs his job well. Although the employer may not know it, the employee may hold on to his word. In this example, the offer is the owner's regularization of employment, which was accepted by the employee. If implied and oral contracts are agreements per se, what could possibly go wrong?

Because implied contracts are not written on paper, one of the two parties may forget about it. When this happens, the other party would have the right to file charges for breach of contract. If you are an employer reading this article, you better be careful with what you are saying. You would not want to get involved in a breach of contract lawsuit would you? If you don't, here are some factors you may consider:

  • If you want to have an implied agreement with your employee, make sure it is legal.
  • If the employee agrees with your proposition or accepts your offer, then you have an agreement that should be followed just like a formal contract.
  • Implied and oral contracts can become binding even without an explicit agreement coming from the two parties.
  • If one of the parties violates the conditions of the implied contract, the other participant may file a complaint against it.

There is nothing bad in giving good statements and remarks to employees. What an employer should remember though is the fact that just a simple phrase such as "keep up the good work" may mean something to an employee. It may mean that because you are pleased with his work, you would not terminate or fire him. The ultimate secret to avoid making implied and oral contracts is by carefully choosing your words.

But if you really want to make such an agreement with the employee, you may just include it in the employment contract. You can ask a Los Angeles labor attorney for more legal information related to implied and oral contracts.

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