Contracts implied-in-fact like a form of will expression

<http://lorenz.userweb.mwn.de/urteile/BGHZ_91_324.htm> accessed 06 March 2023.

This allows us to conclude that the performance of conclusive actions may not directly correlate with the awareness of their significance. This position is not relevant for cases of agreements with defects of will, under the influence of delusion or when a person is not aware of his actions at all (mental illness, intoxication, incapacity, limited legal capacity).

Another illustrative example of the problem is the case of the parking lot in Hamburg. In 1953, the Hamburg senate converted certain parking areas into paid parking spaces. Near these places, signs were installed with the inscription “Parking is paid and guarded”. Despite this signage, the defendant regularly parked their car and refused to pay for parking. The defendant argued that he did not require the protection of his vehicle. However, the court, notwithstanding, ordered him to pay for parking. Hamburger Parkplatzfall [1956] BGHZ 21, 319 <https://lorenz.userweb.mwn.de/urteile/ bghz21_319.htm> accessed 06 March 2023.

During the court session, a critical opinion was voiced. The judge said that to conclude a contract, the party must consent. Since the defendant did not consent, the agreement was not established, leading to non-contractual relations between the parties. Such an approach enables us to seek compensation even if the party did not knowingly enter into the contract. We have to use two algorithms for contracts. The first arises when a person understands he has concluded to agree and consents willingly. The second occurs when a person does not intend to enter into a contract but takes conclusive actions that cause damage to the other party.

A contract implied in fact expresses will when the parties enter into a legal relationship by performing actions the other party understands as a desire to enter into a contract. Because of this, the desire for clear consequences is essential. Each contract provides for the emergence of specific rights and obligations. If the parties attach a different meaning to their actions, the question of determining the deed's fictitiousness arises.

This can be illustrated using the example of an auction. Let us imagine that the auctioneer and the visitor have agreed that he will raise his hand to raise the bid. They aim to increase the lot's value, not make the deal. If the visitor raises his hand and no one raises the bid after him, no obligations will arise between him and the auctioneer. This is justified because their purpose was not to conclude a sales contract. And although conclusive actions were formally taken to agree, legal relations will not arise. The main feature of a fictitious deed lies in the inconsistency of the internal and external will of all involved participants in the legal relationship, and the underlying purpose may even be illegal (for example, hiding property from confiscation), yet this does not affect the recognition of the deed as fictitious.

ANALYSIS OF SOME PRACTICES OF APPLYING CONTRACT IMPLIED IN FACT

Contracts implied in fact are actively used in everyday life. Here are a few examples: buying or exchanging currency through machines, purchasing goods in self-service stores, paying for public transport through terminals, giving gifts by transferring a symbol (for example, car keys), paying for services without signing the corresponding act of services rendered.

D. Birk offered other examples: 1) a customer who puts goods on the cash register in a store declares that he wants to buy it; 2) a raised glass at the bar means: I will order the same drink again; 3) raising a hand during an auction means placing a bid; 4) passing through a customs gate with a green marking when entering the country is an implicit customs declaration and says: I declare that I have nothing to declare; 5) payment of a tax refund by the tax inspectorate after submitting a tax declaration. Dieter Birk, Steuerrecht (11 aufl, Muller CF in Huthig Jehle Rehm 2008).

The given list of examples of implied-in-fact contracts in everyday life is indeed not exhaustive. Implied-in-fact contracts should be understood as a form of will expression, not a particular type of contract. Essentially, any contract can be construed as an impliedin-fact contract, except those mandated to be in written form. For example, a passenger and baggage transportation contract can be concluded in different forms (in writing, by conclusive actions or verbally). In this case, boarding the passenger on the bus or dropping the token into the turnstile will be conclusive actions. The indicated actions will be recognised as a direct expression of the passenger's will, which confirms his desire to conclude a contract of carriage. A similar situation can be cited for the retail sales contract. However, reducing conclusive actions only to use terminals and vending machines is incorrect.

M. Eisenberg considered an interesting case: “Every day Mary Moore passes a produce store on her way to work and stops to buy an apple for lunch. One day, Moore is in a hurry to catch her bus, so she takes an apple from a bin outside the store, catches the shopkeeper's eye, and waves the apple at him. The shopkeeper nods back. Even though Moore didn't say, “I offer to buy this apple for the price posted on the bin”, that is implied from her waving the apple at the shopkeeper and her past practice, and even though the shopkeeper did not say, “I accept your offer,” that is implied from his nodding his head and his past practice. Because an implied-in-fact contract is real, the usual remedy for breach of an implied-in-fact contract is expectation damages. Whether the defendant was unjustly enriched is normally irrelevant.” Melvin A Eisenberg, Foundational Principles of Contract Law (Oxford commentaries on American law, OUP 2018) 493-6, doi:10.1093/oso/9780199731404.003.0035.

This example demonstrates two principles that are necessary for implied-in-fact contracts. First, conclusive actions can be applied in the frames of customary law. In the proposed example, we saw that an established custom arose between Mary Moore and the seller when the buyer took the apple, waved his hand, and paid for the goods later. If another person did the same, his actions would be classified as theft or unjust enrichment. In this example, a retail sales contract concluded as an implied-in-fact contract. Customary norms created the rules of the agreement. Secondly, if conclusive actions were not agreed on to express will between the parties, there are grounds for compensatory relations. If a third party saw Mary Moore's actions and took the apple, but there was no nod from the seller, that person would have to reimburse the value of the apple. In this case, we would use a compensatory mechanism.

An implied contract is based on the presumption of intent, which allows us to recognise that the parties to the agreement a priori seek to achieve its purpose and fulfil its obligations. In this example, we see another confirmation of the hypothesis that contracts are based on the parties' intentions. For implied-in-fact contracts, the expression of the parties' will must indicate the desire to covenant. In the opposite case, the contract will not be concluded if no acceptance is received from the other party. In this case, obligations to compensate for damage will arise.

We know cases when implied-in-fact contracts are used in less common circumstances. Take the case Copyright v. Implied-in-Fact Contract as an example. Forest Park developed an idea for a series and pitched it to Universal TV, who liked the concept but declined to buy it. Later, Universal TV released a new series bearing striking similarities to Forest Park's ideas, leading to a dispute between the parties in question.

To prove a violation of the terms of the contract, it is necessary to provide evidence of the existence of the agreement itself, which must contain a provision on the obligation to make payment in case of the presented ideas used. While Forest Park and Universal TV had agreements requiring payment for idea usage, it was a daily practice to conclude contracts implied in fact without compensating the creator. The court assumed that the parties understood the payment procedure for the proposed idea. Still, Universal insisted that the agreement did not specify the payment amount, so no contract was formed. Forest Park insisted that Universal had agreed to pay for using the idea at an “industry standard”. In court, Forest Park had to prove the existence of an industry-standard price and establish similar arrangements. Bruce Strauch, Bryan M Carson and Jack Montgomery, `Cases of Note-Copyright vs Implied-in-Fact Contract' (2013) 25(2) Against the Grain 56, doi:10.7771/2380-176X.6490.

In this case, the application of the implied-in-fact contract is unambiguous. The main issue in this dispute should be proving the kinship of the ideas of the series. When Universal used Tove and Hayden's ideas, they took conclusive action. Even if it is recognised that there is no implied-in-fact contract between them, Universal has the obligation to compensate for damage and unreceived remuneration.

CONCLUSIONS

Implied-in-fact contracts, like all other contracts, require the parties' will. Guided by their own free will, the parties take actions that involve the conclusion of an agreement. Taking conclusive actions may not be directly related to the awareness of their meaning. However, for contracts implied in fact, even accidental activities can create legal consequences. This is demonstrated in detail in the Trier wine auction case example. However, this concept is not relevant for cases of agreements with defects of will, under the influence of delusion or when a person is not aware of his actions at all (mental illness, intoxication, incapacity, limited legal capacity).

Implied-in-fact contracts should not be understood as different types of contracts because they are a form of agreement and will expression. Any arrangement can be concluded like a implied-in-fact contract. The only exceptions are contracts for which written form is mandatory.

This is confirmed by the fact that the same contract can be concluded orally, in writing, or conclusively. For example, a passenger transportation contract can be concluded by signing a written agreement with the carrier, in verbal form, or as an implied-in-fact contract. The choice of contract form will not affect its content and subject matter.

At the same time, contracts must comply with all general requirements established for contracts. For example, the party should study the terms and conditions of the agreement, particularly when concluding a contract using vending machines and terminals. In such cases, the precise terms of the agreement must either be visibly displayed on the devices' surface or presented in electronic form for review. In any case, an individual must have the opportunity to familiarise himself with the terms of the contract in an accessible and understandable form. Failure to do so would violate the principles of contract law, leading to the deed's invalidity.

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