A contract is vital when approaching a business agreement. In Kentucky, there are different types of contracts, written and implied. It’s important to understand the difference.
Employment Contracts
Whether you are the employee or employer, having a clear understanding of your relationship with one another is critical. A contract, written or implied, will guide you through the complex grounds of this business arrangement. Written contracts are just this, they state what the expectations are of each party, responsibilities, and benefits. Often, employees aren’t aware of what the contract states if they are to terminate their employment. For instance, whether they can work with a competitor of the employer.Most likely the implied employment contract will not state the details in writing, but use statements made during conversations during employee and employer. These discussions may have taken place during the interview process or as the employee’s responsibilities may change during employment. It may be possible that one’s pay or benefits may increase if their title changes with the newly assigned responsibilities.
What Is a Written Business Contract?
A written contract is the most straightforward and enforceable type of agreement. It is a document that clearly outlines the terms and conditions agreed upon by two or more parties.
Key Characteristics of Written Contracts
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- Clearly documented in physical or digital form
- Signed (or electronically agreed to) by all parties
- Includes specific terms such as scope, payment, timelines, and responsibilities
- Often reviewed and negotiated before signing
Examples of Written Contracts
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- Service agreements between a contractor and client
- Employment agreements
- Lease agreements for commercial property
- Vendor or supplier contracts
Why Written Contracts Matter
Written contracts are valuable because they:
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- Reduce misunderstandings
- Provide clear legal evidence in disputes
- Define responsibilities and expectations upfront
- Make enforcement in court much easier
If there is ever a disagreement, the written document is typically the first—and strongest—piece of evidence reviewed.
What Is an Implied Business Contract?
An implied contract is not written down or explicitly stated in a formal document. Instead, it is created through actions, behavior, or circumstances that indicate both parties intended to enter into an agreement.
There are two main types:
- Implied-in-fact contracts (based on behavior and mutual understanding)
- Implied-in-law contracts (quasi-contracts) (created by courts to prevent unfair enrichment)
For business owners, the most common concern is the implied-in-fact contract.
Signs of an Implied Contract
You may be dealing with an implied contract if:
- A customer regularly pays for a service after receiving it, without a written agreement
- A vendor continues delivering goods based on past behavior rather than a renewed contract
- Work begins after a verbal agreement and consistent performance follows
- One party reasonably expects payment or service based on established conduct
Example Scenario
A marketing consultant starts managing a company’s social media after a brief phone call. The company begins receiving work and pays invoices monthly, even though no formal agreement was signed. Over time, a legally binding implied contract may exist based on the behavior of both parties.
Key Differences Between Written and Implied Contracts
Here’s how to distinguish them clearly:
1. Form of Agreement
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- Written Contract: Documented and signed
- Implied Contract: Based on actions and circumstances
2. Clarity of Terms
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- Written Contract: Specific and detailed
- Implied Contract: Vague or inferred from behavior
3. Proof in Legal Disputes
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- Written Contract: Easy to present as evidence
- Implied Contract: Requires witness testimony, emails, invoices, or behavioral patterns
4. Risk Level
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- Written Contract: Lower risk due to clarity
- Implied Contract: Higher risk due to ambiguity
When an Implied Contract Becomes Legally Binding
One of the biggest misconceptions in business is that “no signature means no contract.” That is not always true.
Courts may enforce an implied contract when:
- One party provides a service or product
- The other party knowingly accepts the benefit
- There is an expectation of payment or compensation
- The behavior of both parties shows mutual agreement
If these elements are present, a court may decide that a contract exists—even if nothing was written down.
Common Business Risks With Implied Contracts
Operating without written agreements can create serious risks:
1. Payment Disputes
A client may argue they never agreed to pay a certain rate or scope.
2. Scope Creep
Work expectations expand beyond what was originally intended.
3. Miscommunication
Each party assumes different terms were agreed upon.
4. Legal Exposure
You may unintentionally be bound to obligations you never formally accepted.
How to Protect Your Business
To reduce reliance on implied agreements, businesses should:
1. Use Written Contracts for Everything
Even small jobs or short-term services should have a written agreement.
2. Confirm Agreements in Writing
Follow up verbal discussions with email confirmations summarizing:
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- Scope of work
- Pricing
- Timeline
3. Standardize Terms
Use templates for recurring services to eliminate ambiguity.
4. Document All Work and Communication
Keep records of:
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- Emails
- Invoices
- Purchase orders
- Delivery confirmations
5. Set Clear Expectations Early
Make it standard practice to say: “We’ll send over a written agreement before starting.”
How Courts Typically View Each Type
In general:
- Written contracts are favored because they reduce uncertainty.
- Implied contracts are used as a fallback when no written agreement exists but fairness requires enforcement.
However, courts will not create a contract where none was intended—there must be evidence of mutual understanding or benefit exchange.
Final Thoughts
The difference between a written and implied business contract often comes down to one thing: clarity versus assumption.
Written contracts protect all parties by clearly defining expectations before work begins. Implied contracts, while legally valid in many cases, introduce uncertainty that can lead to disputes, misunderstandings, and financial risk.
For any business operating in today’s fast-moving environment, the safest strategy is simple: If there is an agreement worth acting on, it is worth putting in writing.
Contact (859-746-0500) Michael O’Hara, PLLC for a Consultation
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About Michael A. O’Hara, PLLC
About Michael A. O’Hara, PLLCWhen you have to deal with the justice system – whether related to a civil or criminal matter – you need more than the truth on your side. You need a skilled attorney who can employ sound legal strategies to produce the results you are hoping for. I am attorney Michael A. O’Hara, and I am licensed to practice in Kentucky and Ohio at the state level, as well as in Federal District Court and the Federal Court of Claims. I have been representing clients in the Northern Kentucky/Greater Cincinnati area since 1994.