Benefit in Implied-in-Law and Implied-in-Fact Contracts
Saturday February 12, 2011
In the Fall Term, we saw that reliance plays an important role in determining the enforceability of the promise on which the promisee relied. If the promisee’s reliance was bargained for, it represents the consideration advanced by the promisee in support of the promisor’s promise. If the promisee’s reliance was unbargained for, it cannot be consideration, but in appropriate circumstances it might justify the enforcement of the relied-upon promise even though there is no consideration. In our discussion of implied-in-fact and implied-in-law contracts, we see that just as reliance, bargained for or unbargained for but foreseeable was important in enforceability determinations, so too is benefit important in determining the presence of an implied-in-fact or implied-in-law contract. The role that benefit plays is not, however, articulated with the care that is appropriate. I intend to try to attempt to provide a rationale for the use of benefit, though a different use, in each. The courts often discuss benefit both in implied-in-fact and implied-in-law contracts without explaining what role the benefit plays in determining the existence of a contract for which we do not have conventional offer and acceptance or, indeed, any other form of articulated contract formation.
The role of benefit in implied-in-law contracts is perfectly clear. Once we see that an implied-in-law contract, also called a quasi-contract and increasingly referred to as an application of the principles of restitution. is to provide a solution to the unjust circumstance of the defendant having benefitted from the actions of the plaintiff without payment to the plaintiff of the value of the benefit received by the defendant. The paradigm case is the one we considered in Nursing Care Services, Inc. v. Dobos (casebook page 504). The court constructs an implied-in-law contract to require Mary Dobos to pay to Nursing Care Services bills arising out of nursing care provided without any articulated contract. The court acknowledges the possibility of instances in which the benefit received from the plaintiff may have been “foisted” on the defendant - that the plaintiff may be an “officious intermeddler,” but states that the record before the court suggested just the opposite - that defendant had welcomed the care, but had thought that some other person or entity would pay the bill. There can be no doubt that without the benefit, there would have been no valid claim. The theory of action, whether it be called implied-in-law contract, unjust enrichment, quasi-contract or restitution, is that if a court finds that the defendant ought to pay the plaintiff because of benefits received by defendant from plaintiff, then the defendant must pay the defendant.
It is more difficult to understand the role of benefit in implied-in-fact contracts situations. In Day v. Caton (casebook page 511), the court finds that an implied-in fact contract exists because the plaintiff had built the party wall with the knowledge of defendant and that defendant knew that the plaintiff wanted to be compensated for the wall which would equally benefit the plaintiff and the defendant. The court tells us that the nature of implied-in-fact contract is that the court infers from the facts the existence of a contract, though words of contract have never passed between the parties. The court finds the source of such an inference in the benefit which the defendant “voluntarily accepts and avails himself of valuable services rendered for his benefit, when he has the option whether to accept or reject them.”
Looking closely at these two cases, you could draw the following conclusion: benefit is a necessary component of both doctrines but serves a very different role. In implied-in-law contracts it is the benefit which must be balanced by a recovery in restitution by the plaintiff in order to avoid the injustice caused by the defendant’s retention of an unpaid for benefit. In implied-in-facts contracts, the existence of the benefit provides the basis for the inference that the parties have formed a contract. At that point, contracts law takes over the task of determining the remedy. As the notes following these cases suggests, the remedy for breach of an implied-in-law contracts is in restitution, that is, the defendant must pay to the plaintiff the monetary equivalent of the value the defendant had received from plaintiff. Remedy for breach of an implied-in-fact contract is based on the market value of the plaintiff’s services. In a conventional contract the remedy for goods delivered or services received would be the price, but in the implied-in-fact contract, there may very well be no basis for finding an agreed-upon price. The market value of the goods or services delivered becomes, therefore, the basis for recovery (the assumption being that the price of the good or service would be the market price of such goods or services at the time and place they were delivered).
There is a reasonable logical basis for this distinction. Its application is more difficult. Could the Dobos case have been treated as an implied-in-fact contract? After all, like the defendant in Day v. Caton, Mary Dobos knew about the services she was receiving and understood that these were not gift services but rather that plaintiff expected to be paid. She accepted the benefit under those circumstances even though she could have rejected those services (at least those of which she was aware). That sounds like it satisfies the criteria of an implied-in-fact contract, but the court says the action is an implied-in-law contract. The remedy in the Dobos case appears to be the ordinary charges of Nursing Care Services. The remedy is not, as far as one can tell, arrived at by quantifying the benefits Mary Dobos received from the nursing services rendered to her. This appears to be the remedy more appropriate to an implied-in-fact than to an implied-in-law contract.
Equally mysterious is the decision in Bastian v. Gafford. The court was obviously disinclined to apply the doctrine of implied-in-law contract because the building ultimately constructed for Gafford had not used the plans created by Bastian. The suit by Bastian sought recovery for the value of the plans Bastian had prepared for Gafford. Of course the problem with applying implied-in-fact contract to these facts, as the court suggests in remanding for a new trial, is rooted in the same problem that Gafford had received no “benefit” from Bastian. Gafford did have the set of plans, of course, but didn’t use them and we are told of no use that Gafford can or will make of those plans. The question for the new trial court will be whether receipt of those unused plans suffices to be the source of an inference that a contract existed between Bastian and Gafford for Gafford to pay Bastian for the plans whether or not he used them. Of course the truth of the matter may be that Gafford had, in fact, benefitted from the plans because with them he established a relationship with a bank which ultimately financed Gafford’s building. But if that is the benefit Gafford received, finding an implied-in-law contract based on that benefit could have resulted in a verdict for Bastian equal to the value of the Gafford-bank relationship to Gafford. As an implied-in-fact contract, the remedy would, presumably, be the market price of hiring a builder to draw up plans for a building.
Finally, could Day v Caton have been decided on the basis of an implied-in-law contract? An important benefit had been conferred upon the defendant by the plaintiff. The defendant must have understood that plaintiff did not intend to make a gift to defendant. If the court believed that failure of defendant to contribute part of the cost of the party wall was unjust, the facts of the case satisfy the element of contract implied-in-law.
Decisions like that of the Supreme Court of Maine in Paffhausen v. Balano (casebook page 516) recite the conventional distinction between implied-in-fact and implied-in-law contracts and the remedies appropriate to each. This discussion of the cases, however, suggests that the distinction is easy to make but hard to apply. You know, of course, my view about such difficulties from the point of view of a practicing lawyer - you need to know both and argue them alternatively, using the correct elements belonging to each and the correct remedy belonging to each.
The role of benefit in implied-in-law contracts is perfectly clear. Once we see that an implied-in-law contract, also called a quasi-contract and increasingly referred to as an application of the principles of restitution. is to provide a solution to the unjust circumstance of the defendant having benefitted from the actions of the plaintiff without payment to the plaintiff of the value of the benefit received by the defendant. The paradigm case is the one we considered in Nursing Care Services, Inc. v. Dobos (casebook page 504). The court constructs an implied-in-law contract to require Mary Dobos to pay to Nursing Care Services bills arising out of nursing care provided without any articulated contract. The court acknowledges the possibility of instances in which the benefit received from the plaintiff may have been “foisted” on the defendant - that the plaintiff may be an “officious intermeddler,” but states that the record before the court suggested just the opposite - that defendant had welcomed the care, but had thought that some other person or entity would pay the bill. There can be no doubt that without the benefit, there would have been no valid claim. The theory of action, whether it be called implied-in-law contract, unjust enrichment, quasi-contract or restitution, is that if a court finds that the defendant ought to pay the plaintiff because of benefits received by defendant from plaintiff, then the defendant must pay the defendant.
It is more difficult to understand the role of benefit in implied-in-fact contracts situations. In Day v. Caton (casebook page 511), the court finds that an implied-in fact contract exists because the plaintiff had built the party wall with the knowledge of defendant and that defendant knew that the plaintiff wanted to be compensated for the wall which would equally benefit the plaintiff and the defendant. The court tells us that the nature of implied-in-fact contract is that the court infers from the facts the existence of a contract, though words of contract have never passed between the parties. The court finds the source of such an inference in the benefit which the defendant “voluntarily accepts and avails himself of valuable services rendered for his benefit, when he has the option whether to accept or reject them.”
Looking closely at these two cases, you could draw the following conclusion: benefit is a necessary component of both doctrines but serves a very different role. In implied-in-law contracts it is the benefit which must be balanced by a recovery in restitution by the plaintiff in order to avoid the injustice caused by the defendant’s retention of an unpaid for benefit. In implied-in-facts contracts, the existence of the benefit provides the basis for the inference that the parties have formed a contract. At that point, contracts law takes over the task of determining the remedy. As the notes following these cases suggests, the remedy for breach of an implied-in-law contracts is in restitution, that is, the defendant must pay to the plaintiff the monetary equivalent of the value the defendant had received from plaintiff. Remedy for breach of an implied-in-fact contract is based on the market value of the plaintiff’s services. In a conventional contract the remedy for goods delivered or services received would be the price, but in the implied-in-fact contract, there may very well be no basis for finding an agreed-upon price. The market value of the goods or services delivered becomes, therefore, the basis for recovery (the assumption being that the price of the good or service would be the market price of such goods or services at the time and place they were delivered).
There is a reasonable logical basis for this distinction. Its application is more difficult. Could the Dobos case have been treated as an implied-in-fact contract? After all, like the defendant in Day v. Caton, Mary Dobos knew about the services she was receiving and understood that these were not gift services but rather that plaintiff expected to be paid. She accepted the benefit under those circumstances even though she could have rejected those services (at least those of which she was aware). That sounds like it satisfies the criteria of an implied-in-fact contract, but the court says the action is an implied-in-law contract. The remedy in the Dobos case appears to be the ordinary charges of Nursing Care Services. The remedy is not, as far as one can tell, arrived at by quantifying the benefits Mary Dobos received from the nursing services rendered to her. This appears to be the remedy more appropriate to an implied-in-fact than to an implied-in-law contract.
Equally mysterious is the decision in Bastian v. Gafford. The court was obviously disinclined to apply the doctrine of implied-in-law contract because the building ultimately constructed for Gafford had not used the plans created by Bastian. The suit by Bastian sought recovery for the value of the plans Bastian had prepared for Gafford. Of course the problem with applying implied-in-fact contract to these facts, as the court suggests in remanding for a new trial, is rooted in the same problem that Gafford had received no “benefit” from Bastian. Gafford did have the set of plans, of course, but didn’t use them and we are told of no use that Gafford can or will make of those plans. The question for the new trial court will be whether receipt of those unused plans suffices to be the source of an inference that a contract existed between Bastian and Gafford for Gafford to pay Bastian for the plans whether or not he used them. Of course the truth of the matter may be that Gafford had, in fact, benefitted from the plans because with them he established a relationship with a bank which ultimately financed Gafford’s building. But if that is the benefit Gafford received, finding an implied-in-law contract based on that benefit could have resulted in a verdict for Bastian equal to the value of the Gafford-bank relationship to Gafford. As an implied-in-fact contract, the remedy would, presumably, be the market price of hiring a builder to draw up plans for a building.
Finally, could Day v Caton have been decided on the basis of an implied-in-law contract? An important benefit had been conferred upon the defendant by the plaintiff. The defendant must have understood that plaintiff did not intend to make a gift to defendant. If the court believed that failure of defendant to contribute part of the cost of the party wall was unjust, the facts of the case satisfy the element of contract implied-in-law.
Decisions like that of the Supreme Court of Maine in Paffhausen v. Balano (casebook page 516) recite the conventional distinction between implied-in-fact and implied-in-law contracts and the remedies appropriate to each. This discussion of the cases, however, suggests that the distinction is easy to make but hard to apply. You know, of course, my view about such difficulties from the point of view of a practicing lawyer - you need to know both and argue them alternatively, using the correct elements belonging to each and the correct remedy belonging to each.