Future Business Leaders of America (FBLA) Business Law Practice Exam

What is defined as an implied contract?

1. A contract created through written terms

2. A contract established through actions and circumstances rather than explicit agreement

3. A formal agreement with signatures from both parties

4. An agreement made in the presence of witnesses

The correct answer is: A contract established through actions and circumstances rather than explicit agreement

An implied contract is indeed established through actions and circumstances rather than through explicit verbal or written agreements. This type of contract is recognized by the law based on the behavior and conduct of the parties involved, indicating that they have entered into an agreement even though there was no formal or explicit stating of terms. For instance, when a person orders food at a restaurant, there is an implied contract that they will pay for the meal upon consumption, even though there may not be a spoken or written agreement to that effect. In contrast, the other options describe different types of agreements. A contract created through written terms specifically refers to explicit agreements documented in writing, which is not the focus of an implied contract. A formal agreement with signatures reflects a written contract where both parties have actively acknowledged and consented to the terms, which again does not align with the nature of implied contracts. Lastly, an agreement made in the presence of witnesses suggests a formality and acknowledgment that goes beyond the unspoken understanding typical in implied contracts. Thus, the essence of an implied contract lies in the established understanding between parties based on their actions rather than explicit statements.