Opinion ID: 2805587
Heading Depth: 3
Heading Rank: 2

Heading: Implied-In-Fact Contracts

Text: In the absence of an express contract between the parties governing a particular subject matter, an implied contract may exist. County of Campbell v. Howard, 133 Va. 19, 54-55, 112 S.E. 876, 886 (1922); Ellis & Myers Lumber Co. v. Hubbard, 123 Va. 481, 502, 96 S.E. 754, 760 (1918). Like an express contract, an implied-in-fact contract is created only when the typical requirements to form a contract are present, such as consideration and mutuality of assent. City of Norfolk, 120 Va. at 361-62, 91 S.E. at 821-22. However, an implied-in-fact contract is arrived at by a consideration of [the parties'] acts and conduct. Id. at 362, 91 S.E. at 821.
The circuit court concluded that, between Spectra-4 and Uniwest, and between Spectet and Uniwest, implied-in-fact contracts governed Uniwest's management services for each commercial building. This was not error. 10 The record reflects that, even though no oral or written agreement was executed between the parties, Uniwest provided Spectra-4 and Spectet management services for approximately twelve years. For each commercial building, Uniwest provided a building manager, collected rent from tenants, addressed problems raised by tenants, oversaw building maintenance and engineering, and maintained an operating account from which it withdrew operating costs and paid itself a monthly fee for its services. These actions establish that an implied-in-fact contract existed between Spectra-4 and Uniwest, and between Spectet and Uniwest, and that those implied-in-fact contracts governed Uniwest's management services.
The circuit court concluded that these implied-in-fact contracts effectively incorporated the previously expired, expressly created Management Agreements in their entirety for purposes of the implied-in-fact contracts' terms and conditions. This was error. The threshold error in the circuit court's reasoning was the court's determination that mutuality of assent existed in light of its factual finding that Spectra-4, Spectet, and Uniwest held the subjective belief that they were operating under the entirety of the Management Agreements. A meeting of the minds cannot exist simply because the parties independently 11 believe the exact same thing. Instead, mutuality of assent exists by an interaction between the parties, in the form of offer and acceptance, manifesting by word, act[,] or conduct which evince the intention of the parties to contract. Green v. Smith, 146 Va. 442, 452, 131 S.E. 846, 848 (1926). In other words, the parties' belief of what the agreement is must coincide with written or spoken words, if an express contract is to be formed; or must coincide with the parties' conduct, if an implied-in-fact contract is to be formed. Id.; see also Joseph M. Perillo, 1 Corbin on Contracts § 1.19, at 55-58 (rev. ed. 1993) (making the point that the only difference between an express and implied-in-fact contract is the manner in which mutuality of assent is established). Accepting that belief must exist in tandem with words or actions is only a starting point. With implied-in-fact contracts, the parties' conduct must also establish what the terms of the contract are. See Hendrickson, 161 Va. at 200, 170 S.E. at 605; City of Norfolk, 120 Va. at 361-62, 91 S.E. at 821-22. In limited circumstances, an implied-in-fact contract may encompass the totality of an express contract simply by way of the parties acting in a manner consistent with such an express contract. But it is only when the parties to an express contract continue to act as if that contract is still operative even after it expires that the entirety of the 12 material terms of the prior contract . . . survive intact by way of a subsequently formed implied-in-fact contract. Luden's Inc. v. Local Union No. 6 of the Bakery, Confectionery & Tobacco Workers Int'l Union, 28 F.3d 347, 355-56 (3d Cir. 1994). Importantly, the logic recognized in Luden's Inc. applies only to those specific circumstances: when the same parties are engaged in the same course of dealing both during and after the expiration of the express contract. Absent such circumstances, an implied-in-fact contract may include only the particular terms of a previously expired express contract which the parties' subsequent actions, embodying their mutuality of assent, specifically encompass. See Green, 146 Va. at 452, 131 S.E. at 848; City of Norfolk, 120 Va. at 361-62, 91 S.E. at 821-22. The logic of Luden's Inc. does not apply to the factual circumstances of this case. The previously expired express contracts in the form of the Management Agreements were between Spectra-4, Spectet, and Jefferson/LBG. The implied-in-fact contracts were between Spectra-4, Spectet, and Uniwest. Jefferson/LBG and Uniwest are legally distinct parties. Consequently, Spectra-4, Spectet, and Uniwest could not simply act consistent with the Management Agreements in order for their implied-in-fact contracts to include the full terms of 13 the Management Agreements. The implied-in-fact contracts included only the specific terms of the Management Agreements encompassed by the parties' conduct. Thus, on the present record no basis existed for the circuit court to hold that the implied-in-fact contracts permitted Uniwest to withdraw $13,847.61 in premature termination fees from Spectra-4's operating accounts, and $22,605.72 in premature termination fees and $1,751.30 in copying costs from Spectet's operating accounts. The record demonstrates that the implied-in-fact contracts incorporated only some provisions of the Management Agreements. For example, evidence at trial established that Spectra-4 and Spectet not only permitted Uniwest to calculate their management fees in a manner consistent with the Management Agreements, but that the parties specifically referenced and relied upon Article 17.3 of the Management Agreements in order to recalculate Uniwest's management fees. Thus, the impliedin-fact contracts encompassed, among other terms, the terms and conditions of the Management Agreements relating to the calculation of the management fees. However, no evidence established that Spectra-4, Spectet, and Uniwest engaged in conduct supporting the conclusion that the implied-in-fact contracts encompassed those terms and conditions of the Management Agreements governing premature 14 termination fees. The Management Agreements' liquidation clause was the only basis for Uniwest withdrawing premature termination fees from Spectra-4's and Spectet's operating accounts. At most, evidence showed that Uniwest actually withdrew premature termination fees upon the termination of Uniwest's management services. But as the circuit court recognized, the parties only terminated [the implied-in-fact contracts] once. And there[ is] no pattern of conduct of termination. Further, Spectra-4 and Spectet did not acquiesce to Uniwest's withdrawal of funds, but consistently disputed it. Thus, on this record no conduct established a mutuality of assent that the implied-in-fact contracts encompassed the Management Agreements' liquidation clause. Accordingly, Uniwest's withdrawal of $13,847.61 was not authorized by the implied-in-fact contract between Spectra-4 and Uniwest, and Uniwest's withdrawal of $22,605.72 was not authorized by the implied-in-fact contract between Spectet and Uniwest. Additionally, no evidence established that Spectra-4, Spectet, and Uniwest engaged in conduct so that the implied-infact contracts encompassed terms and conditions permitting Uniwest to charge for copying costs. Uniwest's Chief Financial Officer testified at trial that it withdrew $1,751.30 in copying costs from Spectet's operating accounts not based on the Management Agreements, but based only on standard 15 procedure. Also, the Management Agreements themselves permitted the Agent to pay or reimburse itself for all expenses and costs of operating the Project. However, Uniwest's Chief Financial Officer further testified that, while Uniwest would occasionally bill for FedEx charges or something like that, she could not recall Uniwest ever charging Spectra- 4 or Spectet for copying costs. No other evidence was introduced pertaining to Uniwest's history of charging for copying costs. Thus, on this record no conduct established a mutuality of assent that the implied-in-fact contracts encompassed a term allowing Uniwest to charge copying costs. Accordingly, Uniwest's withdrawal of $1,751.30 was not authorized by the implied-in-fact contract between Spectet and Uniwest.