Legal Question in Business Law in California

Good question. A lot will depend upon the relationship of the parties, whether they are both merchants, etc. Additional information is required. For instance, was there a written contract? If so, did it have an automatic renewal provision?

What is the reason that you are asking this question? Do you now want to get out of the agreement? Or, do you want to enforce the agreement?

I think you need to contact an attorney to discuss your options and what is involved.

Caleb

What you are describing is a textbook example of a "contract implied in fact."

In one way of classifying contracts, there are three kinds: written contracts, oral contracts, and contracts implied in fact. A contract implied in fact is one that a court will identify and enforce because the parties behave as though they are in contract. "If it quacks like a duck, then it is a duck." An expired express contract that the parties nevertheless continue to honor is an excellent example of a contract implied in fact.

Contracts "implied in fact" must be distinguished from contracts "implied in law," which are also called "quasi contracts." These are not true contracts at all, and courts enforce them, not because the parties are behaving as though they are in contract, but because a duty or obligation has arisen between two parties that the law considers necessary to enforce as though there were a contract between them.

So, yes, there is a contract between the parties, and its terms are basically identifiable from what the parties are in fact doing.

An example is old Fred, the janitor. He worked for Acme for 43 years until he turned 65 and retired. Trouble is, Fred forgot to stop showing up at 6 p.m. for work, and Acme forgot to replace him. Is Fred still an employee? You bet.

As a Franchise Attorney I agree with the other attorney answers. To Bryan's example of old Fred, the janitor, who is still an employee I only add the following. Generally speaking, old Fred can be out in the cold whenever the employer, Acme, wises up - probably at the next payroll. Consult with a good business or franchise attorney in your area for specific advice.

Mr. Franchise - Kevin B. Murphy, B.S., M.B.A., J.D.

Franchise Foundations, a Professional Corporation