implicit contract
implicit contractA situation when people or firms expect to have continuing dealings with one another, and so need to agree the terms on which these will take place, but a formal or explicit contract between them is impossible or impracticable. The difficulties which make implicit contracts preferable to formal legal contracts arise mainly from uncertainty about the future and problems in getting information that can actually be proved to be reliable. A formal legal contract has to specify what is to happen under any given circumstances. If the number of possible sets of circumstances is very large then a legal contract might be excessively complicated to negotiate, and actual compliance with it might be impossible to monitor. In many cases, such as possible future innovations, circumstances may change in ways which cannot even be imagined in advance, let alone described in legally binding terms. An implicit contract implies that, while if circumstances...
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