San Francisco Employment Law Firm Blog
Both employees and employers in California need to know that even if they don’t sign a formal employment contract, their conduct alone, without many or any actual documents to that effect, can form an employment or business relationship. This is because to form a contract, a manifestation of mutual assent is necessary. Mutual assent may be manifested by written or spoken words, or by conduct. Restatement of Contracts § 19. “Contracts are often spoken of as express or implied. The distinction involves, however, no difference in legal effect, but lies merely in the mode of manifesting assent. . . . assent may be manifested by words or other conduct . . . intention to make a promise may be manifested in language or by implication from other circumstances, including course of dealing or usage of trade or course of performance.” See also CCP 1619 [contracts are either express or implied], and 1621 [“`An implied contract is one, the existence and terms of which are manifested by conduct.’ The distinction between express and implied in fact contracts relates only to the manifestation of assent; both types are based on the expressed or apparent intention of the parties.” 1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts § 11, p. 46.
“. . . the actions of the parties may show conclusively that they have intended to conclude a binding agreement, even though one or more terms are missing or are left to be agreed upon. In such cases courts endeavor, if possible, to attach a sufficiently definite meaning to the bargain. An offer which appears to be indefinite may be given precision by usage of trade or by course of dealing between the parties. Terms may be supplied by factual implication, and in recurring situations the law often supplies a term in the absence of agreement to the contrary.” Restatement § 33, com., a.
Thus, in a rather common situation where one party performs services for another after not fully completing the negotiations over the terms of that engagement, that party can still show that it is entitled to the compensation discussed and promised during those negotiations along with the work performed to reflect that the parties generally agree to be engaged in that relationship. Thus, an employer cannot avoid paying their employee or vendors for the work performed simply because they didn’t sign a contract after exchanging emails and phone calls with each other about the terms of their relationship, even though it might be challenging to determine what the compensation due is under such circumstances.
Of course, an easy way to avoid disputes over compensation due is executing an agreement before the work starts or as soon as possible after.