Contracts and Sales Multistate Bar Practice Exam

What occurs when both parties begin performing under a contract that lacked formal communication?

1. A contract is automatically implied

2. No contract is formed

3. Both parties are at risk of breach

4. Only the party initiating performance is bound

The correct answer is: A contract is automatically implied

When both parties begin performing under a contract that lacked formal communication, an implied contract may arise based on their conduct. This situation typically indicates that both parties have accepted the terms of the agreement through their actions, even though they may not have formally stated these terms in writing or verbally. The doctrine of implied contracts, or quasi-contracts, applies here, showing that the law can recognize agreements based on the behavior of the parties involved. In many cases, performance itself can demonstrate mutual assent, which is a key element for the formation of a contract. The performance of acts consistent with an agreement creates a binding obligation, resulting from the parties' understanding that their actions were in pursuit of a shared goal, aligning their conduct to fulfill the unnamed or uncommunicated terms of the contract. Hence, this context highlights that the starting of performance indicates acceptance of the contract's terms, forming an enforceable agreement despite the absence of formal communication.