Do 'implicit contracts' exist?

[Jeffrey Slater]

Hi all,

I was recently arguing with someone on the internet about the social contract, and he brought up the idea that 'when you eat at a restaurant, you are entering into an implicit contract with the restaurant owner- that he will bring food and you will pay for it.'  His argument was that, you don't sign a contract at a restaurant, yet you are subject to the implicit contract with the restaurant owner, therefore implicit contracts exist, the social contract is implicit, and is therefore valid.

That line of reasoning is flawed for many reasons which we can discuss, but setting aside the social contract argument, what I am really interested in talking about is whether or not the very idea of an 'implicit contract' is valid.  

It seems to me that, in a free society, it would not necessarily be explicitly wrong to walk out without paying for a meal (assuming you didn't sign an explicit contract)- but at the same time it would not be wrong for the restaurant to refuse you service the next time you come in, as well as for the restaurant owner to warn other restaurants about you not paying.  This circumvents a need for an explicit contract in every minute economic interaction, while also not imposing the idea of an implicit contract on someone involuntarily.  These are just my preliminary thoughts on the issue.

[TheRobin]

I don't see why there wouldn't be something as an "implicit contract" in your restaurant example. I also don't see why signing a piece of paper is necessary for an agreement to be valid and binding.Unless a contract is something more than an agreement between indiviuals, in which case, please tell me what the difference would be.

[Jeffrey Slater]

I suppose I was thinking of a contract as being an agreement where the terms, conditions, and means of arbitrating any disputes are negotiated in advance.  The difference is that, in the restaurant example, the terms are not spelled out (even though they are pretty simple), and more importantly, the means of arbitration in the event of a dispute are not agreed upon.  If, for example, we sign a contract to build a house, we can agree on who will arbitrate disputes over the costs, penalties, etc before we get started.  If I walk into a restaurant, sit down, order food, and they bring it to me, how is it that there is something binding me to pay for that food?  Or, put differently, can the restaurant owner decide that 'because I didn't pay, the terms of his implicit contract are that I must become a slave in his kitchen until the balance is paid'?  The dispute resolution is the sticking point for me on the whole idea of implicit contracts.

[SimonF]

 

If I walk into a restaurant, sit down, order food, and they bring it to me, how is it that there is something binding me to pay for that food? 

 

Whenever you "order" something the person receiving the order has a right to payment for the service if they provide it. Prices appear on the menu so that the person giving the order is aware of the associated need for renumeration.

Restaurants do need to be careful; if you go in and just say "I'd like some food" you are not oblidged to pay. If they say "would you like to order" and you agree, then you are agreeing to a contract to purchase.

[Jeffrey Slater]

I agree that, in principle, to go to a restaurant, sit down and look at a menu with prices listed, and order something comes with the implicit expectation that you will pay for the food.  What I am confused about is this- what recourse does the restaurant have if I don't pay, and how can that be reasonably enforced with respect to the non-aggression principle if we never agreed on a means of dispute resolution before the transaction took place?  

[darknova]

 

I agree that, in principle, to go to a restaurant, sit down and look at a menu with prices listed, and order something comes with the implicit expectation that you will pay for the food.  What I am confused about is this- what recourse does the restaurant have if I don't pay, and how can that be reasonably enforced with respect to the non-aggression principle if we never agreed on a means of dispute resolution before the transaction took place?  

 

Eating food at a restaurant and leaving without paying is theft, just as walking out of a hardware store with a screwdriver and not paying for it is theft. Restaurants don't have much recourse in the current state-controlled system unless they catch you walking out, which is really easy to avoid if you're even slightly observant, or if they have security cameras watching all the patrons. Lots of places out there will just take the dine-and-dash as a loss, cause it's really tough to get any resolution by going to the cops, and I'd imagine it would be similar in a stateless society.

To me, the restaurant example is just another way of describing theft. Walking out of an establishment with food in your stomach that you didn't pay for is no different than walking out of an establishment with a screwdriver in your pocket that you didn't pay for.

[Brandon Buck _BB_]

If that's a concern, it would seem to me that a larger concern would be the guy who, while cutting a yard, runs over a rock that flies from under the mower and hits your ten year old kid in the head.

 

You had no implicit agreement with this man either.

[TheRobin]

 

I agree that, in principle, to go to a restaurant, sit down and look at a menu with prices listed, and order something comes with the implicit expectation that you will pay for the food.  What I am confused about is this- what recourse does the restaurant have if I don't pay, and how can that be reasonably enforced with respect to the non-aggression principle if we never agreed on a means of dispute resolution before the transaction took place?  

 

If someone doesn't pay for the food they ordered then that's theft, so they already didn't respect the non-aggression principle there.

Assuming they would instead have snuck directly into the kitchen and grabbed some food and tried to run off. Would you also be concerned then that there was no mutual agrrement of dispute resolution, or would you accept that using force to stop them from escaping was justified?

[Pepin]

 

You decide to go to a club. A friend recommended the club to you, and said that the cover charge is $5. There is a bouncer at the front door. You walk up to the man and give him $5, and proceed to walk in... Until the bouncer stops you and says "hey, if you want to get in, you have to pay the cover charge". 

You say "did I not give you enough money?".

The bouncer says "the cover charge is $5, you haven't paid any of it".

You reply "I just gave you the $5 for the cover charge".

The bouncer replies "that was not at all implicit in the exchange".

"You are the bouncer, correct?"

"Yes".

"And you let people in based on whether they pay the cover charge of $5, correct?".

"Yes".

"Then you should let me in because I paid the cover charge, right?"

"No... Again, how would I know the $5 you were giving me was to get in if you did not specify it?".

"Well you know now because I am telling you".

"But I did not know before you handed me the $5, and it is too late for you to state the terms of a contract that I did not agree to".

"But you are the bouncer, and your job is to let people in based on whether or not they pay the $5 cover charge".

"Correct, but how can I know that you are intending to pay the cover charge in order to get in, if you do not state this before hand?".

"Because this is the role you are playing at the moment. I am the customer and you are the provider".

"Sir, I am sorry that you made the mistake of assuming there was an implicit contract where there was none, but I cannot let you in".

"And I assume that you cannot give me my money back either, as you seem to imply that the interaction was one of charity".

"Sir, unless you specify that the interaction is not one of charity, how can one assume it isn't?".

"All acts are assumed to be acts of charity, unless otherwise stated beforehand?"

"Yes".

"And is this the principal the entire club acts on?".

"Yes of course, this is universal to society".

"In that cases, here is $5 to pay the cover. I'm going to have a few drinks on the house."

[ribuck]

In real life, voluntary exchange doesn't need to be formalised like this.

99% of people pay for their restaurant meals, without even knowing what an implied contract is. And the bouncer lets 99% of people in, who have paid the $5 cover charge.

The 1% of diners who skip without paying; you can be sure that an implied contract wouldn't have affected their behavior. And the 1% who are not admitted by the bouncer? You can be sure the bouncer is not dicking around with some technicality of interpretation of contract law; he has some other unrelated reason for excluding them.

You see uncontracted voluntary exchange all the time. At a coffee shop, there's no contract saying how long you can sit at a table, per drink purchased. Yet most people will know when they have overstayed their welcome. And the remaining 1% get the message after a polite reminder ("Are you finished, Sir, or are you wishing to order something more?" as the waitress sweeps away the used crockery).

[Jeffrey Slater]

For all but the most abstract examples, you are absolutely correct.  Most people are willing to accept simple exchanges without a signed contract.  What I am thinking about is a bit more abstract.  In a free society, you are only allowed to use force in self defense.  The question I have been mulling over stems from this- it does not seem justifiable to call it 'self-defense' to rough up a guy for not paying for a meal, or to kidnap him for not paying, or whatever other types of force we use to punish transgressors in today's society, since there is not some explicitly defined agreement between the restaurant and the customer.

 

After mulling over this for a while, I would like to propose a solution that uses the DRO / insurance model to solve this problem peacefully.  Suppose you own a restaurant, and you are concerned about how to get people to pay for the food.  To address this, you pay for 'dine and dash' insurance- insurance that would cover the meal cost of anyone who walks out.  The insurance company now has an incentive to stop people from walking out on their meal checks, and so it gets together with the DRO companies and brands those who walk out without paying as being bad customers, which flags them whenever they try to go to another restaurant and allows you (or other restaurant owners) to deny service to them.

 

Or, a simpler solution could be to demand payment in advance.

 

I guess what I am trying to get at here is the practical aspect of implicit contracts.  I have no issue with the fact that it is wrong to walk out without paying, but if it happens, then how does a free society deal with it- while simultaneously respecting the non aggression principle?

[TheRobin]

the most simple solution would probably be for the restaurant owner to call up his DRO and have them transfel the owed money to their bank account.Then the DRO would probably contact the bank (and/or that person's DRO) and have the money (plus some extra) taken out of the person who dodged the bill and make a remark in his file about that behaviour.

 

 

An actual example frm the real world that happened to some guys I knew: They tried to run out without paying go caught at the door, didn't have money and then could chose between leaving their cell phones behind as insurance and come up with the money in the next few days or having the police called on them. So there's an example that didn't end with the restaurant owner having to personally incarcarate someone and still getting his money without even police violence involved.

[Guest darkskyabove]

 

To address this, you pay for 'dine and dash' insurance- insurance that would cover the meal cost of anyone who walks out.

 

How about "tax and spend" insurance? I pay a premium to protect against tax increases, and the insurance company has an incentive to stop Congress from wasteful spending.

[Formelyknown]

If I were the owner I would ask the leaving customer to pay and tell him if he doesn't. He won't be welcome into my restaurant anymore. Furthemore, all other members of the good customer club will do the same.

[masonman]

 

In real life, voluntary exchange doesn't need to be formalised like this.

99% of people pay for their restaurant meals, without even knowing what an implied contract is. And the bouncer lets 99% of people in, who have paid the $5 cover charge.

The 1% of diners who skip without paying; you can be sure that an implied contract wouldn't have affected their behavior. And the 1% who are not admitted by the bouncer? You can be sure the bouncer is not dicking around with some technicality of interpretation of contract law; he has some other unrelated reason for excluding them.

You see uncontracted voluntary exchange all the time. At a coffee shop, there's no contract saying how long you can sit at a table, per drink purchased. Yet most people will know when they have overstayed their welcome. And the remaining 1% get the message after a polite reminder ("Are you finished, Sir, or are you wishing to order something more?" as the waitress sweeps away the used crockery).

 

 

I think this is a good thing to keep in mind when issues like this come up. If implied contracts were something that was causing a lot of problems with customers not paying, resteraunts wouldn't just ban 75% of potential customers from entering their resteraunt, they would just change their payment and contract system. There would be a point (in terms of numbers of people who walk out without paying) where a more direct contract system (signature or otherwise) would lead to greater profits relative to competing resteraunts, even though it would mean slightly more hassle for the customer.

[Pepin]

In an exchange, both parties must be aware that they are performing an exchange. If one party is not aware that an exchange is occurring, then no exchange is occurring, as both parties must be aware that they are exchanging something. This is to say, that by definition, a trade cannot occur when another party is not aware that they are involved in a trade. This would also be bound the exchange of a gift, one party must be aware that they are giving the gift in exchange for nothing, and the other party must be aware that they are receiving a gift in exchange for nothing. If both parties are not aware of this, then it cannot be said that any exchange occurred.

For instance, if you come home and a car you do not recognize is on your front lawn. You have no reason to believe that the car is now your car simply because someone put it is on your property, as property is not some magical device that transfers ownership, rather trade is. You also have no reason to believe that someone has given you the car for free because no interaction had taken place with the previous owner. You realize that since no interaction has occurred in regards to the car, that you cannot claim ownership of the car. Even if there was an interaction with the previous owner, if they were to offer you the car in exchange for nothing, you'd likely be skeptical as to  their motives.

Now, if you receive a letter the next day saying "please make a payment to pay off car debt to BBB Company", you could not be bound by the debt, since there was no exchange, and property is not some magical entity that transfers ownership. You would not say "no, I do own the car and owe no debt, because property is a magical entity that transfers ownership, and you transferred ownership to me before making it clear that I would need to provide something in exchange for the car, instead you would say "I owe you nothing as I did not even agree for the car to be dropped off on my property, nor was I aware that any exchange was to take place. If anything, I thought the car was stolen, and then abandoned. If this is your car and if you dropped it off on my property, it is incumbent on you to retrieve it. If you fail to retrieve it, leave it in my yard against my will, and still claim that I owe you something, then this is a matter I do not fear to sort out in a court".

Now this is where it gets interesting. If you use the car on any sort of basis, this is something that that BBB Company would be able to use in order to claim that the debt is valid, as if you do not claim ownership of the car, you would not act in a manner that claims ownership of the car.

To put this into context of a restaurant, if a bartender hands you a drink, you do not assume that the act of handing you the drink magically transfers ownership. Some sort of exchange is likely occurring, and it would be irrational to assume that nothing is to be given in return on your side. You would likely not drink the drink, but rather you'd say to the bartender "I didn't ask for this, why did you give me a drink". If the bartender then asks you to pay for the drink, you would say that you weren't aware that any exchange was occurring and that you do not claim ownership of the drink. If you then proceed to drink the drink, this is a claim to ownership of the drink, and would be something that the bartender could ask to be compensated for.

The default position in any exchange is to assume that both parties will be exchanging something. If the exchange is one in which one party is to receive something for nothing, both parties must be aware of this. To assume that the default position of an exchange is one in which things are "free" unless implicitly stated, is to not have any interest in the other party's understanding of the exchange, which is to invalidate action the idea that any trade occurring.

I will admit that the phrasing of the above is likely difficult to understand, and I will work to make it more clear.

[TheRobin]

for what it's worth, I find your explanation very clear and easy to understand. Very good explanation and insightful points (to me at least)

[Metric]

 

I think this is a good thing to keep in mind when issues like this come up. If implied contracts were something that was causing a lot of problems with customers not paying, resteraunts wouldn't just ban 75% of potential customers from entering their resteraunt, they would just change their payment and contract system. There would be a point (in terms of numbers of people who walk out without paying) where a more direct contract system (signature or otherwise) would lead to greater profits relative to competing resteraunts, even though it would mean slightly more hassle for the customer.

 

Yes, I like this approach.

What is happening in a resturant is very different from what is happening with the "social contract."

In a resturant, the implicit understanding is that we can avoid the whole business with escrow accounts and enforcability and simplify things greatly for everyone if you just pay the bill.  If this understanding breaks down and hurts the profitability of a resturant, then the whole process has to get more explicit and more enforcable (and more complicated and expensive).  It's just a market condition to which the resturant must adapt, but the market has already found a voluntary solution which is optimal for everyone.

In the "social contract," someone is trying to enforce something on you that you may explicitly disagree with, by claiming that you implicitly agree to it.

As usual, it's a smokescreen argument -- yes, there is "something" that is implicit in both cases, but that's where all similarities end as the "something" is completely different.

[Merralea]

In order for a contract, or anything else, to be implied (literally, "something suggested but not stated directly"), an action must be undertaken or a statement made that implies it. If I order at a restaurant, I imply that I am going to pay. If I'm in an 80's movie, ask if you want to have a good time and you give me some sum of money, it is implied that we will be having sex. Such 'contracts,' while not the most enforceable thing in the world, and subject to complications whenever the implication was not properly inferred (lost in translation), are as valid (assuming both parties understand the communcation) as if the contract had been stated outright, as the same agreement was communicated and mutually understood.

 

However, in the example of the social contract, and many others like it, a case is made of an implication where nothing has been said or done to imply agreement-- *inaction,* rather than an action, is taken as implication; e.g., by *not* leaving a "country," you imply agreement to abide by its laws. This is equivalent to having my car stopped at a light, when a drifter comes up, washes my windows, then mugs me, and saying that this is all perfectly legitimate as my non-moving of the car "implied" my consent, or that it is okay to rape someone in a coma and leave some benjamins on the nightstand. By the definition of the word imply, inaction cannot imply.