Implied Contract. Thomas Rinks and Joseph Shields developed Psycho Chihuahua, a caricature of a Chihuahua dog with a "do not back down" attitude. They promoted and marketed the character through their company, Wrench, L.L.C. Ed Alfaro and Rudy Pollak,

Question

representatives of Taco Bell Corp, learned of Psycho Chihuahua and met with Rinks and Shields to talk about using the character as a Taco Bell "icon." Wrench sent artwork, merchandise, and marketing ideas to Alfaro, who promoted the character within Taco Bell. Alfaro asked Wrench to propose terms for Taco Bell's use of Psycho Chihuahua. Taco Bell did not accept Wrench's terms, but Alfaro continued to promote the character within the company. Meanwhile, Taco Bell hired a new advertising agency, which proposed an advertising campaign involving a Chihuahua. When Alfaro learned of this proposal, he sent the Psycho Chihuahua materials to the agency. Taco Bell made a Chihuahua the focus of its marketing but paid nothing to Wrench. Wrench filed a suit against Taco Bell in a federal district court, claiming in part that it had an implied contract with Taco Bell, which the latter breached. Do these facts satisfy the requirements for an implied contract? Why or why not?

Answer 1

Implied contract
The court held that Wrench submitted sufficient evidence of an implied contract to survive Taco Bell's motion for summary judgment on the issue (but ultimately ruled against Wrench on other grounds). "Implied in fact contracts often arise where one accepts a benefit from another for which compensation is customarily expected. Thus, where evidence shows that the parties understood that compensation would be paid for services rendered, a promise to pay fair value may be implied, even if no agreement was reached as to price, duration, or other terms of the contract." Here, "Taco Bell concedes that there is sufficient evidence in the record to support Plaintiff's allegation that the parties had a basic understanding that if Taco Bell used the Psycho Chihuahua idea, concept, or image, that Taco Bell would compensate Plaintiffs for the fair value of such use." Furthermore, "[t] he cases establish that a plaintiff may support a claim of implied in fact contract by showing that the plaintiff disclosed an idea to the defendant at the defendant's request and the defendant understood that the plaintiff expected compensation for use of his ideas. Because Taco Bell concedes that there is sufficient evidence to support such an understanding in this case, Taco Bell's assertion that Plaintiffs cannot establish an implied in fact contract must be rejected."