Is Payment Required For Services Provided After a Contract Expired?

When Parties to An Expired Contract Act As If the Contract Was Extended By An Express Agreement the Law May Deem That the Contract Was Extended By Implied Agreement. Accordingly, Liabilities Such As Payment For Services Rendered After the Expiry Date May Arise.

Understanding the Doctrine of Extending a Contract By Conduct Involving Disregard to a Contract Expiry Date

Contract Document Contract terms within many business agreements often state that the relationship, and thus the rights and responsibilities, between the contracting parties will expire at a certain date; however, the contract may remain in force if the date passes and the parties behave as if the contract remains in force.

The Law

The principle that behaviour of parties to a contract may demonstrate an implied agreement to extend or renew an expired contract was explained by the Court of Appeal within the case of Coffee Time Donuts Incorporated v. 2197938 Ontario Inc., 2022 ONCA 435, while replying upon the Supreme Court decision in Saint John Tug Boat Co. Ltd. v. Irving Refining Ltd., [1964] S.C.R. 614, wherein each case it was respectively said:


[7]  We see no error in the motion judge’s finding that the agreement between the appellants and the respondent was continued by the conduct of both parties after the term of the written agreement expired. The motion judge found that the appellants continued to buy products from the exclusive suppliers under the franchise agreement after the end of the term of the written agreement, continued to use “Coffee Time” branding, and continued to pay franchise royalties to the respondent until February 16, 2016. Even after the appellants ceased paying the franchise royalties, they continued to use the “Coffee Time” branding for their business and to purchase products from authorized suppliers. In the circumstances, we see no basis to interfere with the finding by the motion judge that the agreement was continued by the conduct of the parties after the expiration of the written agreement: Saint John Tug Boat Co. Ltd. v. Irving Refining Ltd., 1964 CanLII 88 (SCC), [1964] S.C.R. 614, at pp. 621-22.


The test of whether conduct, unaccompanied by any verbal or written undertaking, can constitute an acceptance of an offer so as to bind the acceptor to the fulfilment of the contract, is made the subject of comment in Anson on Contracts, 21st ed., p. 28, where it is said:

The test of such a contract is an objective and not a subjective one, that is to say, the intention which the law will attribute to a man is always that which his conduct bears when reasonably construed, and not that which was present in his own mind. So if A allows B to work for him under such circumstances that no reasonable man would suppose that B meant to do the work for nothing, A will be liable to pay for it. The doing of the work is the offer; the permission to do it, or the acquiescence in its being done, constitutes the acceptance.

In this connection reference is frequently made to the following statement contained in the judgment of Lord Blackburn in Smith v. Hughes, which I adopt as a proper test under the present circumstances:

If, whatever a man's real intention may be he so conducts himself that a reasonable man would believe that he was consenting to the terms proposed by the other party and that other party upon that belief enters into a contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party's terms.

The American authorities on the same subject are well summarized in Williston on Contracts, 3rd ed., vol. I, para. 91A where it is said:

Silence may be so deceptive that it may become necessary for one who receives beneficial services to speak in order to escape the inference of a promise to pay for them. It is immaterial in this connection whether the services are requested and the silence relates merely to an undertaking to pay for them, or whether the services are rendered without a preliminary request but with knowledge on the part of the person receiving them that they are rendered with the expectation of payment. In either case, the ordinary implication is that the services are to be paid for at their fair value, or at the offered price, if that is known to the offeree before he accepts them.

It must be appreciated that mere failure to disown responsibilty to pay compensation for services rendered is not of itself always enough to bind the person who has had the benefit of those services. The circumstances must be such as to give rise to an inference that the alleged acceptor has consented to the work being done on the terms upon which it was offered before a binding contract will be implied.

As was observed by Bowen L.J., in Falcke v. Scottish Imperial Insurance Company:

Liabilities are not to be forced upon people behind their backs any more than you can confer a benefit upon a man against his will.

Like the learned trial judge, however, I would adopt the following excerpt from Smith's Leading Cases, 13th ed. at p. 156 where it is said:

But if a person knows that the consideration is being rendered for his benefit with an expectation that he will pay for it, then if he acquiesces in its being done, taking the benefit of it when done, he will be taken impliedly to have requested its being done: and that will import a promise to pay for it.

As explained in Saint John Tug Boat, where an offer is made and a party to whom the offer was made acts as if the offer is accepted, then the law will deem that the contract was accepted.  Similarly, per Coffee Time, where a contract expires and the parties act as if the contract is extended, the law will deem that the contract was extended.  It appears apparent that, in this way, the law follows the moral principle that actions speak louder than words.

Summary Comment

The behaviour of parties to a contract containing an expiry date often demonstrates that the expiry date is being ignored. In such circumstances, the contract may be deemed impliedly extended with the contract terms remaining in effect despite the passing of the written expiry date.

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