Paralegal Advanced Competency Exam (PACE) Practice Exam

What is implied when a person uses electricity in their home?

1. No contract exists with the power company

2. A verbal agreement has been established

3. An implied contract is formed with the utility provider

4. Electricity is free to use

The correct answer is: An implied contract is formed with the utility provider

When a person uses electricity in their home, it is understood that an implied contract is formed with the utility provider. This is based on the principle that when a customer consumes a service (in this case, electricity), it indicates their intention to pay for that service. It is customary for utility services to operate on an implied contract, wherein the customer expects to receive electricity and the utility provider expects to be compensated for it. This relationship is typically established through the act of usage, even if a formal written contract is not signed by both parties. The utility provider delivers electricity, and by using that electricity, the consumer is essentially agreeing to the terms of service that have been set by the provider, which usually includes payment for consumption. In contrast, the other options do not accurately reflect the nature of the relationship between the consumer and the utility provider. The absence of a formal contract does not negate the existence of an implied agreement, and assuming that electricity is free undermines the fundamental business model of utility companies.