Precontractual Liability

Question 1

What is restitution in the context of precontractual liability?

Answer 1

If during the course of negotiations one party has conferred a benefit on the other, the recipient may be required to restore the benefit or its value.

Question 2

Can a party recover on a theory of restitution for voluntary services?

Answer 2

No, a party cannot recover if the services rendered were entirely voluntary and designed to protect the complaining party’s own interest, even if they incidentally benefitted the other party.

Question 3

What is reliance in the context of precontractual liability?

Answer 3

A negotiating party may not misrepresent its intention to come to terms, and liability for misrepresentation includes reliance losses.

Question 4

What happens if a promisor misrepresents their intentions?

Answer 4

If the promisor opportunistically strings along the promisee, imposing liability despite the preliminary stage of negotiations produces the most equitable result. The promisee’s recovery should be limited to their reliance expenditures.

Question 5

What is promissory estoppel in the context of precontractual liability?

Answer 5

There’s no common law duty to negotiate in good faith, but an agreement to do so can exist. Breaching this agreement can lead to liability.

Question 6

When is promissory estoppel typically used?

Answer 6

It is used when a contract would have existed except that there was no consideration.

Question 7

What are the requisites for enforceability of precontractual promises?

Answer 7

1) Both parties must manifest an intention to be bound (mutual assent). 2) The terms must be sufficiently definite. 3) There must be consideration.

Question 8

When is an agreement to negotiate in good faith enforceable?

Answer 8

If it has sufficient specificity to be an enforceable contract, the parties intended to be bound by it, and it is supported by consideration.