Promissory Estoppel

Question 1

What is PE?

Answer 1

• Promisor is estopped from claiming the absence of consideration.
  (“I don’t have to pay b/c our agreement wasn’t signed/contracted/finalized.” or “There was nothing in it for me, the promise lacked consideration.”)
• The Promisee relies on the promise to their detriment
  ex. A says to B “I’m thinking about selling my extra truck in order to pay someone to paint the house.” B says he’d do it for a straight trade. A says that would make his life so much easier b/c he could surprise his wife who is returning in 2 weeks, but only if B starts the following morning. That night, A learns his wife’s trip is extended 2 more months while B spent $2,345.67 on supplies specifically for A’s requested work. B returns to A’s house the next morning to begin but A tells B he doesn’t want him to do the job anymore b/c his wife isn’t returning. Plus, A says he could find someone else to do it for less than the full value of truck. B can recover $2,345.67 b/c of A’s promise.
• PE can never put a Plaintiff in a better position than before the promise was made. Can only recover exact cost of labor & materials or the fair market value if the exact cost cannot be reasonably calculated.
• P can’t recover more than the cost of performance - {i.e. P can’t recover pain and suffering, potential lost profits [different from lost wages], punitive damages

Question 2

What is the Significance of PE? Why is it Necessary We Have this Rule?

Answer 2

• The act of reliance by the promisee to his detriment provides the substitute for consideration, so the promise becomes an enforceable K.
• Allows a party to recover damages because of their reasonable reliance in acting or forbearing in accordance with a promise.
• The Court can either:
  a. Enforce the promise;
  b. Partially enforce the promise; or
  c. Award damages for expenses incurred

Question 3

PE Elements

Answer 3

• Promise
• Promisor’s reasonable/foreseeable expectation of reliance by promise
• Actual reliance/inducement of action or forbearance
• Injustice in the event of unenforceability

Question 4

Remedy for PE

Answer 4

Expectation Damages
-“You broke your promise, so you have to make good on it by giving me the benefit of the bargain I expected”

Reliance Damages

• “I relied to my detriment and changed my position and incurred expenses, you must compensate me for them”
• Typically where the court looks

Question 5

Where does PE show up?

Answer 5

i. Family based actions
ii. Charitable Based transactions
iii. Commercial situations

Question 6

Classic View of PE

Answer 6

• Required some elements of a K to exist before someone could invoke PE (i.e. missing price and ToP but all other terms are present)
• Early PE was used in non-commercial cases that did not involve bargained-for transactions (family gifts, charitable donations, and exceptions existed for employee benefits or pension cases)
• Some courts still take the view that PE is limited to cases where the other elements of a K exist but consideration is missing.

Question 7

Modern View of PE

Answer 7

1. PE is now used in cases involving the protection of un-bargained for reliance on commercial or employment promises.
2. PE can be used to permit recovery based upon:
   a. promises made; or
   b. assurances made during pre-contract negotiations.
   - Don’t confuse w/ PER
   - PE will enforce the promise(s) P relies on to induce their action or forbearance, not good-faith representations or offers made in the course of negotiation.
3. Foreseeable reliance on a promise that will cause action or forbearance before acceptance will occur can be a basis to hold an offer open as an option contract for a reasonable amount of time.