Promissory Estoppel

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PROMISSORY ESTOPPEL

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Promise, PLUS UNBARGAINED FOR RELIANCE
-There must be actual reliance and foreseeability of reliance

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R §90

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“A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.
o Example: P will be compensated for his foreseeable, definite, and substantial reliance. However, P can only recover reliance damages (the money required to put P in the position he would have been in had he not acted in reliance on the promise), not expectation damages (the profits P would’ve made had the loan been given).
o Unbargained-for Reliance – promisor may be bound by his promise (even though it isn’t supported by consideration) if the promisee relies upon the promise to his detriment, and the promisor should’ve foreseen this reliance.

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(There must be) Actual Reliance

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The promisee must actually rely on the promise. The claimed reliance must be an affirmative act, and promisee must show that he wouldn’t have acted if not for the promise. Same with forbearance.

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(There must be) Foreseeability of Reliance

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Promisee’s reliance must be reasonably foreseeable to the promisor. The promisor must also foresee, probably, that the promisee would rely in the particular way that he did.

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Promises to make gifts

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P.E. often applied to enforce promises to make gifts that induce detrimental reliance.

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Intra-family promises

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P.E. may be used to enforce certain promises made by one family member to another, if the latter reasonably and detrimentally relies on the promise. Most courts don’t give full contractual damages (i.e. lost profits) in these situations, but merely re-compensate the promise for his out-of-pocket losses.

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Ricketts v. Scothorn

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o D promised P (his granddaughter) $2,000 in a promissory note so that she shouldn’t have to work anymore. P immediately quit work (but got another job w/ D’s permission). D paid one year’s interest on the note and told daughter that he would like to pay the rest after selling his farm. D (Grandfather) died but regretted never fully paying P. D’s promise had no consideration (he didn’t bargain for her to leave bc there was no condition saying she HAD to quit her job & he didn’t really get anything in return, although you could argue that he did).
o ISSUE: Can a promise still be enforced without consideration? YES.
o HOLDING: When a promisee changes his position to his disadvantage (quitting her job), in reliance on a promise, a cause of action arises. Even if D didn’t actually desire P to quit her job (which he probably did), it is certain that he viewed P quitting her job as the reasonable and probable consequence of his promise. “Having intentionally influenced P to alter her position for the worse on the faith of the note being paid when due, it would be grossly inequitable to permit the promisor to resist payment on the grounds that there was no consideration. She relied on his promise in good faith, which lead her to change her position for the worst.

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Oral promises to convey land

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A promise to make a gift of land, like any other gratuitous promise is unenforceable for lack of consideration. If the recipient of such a promise, acting in reasonable reliance on the promise and w/ the continuing assent of the promisor, incurs detriment with respect to the land, the promise may be enforced under the promissory estoppel doctrine.
o Note: The S.O.F requires that a contract to convey land must be in writing to be enforceable. If one party to an oral contract to convey land relies to his detriment on the K, he may be able to use promissory estoppel to recover his reliance interest. In other words, promissory estoppel may be used as a substitute for compliance with the SOF, just as it may be used to substitute for consideration.

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Charitable Substitutions

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Such a promise would not ordinarily be enforceable, since a charitable donor usually does not bargain for anything in return for his promise, and therefore there is no consideration.

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Allegheny College v. National Cautaugua County Bank

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o College asked D to contribute to the college’s scholarship fund. D pledged 5k in consideration of her interest in Christian Education and others subscribing. Her 5k was to go to a scholarship named in her honor. She paid $1,000 and then repudiated promise.
o ISSUE: Was there sufficient consideration to make the charitable donation promise legally enforceable? Yes.
o HOLDING: Cardozo finds consideration in P’s acceptance of the 1,000 and setting it aside. This implied that they were setting it aside bc they were going to put her name on the scholarship (like Wood case). Both parties benefited: school gained $ and woman gained benefit (social recognition for donation and getting her name posted). School was bound by the implied promise to use money strictly for the memorial fund. (There is also consideration when D says “in consideration of others subscribing” b/c D was bargaining for an action (getting other donators) by P.)
o Promissory estoppel doesn’t get used here bc consideration was found.
o Dissent: words used merely expressed an expectation, no promise present.
• Oral promises to charities not covered by this rule

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Blinn v. Beatrice Hospital

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o Blinn (P) worked at Beatrice Hospital (D). Blinn got a job offer from another hospital, so he asked for job assurance from D. D said they had at least 5 more years of work to do. So, Blinn turned down other job, but was fired 6 months later.
o ISSUE: Is Blinn’s promise of fixed employment enforceable according to 1) breach of contract [No] and 2) Promissory Estoppel [Yes]
o HOLDING: D’s assurances weren’t enough for an oral contract. Statement, “We’ve got at least 5 more years of work for you,” is too indefinite and not a clear offer of fixed employment. And, this should be judged by the “objective” outward manifestations of the parties rather than P’s subjective understanding of job security – no material issue of fact on this issue. In this state, there is no requirement that a PE promise be definite, just that the reliance is reasonable and foreseeable. A promisor doesn’t need to intend a promise to be binding in order to foresee that a promisee may reasonably rely on it. Blinn reasonably and foreseeably relied on the promise of fixed employment. Genuine issue of material fact on PE claim, should go to jury.

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Equitable Estoppel vs. Promissory Estoppel

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o Equitable Estoppel: based upon the representation of existing or past facts; available only as a ‘shield’ or defense
o Promissory Estoppel: requires existence of a promise in the future; (unlike equitable) can be used as a ‘sword’ in a cause of action of damages.

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Promissory Estoppel under the UCC

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Not explicitly recognized by the UCC, but most courts have held that a party to a contract for the sale of goods may invoke the doctrine in appropriate circumstances.

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Remedy for Promissory Estoppel

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• Remedy granted is limited as justice requires → either restitution or reliance damages rather than expectation damages (R.2d § 90, Comment d)
• Quasi Contract (no promise actually made, but justice requires recovery) → remedy is usually limited to restitution damages to prevent unjust enrichment