promissory estoppel – a person may be bound to a promise (estopped to deny the promise) if another person was induced to take action on that promise to their own detriment

****************************

promissory estoppel:
(1924)

1. The principle that a promise made without consideration may nonetheless be enforced to prevent injustice if the promisor should have reasonably expected the promisee to rely on the promise and if the promisee did actually rely on the promise to his or her detriment. Also termed (inaccurately) equitable estoppel. [1]

1. The principle that a promisor will be bound to a promise (that is, estopped to deny the promise), even though it is without consideration, if she intended that the promise should be relied upon and it was in fact relied upon, and if a refusal to enforce the promise would result in an injustice.  EXAMPLE:  A general contractor whose successful bid for a contract to construct a house incorporates a supplier’s bid to him may be entitled to hold the supplier to her bid on the theory of promissory estoppel. [2]

1. A new name for an established doctrine. The principal that an estoppel may arise from the making of a promise, even though without consideration, if it was intended that the promise should be relied upon and in fact it was relied upon, and if a refusal to enforce it would be virtually to sanction the perpetration of fraud or would result in other injustice. 28 Am J2d Estop Sec 48.

A promise which the promisor  should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by the enforcement of the promise. Fried v Fisher, 328 Pa 497, 197, 196 A 39, 115 ALR 149. [3]

 Excerpt from Arthur Linton Corbin’s “Corbin on Contracts“:

    “One of the earlier attempts at a doctrine of enforceability because of action in reliance was to state a rule that a promise might become enforceable by reason of ‘promissory estoppel.’ The use of this phrase made some headway, because it satished the need of the courts for a justification of their enforcement of certain promises in the absence of any bargain or agreed exchange. Nevertheless, the phrase is objectionable. The word estoppel is so widely and loosely used as almost to defy dehnition yet, in the main, it has been applied to cases of misrepresentation of facts and not to promises. The American Law Institute was well advised in not adopting this phrase and in stating its rule in terms of action or forbearance in reliance on the promise.  The doctrine of promissory estoppel is equitable in origin and nature and arose to provide a remedy through the enforcement of a gratuitous promise. Promissory is distinct from equitable estoppel in that the representation at issue is promissory rather than a representation of fact. ‘Promissory estoppel and estoppel by conduct are two entirely distinct theories. The latter does not require a promise.”[4]

    Excerpt from Business Law Today by Roger LeRoy Miller (11th Ed.):
     “Sometimes, individuals rely on promises, and their reliance may form a basis for a court to infer contract rights and duties. Under the doctrine of promissory estoppel (also called detrimental reliance), a person who has reasonably and substantially relied on the promise of another can obtain some measure of recovery. Promissory estoppel allows a party to recover on a promise even though it was made without consideration. Under this doctrine, a court may enforce an otherwise unenforceable promise to avoid an injustice that would otherwise result.
     For the doctrine of promissory estoppel to be applied, the following elements are required:
  1. There must be a clear and definite promise.
  2. The promisor should have expected that the promisee would rely on the promise.
  3. The promisee reasonably relied on the promise by acting or refraining from some act.
  4. The promisee’s reliance was definite and resulted in substantial detriment.
  5. Enforcement of the promise is necessary to avoid injustice.
     If these requirements are met, a promise may be enforced even though it is not supported by consideration. In essence, the promisor (the offeror) will be estopped (barred or prevented) from asserting lack of consideration as a defense.
     Promissory estoppel is similar in some ways to the doctrine of quasi contract…. In both situations, a court is acting in the interests of equity and imposes contract obligations on the parties to prevent unfairness even though no actual contract exists. The difference is that with quasi contract, no promise was made at all. In contrast, with promissory estoppel, an otherwise unenforceable promise was made and relied on.
    Promissory estoppel was originally applied to situations involving gifts (I promise to pay you $1,000 a week so that you will not have to work) and donations to charities (I promise to contribute $50,000 a year to the All Saints orphanage). Later, courts began to apply the doctrine in other situations, including business transactions, employment relationships, and disputes among family members.
CASE EXAMPLE 12.9 Jeffrey and Kathryn Dow own 125 acres of land in Corinth, Maine. The Dows regarded the land as their children’s heritage, and the subject of the children’s living on the land was often discussed within the family.
With the Dows’ permission, thcir daughter Teresa installed a mobile home and built a garage on the land. After Teresa married Jarrod Harvey, the Dows agreed to finance the construction of a house on the land for the couple. When Jarrod died in a motorcycle accident, however, Teresa financed the house with his life insurance proceeds. The construction cost about $200,000.
     Teresa then asked her parents for a deed to the property so that she could obtain a mortgage. They refused. Teresa sued her parents based on promissory estoppel. Maine’s highest court ruled in Teresa’ favor. The court reasoned that the Dows’ support and encouragement of their daughter’ construction of a house on the land “conclusively demonstrated” their intent to transfer it. For years, they had made general promises to convey the land to their children, including Teresa. Teresa had reasonably relied on their promise in financing construction of the house to her detriment ($200,000). The court concluded that enforcing the promise was the only way to avoid injustice in this situation.” [5]

 

Related Terms:

reliance – trust in a person combined with an action based on that trust

consideration – something of value to someone else (may be tangible or intangible) which motivates someone else to do something

 

 

 

References:

[1]: Black’s Law Dictionary Deluxe Tenth Edition by Henry Campbell Black & Editor in Chief Bryan A. Garner.

[2]:  Ballantine’s Law Dictionary Legal Assistant Edition by Jack Ballantine (James Arthur 1871-1949).  Doctored by Jack G. Handler, J.D. © 1994 Delmar by Thomson Learning.

[3]:  Ballantine’s Law Dictionary with Pronunciations
Third Edition by James A. Ballantine (James Arthur 1871-1949).  Edited by William S. Anderson.  © 1969 by THE LAWYER’S CO-OPERATIVE PUBLISHING COMPANY.

[4]:   Arthur Linton Corbin, Corbin on Contracts 204 (one-vol. ed., 1952).

Ann Taylor Schwing, California Affirmative Defenses 5 34:16, at 35 (2d ed. 1996) (quoting Division of Labor Law Enforcement v. Transpacific Transp. Co., 88 Cal. App. 3d 823, 829 (Cal. Ct. App. 1979)).

[6]:  Miller, Roger LeRoy. Business Law Today: 11th Edition. Cengage Learning, 2017.  ISBN 978-1-305-64452-6

 

************************

Back to Estoppel

Back to Remedies

Back to Section 3: Are you seeking damages, injunctive relief, or both?

Back to Civil Law Self-Help

Home Page