PROMISSORY ESTOPPEL

A.     A theory that sometimes protects a promisee, who has relied to his detriment on the promise, even though consideration or other elements or enforceability are not otherwise present.  PE has its strongest expression where the lack of consideration threatens to make a promise unenforceable. 

B.     The core application of promissory estoppel is in the realm of nonreciprocal promises. 

C.     Elements (as outlined in Deli v. Univ. of Minnesota):

                                                              i.      A promised may be enforced when

1.      It is clear and definite,

2.      The promisor intended to induce the promisee to rely on the promise,

3.      the promisee detrimentally relied on the promise, and

4.      Enforcement of the promise is required to prevent an injustice.

D.     Promissory Estoppel: (Restatement § 90)

                                                              i.      A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promise 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. 

E.     You have to show why there was actual reliance and why the reliance was reasonably foreseeable.

                                                              i.      Factors that are relevant: policies implicit in the transaction type, the reason for the non-performance, the degree of disproportion associated with enforcement of the promise, and any historical patterns of enforcement associated with the transaction type.

F.      Damages = amount of reliance (which is not always the full amount of the promise).

G.     Promissory Estoppel in the Commercial Context

                                                              i.      Most jurisdictions have admitted the possibility of using promissory estoppel to some degree in the commercial context.

                                                            ii.      In Township of YPSILANTI v. GM, the Court held that:

1.      The hyperbole and puffery used by manufacturer's representatives, in negotiating with township for tax abatement allegedly needed to keep manufacturing operation in township, did not constitute a “promise” to continue production in township for any definite period of time, and

2.      Township did not “reasonably rely” on any representations that were made – even if the finding of a contract could be sustained, reliance on the promise would not have been reasonable.

H.    PE in Employment Disputes

                                                              i.      Most courts hold strongly to the employment-at-will doctrine.  Employers should not be held liable for vague promises of employment for an indefinite duration, even in the face of substantial reliance on the part of employees.  Even if fairly clear promises are made, reliance on those promises us not reasonable in light of the at-will nature of employment.  Expenses of preparing to take a job and opportunities foregone while on the job are simply the usually byproducts of working life, as are the expenses incurred by employers to train employees and to forgo opportunities to seek other workers.  Both sides take some risks in light of the flexibility they gain. 

                                                            ii.      A few courts recognize that there can be a genuine injury if an employer promises stable employment and then does not follow through.  Such courts are more willing to apply promissory estoppel to fashion some sort of relief.

I.       PE in Commercial Negotiations

                                                              i.      Some courts have allowed the use of PE in situations where the defendant has, by his conduct, inexorably led the plaintiff down the primrose path, and the plaintiff has suffered thereby.

                                                            ii.      Full enforcement of the contract that might have been is not in order, but at least the plaintiff might be entitled to reimbursement of the expenses it suffered (e.g. Hoffman v. Red Owl Stores Case).

J.      Other Possible Applications

                                                              i.      Promise to make a gift: The P.E. doctrine is most often applied to enforce promises to make gifts, where the promisee relies on the gift to his detriment.

1.      Intra-family promises: The doctrine may be applied where the promise is made by one member of a family to another. (Example: Mother promises to pay for Son’s college education, and Son quits his job.  Probably the court will award just the damages Son suffers from losing the job, not the full cost of a college education.)

                                                            ii.      Charitable subscriptions: A written promise to make a charitable contribution will generally be binding without consideration, under the P.E. doctrine.  Here, the doctrine is watered down: usually the charity does not need to show detrimental reliance.  (But oral promises to make charitable contributions usually will not be enforceable unless the charity relies on the promise to its detriment.)

                                                          iii.      Gratuitous bailments and agencies: If a person promises to take care of another’s property (a “gratuitous bailment”) or promises to carry out an act as another person’s agent (gratuitous agency), the promisor may be held liable under P.E. if he does not perform at all.  (However, courts are hesitant to apply P.E. to promises to procure insurance for another.)

                                                          iv.      Offers by sub-contractors: Where a sub-contractor makes a bid to a general contractor, and the latter uses the bid in computing his own master bid on the job, the P.E. doctrine is often used to make the sub-bid temporarily irrevocable. 

                                                            v.      Promise of job: If an employer promises an at-will job to an employee, and then revokes the promise before the employee shows up for work, P.E. may apply.

1.      Example: A offers a job to B, terminable by either at any time. B quits his established job. Before B shows up for work, A cancels the job offer. A court might hold that even though B could have been fired at any time once he showed up, B should be able to collect the value of the job he quit from A, under a P.E. theory.

                                                          vi.      Negotiations in good faith: A person who negotiates with another may be found to have a duty to bargain in good faith; if bad faith is found, the court may use P.E. to furnish a remedy.

1.      Example: A, owner of a shopping mall, promises that it will negotiate a lease for particular space with B, a tenant.  B rejects an offer of space from another landlord.  A then leases the space to one of B’s competitors for a higher rent.  A court might apply P.E., by holding that A implicitly promised to use good faith in the negotiations and breached that promise.

a.       Promises of franchise: The use of P.E. to protect negotiating parties is especially likely where the promise is a promise by a national corporation to award a franchise to the other party.  (Example: P, a national company that runs a fast food chain, promises B a franchise.  B quits his job and undergoes expensive training in the restaurant business.  If A then refuses to award the franchise, a court might use P.E. to enforce the promise, at least to the extent of reimbursing B for his lost job and training expenses.)