Promissory Estoppel (Contract) - Explained
When Reasonably Relying a Promise Makes that Promise Enforceable
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When is Promissory Estoppel?
A doctrine known as promissory estoppel may serve as a substitute for consideration to make an agreement into a valid contract. Promissory estoppel is an equitable doctrine. If the offeree reasonably relies on the offerors promise to her detriment, the doctrine of promissory estoppel may make the contract valid despite the absence of consideration. The two key elements are:
- that the reliance must be reasonable in light of the situation, and
- the relying party must suffer a tangible detriment.
Note: The court may also consider whether performance causes a hardship on the promising party.
Example: You are having erosion problems in your hard. You cannot afford to pay to have it fixed, so I offer to give you the materials necessary to build a retaining wall. You spend your available money grading out the ground and digging the dirt where the wall will go. After all of this, I back out of my promise. You have now spent your available money and, without installing the wall, made the situation far worse than it was before. A court may deem my promise to be an enforceable contract because you relied to your detriment on my promise.
Next Article: Statute of Frauds - Explained Back to: CONTRACT LAW
How do you feel about the idea that a persons reliance on another persons promise can substitute for consideration? How much of a detriment must the relying party suffer before you think a court should enforce the agreement? Should the promise be enforced if it would result in a significant hardship for the promising party?
Tina says that she will give Sam her car to drive across the country from Georgia to California. Sam relies on Tina's promise by not purchasing a plane ticket. Tina fails to follow through with her promised gift. Sam has to purchase a plane ticket that is dramatically more expensive that it would have been if he had purchased the ticket at the time that Tina made her promise. If Sam wants to sue Tina for breach of contract, what is the likely result?
- The principle of promissory estoppel is based on the provisions of equity. This principle is an exception to the requirement of consideration for the contract to be enforceable. This means that where there is a promissory estoppel, consideration is not necessary to make the contract enforceable. However, for the principle of promissory estoppel to be legally binding, the following must be fulfilled:
- The promisor should have expectations beyond reasonable doubt that the promise will do their part under the promisee.
- That the action under the promise is induced.
- That without the promisee carrying out the action promised, the promisor will suffer an injustice.
- If the person suffers a great injustice due to the other party not delivering the promise then the aggrieved party should sue for damages.
In this situation, it is difficult to see how Sam would be in a worse-off position than if Tina had never made the promise. As such, the element of Sam suffering an injustice may not be present.
- What is a Contract?
- Contract Theory Definition
- Meeting of the Minds
- Doctrine of Utmost Good Faith
- Aleatory Contract Definition
- What are the sources of contract law?
- Restatement of Contracts
- Uniform Commercial Code
- Convention on Contracts for the International Sale of Goods (CISG)
- What is a Unilateral Contract vs a Bilateral Contract?
- What is an Express Contract vs an Implied Contract?
- What are the requirements to form a Contract (Offer, Acceptance, Consideration)?
- What is an Enforceable Contract vs. a Valid Contract?
- What is a Void Contract vs a Voidable Contract?
- Adhesion Contract
- What is Mental Capacity to contract?
- What is the requirement of a Lawful Purpose?
- What are common types of Voidable Contract?
- When does an offer to contact terminate?
- Counterparty Definition
- Mirror Image Rule?
- Rule for Sale of Goods
- Silence is Not Acceptance?
- Mailbox Rule
- Shrink-wrap Agreement Definition
- Click-Wrap Agreement Definition
- What is Consideration?
- What is Promissory Estoppel?
- When is a contract required to be in writing Statute of Frauds?
- What type of writing satisfies the statute of frauds?
- Exceptions to the Statute of Fraud
- Documents Under Seal
- Who Can Sign Contracts on Behalf of a Company?
- E-Sign Act
- Privity of Contract
- Who are third-party beneficiaries to a contract?
- What is assignment and delegation of a contract?
- When is a party's Duty of performance?
- Aleatory Contract
- What is an Executed contract vs an Executory contract?
- Inchoate Definition
- Evergreen Contract
- What is Performance, Substantial Performance, and Breach of a contract?
- What is performance of a Divisible Contract?
- When is a party's duty of performance discharged?
- What are conditions to Contract (Precedent & Subsequent)?
- Abandonment Option (Contract) Definition
- Cooling Off Rule Definition
- What is tender performance of a contract?
- What are Impossibility and Impracticability
- What is a Frustration of Purpose?
- Waiver or Release from Contract
- Accord and Satisfaction
- Force Majeure Clause
- What is a Breach of Contract?
- Repudiation (Contract) Definition
- Anticipatory Repudiation
- Acceleration Clause (Contracts) Definition
- What methods exist for resolving a breach?
- What remedies exist for a breach of contract?
- Rescission (Contract)
- Exculpatory Clause
- Hold Harmless Clause
- What is Efficient Breach?
- Organization of a Contract
- How to Read the Contract
- Contract Representations & Warranties
- Contract Covenants
- What rules does a court follow in interpreting a contract?
- Allonge Definition
- What is the Parol Evidence Rule?
- What is a complete integration vs a partial integration?
- Exceptions to the Parol Evidence Rule
- Patent and Latent Ambiguity in a Contract
- Service Level Agreement Definition
- Offtake Agreement