Promissory Estoppel 1) The promisor should reasonably expect to induce action or forbearance from the promisee; 2) Such action or forbearance is in fact induced; and Well address each of these elements, the purposes of promissory estoppel, and how its used to prevent injustice. Purpose of Promissory Estoppel Courts look at all the circumstances to determine whether the promisor should have foreseen that the promisee would rely on the promise. This may include looking at the communications between the two parties to establish their states of mind. For example, if the promisee told the promissor that he wanted to purchase a car but was $2,000 short of being able to make a down payment, and the promissor then promised him $2,000, the promissor should reasonably expect the promisee to make the down payment in reliance of the promise. This reliance is reasonably foreseeable. The court ruled in favor of the general contractor and reasoned that the subcontractor should have reasonably expected the general contractor to use the subcontractors $115,000 bid to prepare his overall price for the entire construction project. By including detailed information in his bid, including the job name, scope of the work that would be provided, the price for services, and payment terms, it was foreseeable that the general contractor would rely on that bid to use in its own bid for the overall project if the quote was lowest. This specified information was more than just an expression of intent or desire to perform the work. Element 2: Did the promise induce such action or forbearance? Second, a plaintiff will have to show that there was a direct cause-effect relationship between the promisors promise and the promisees action. Promissory estoppel was applied and the airlines promise was enforceable even though it was unsupported by consideration. The subcontractor had expanded its office space, hired a project manager, and secured other subcontractors for the facility expansion project all because of the oral promise. A direct cause and effect relationship existed because the subcontractor would have no reason for taking all these actions in the absence of such a promise. Element 3: Can injustice be avoided by enforcement of the promise? Courts interpret the term injustice to mean an unfair result. If an unfair result would otherwise occur, a promise will be enforced by awarding damages to a harmed party. Damages, however, are limited to reliance damages, which means the amount of harm suffered because of the reliance on the promise. While courts generally prefer to award expectation damages, which means the full promised value of the agreement, these are not necessarily available in promissory estoppel cases. The court will award only those damages necessary to avoid injustice. For example, assume that a homeowner tells an interior designer that he will hire the designer to remodel the homes living room and two bathrooms, but no binding contract is agreed to. The interior designer spends money to purchase new wallpaper, new paint and tools necessary for the remodeling. The day before the project begins, the homeowner backs out and says he no longer needs the interior designers services. This is a classic example of where promissory estoppel may be applied. Although there was no binding agreement between the parties, the designer detrimentally relied on the homeowners promise. What will a court award if the interior designer is successful in a lawsuit against the homeowner? Most likely, it will only award reliance damages, or the costs spent in reliance of the contract performance, which is what is necessary to avoid injustice. As such, the interior designer can recover the costs spent on wallpaper, paint, and tools, but not the full amount that he would have earned had the project been completed. Promissory estoppel plays an important role in American contract law to hold parties accountable and ensure equity, even in the absence of consideration. It is a critical tool that courts can use to avoid injustice when the general contract law rules would cause unfair results. |
