Promissory Estoppel: Everything You Need to Know
Promissory estoppel allows a promise to be enforced by law if someone has suffered an injury or a loss, based on their reliance upon that promise. 3 min read
2. Contract Law
3. Promissory Estoppel Examples
Promissory estoppel allows a promise to be enforced by law if someone has suffered an injury or a loss, based on their reliance upon that promise. Essentially, it prevents a promisor from arguing that the initial promise he made should not be upheld. This takes a promise and makes it legally enforceable, even though it was made without any formal considerations or contracts. When a promisee relies on a promisor's word, and then the promisee suffers some sort of detriment as a result, he or she may have a case for promissory estoppel.
Elements of Promissory Estoppel
To initiate a promissory estoppel, five basic elements are required.
- Legal Relationship - Some type of contractual relationship must already exist or be expected to be established.
- Promisor - The person who made a promise.
- Promisee - The person who relied upon the promise.
- Detriment - Some type of damage suffered by the promisee, as a result of reliance on the promisor's word.
- Unconscionability - A level of unfairness exhibited by the promisor.
You'll notice the word "reasonably" mentioned a lot in these proceedings. This simply means that the promisee relied upon the promisor's promise, within reason. If the promise was something an average person could reasonably rely upon, it may fall within the realm of promissory estoppel.
Beyond the element of reasonability, a promisee will be asked to prove actual suffering or detriment as a result of the promisor failing to follow through on this promise. That loss must be of an economic nature. If there is no other manner in which the injustice can be resolved, a court is likely to enforce the promise made.
Typically, contract law outlines various considerations made in a promise or an agreement. This makes legal consideration a valuable asset when it's exchanged during the creation of a promise or an agreement. For a contract to become enforceable from a legal standpoint, some form of consideration must take place.
This may include the exchange of monies between two parties or a promise to halt from taking some type of action. That said, even though consideration is important, a court may still make a determination in the absence of consideration. However, it would need to see that someone reasonably suffered, as a result of their reliance on the promise made.
Promissory Estoppel Examples
Promissory estoppel doesn't necessarily relate to contract law alone. Here are a few examples.
- Let's say an employer promises to pay an employee a set amount of money during his or her retirement. This might prompt the employee to file for retirement. If, however, the employer does not fulfill this promise, the employee may have a case. The court may rule in favor of the employee, estopping the employer from not delivering on his promise.
- If a man hires an artist to paint a movie set, telling the artist she will receive a portion of his proceeds from his movie contract, but then fails to reimburse the artist for her work, the artist may have a case. A judge may rule that the man must pay the artist a judgment for the value of her work.
- A promise to provide funds to a charity is another example of promissory estoppel. If a charity makes various expenditures on the promise of a donation from another party, but then that party never fulfills their end of the agreement, the organization may have a case. The promisor may be estopped from denying the organization the funds, perhaps under the statute of fraud.
Promissory estoppel falls under United States law. You will find it practiced in other countries, as well. Even though promissory estoppel is enforced in all 50 United States, the requirements vary between jurisdictions, i.e. from state to state. What's essential is what's stated in the law of contracts. If a party has changed his or her position, to the detriment of the other party, then the promisee can seek to have the promise enforced, even in the absence of a contract. This is simply to allow the damaged party to recover damages from a promise made.
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