Explanation of promissory estoppel law

Written by phil m. fowler
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Explanation of promissory estoppel law
Promissory estoppel fills in a gap that, if left unfilled, would leave some people unfairly without a legal remedy. (Getty Thinkstock)

Promissory estoppel law is a legal theory that allows a person to recover money in a situation that resembles a contract but lacks the formalities required for an enforceable contract. Promissory estoppel is an equitable principle, meaning it is a legal rule created and enforced by courts and judges according to what the judges feel is fair in the individual circumstances of the case.

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Generally

Promissory estoppel law fills in a gap that, if left unfilled, would leave some people unfairly without a legal remedy. Promissory estoppel is a way to enforce an agreement that does not meet the legal requirements for a contract. Estoppel is a Latin term meaning "to stop." Basically, the defendant is stopped from refusing to honour a promise made to the plaintiff. The defendant is required to honour the promise even though it is not a binding contract.

History

The history of promissory estoppel goes back hundreds of years to the common law of English courts. The law developed as an exercise of the courts' independent power to grant legal and equitable remedies where the statutory laws of Parliament were insufficient to meet every conceivable set of facts. Promissory law developed to aid those who deserved a remedy but did not meet the strict legal requirements to prove a contract remedy.

Types

Promissory estoppel is also referred to as "justifiable reliance," or simply "reliance." The details can vary from state to state, but as a general matter the guiding principle is that a claim exists where the plaintiff took some action in reasonable reliance on a promise made by the defendant. For example, if I told you that I will sell you a piece of property for a certain price, and then you sell your current home in reliance on my promise to sell you a new site for your home, you probably will be able to enforce that promise even if we never enter into a written contract.

Elements

To prove a claim for promissory estoppel, the plaintiff must show that the defendant made a clear and definite promise, that the plaintiff justifiably and substantially relied on that promise and suffered damage as a result, that the defendant should have been aware the plaintiff would rely on the promise, and that enforcing the promise like a contract will be just and fair. Justifiable and substantial reliance means the plaintiff had a sound, rational reason for relying on the promise.

Misconceptions

A promissory estoppel is similar in character to a contract claim, but in fact, the two claims are distinctly different. A contract claim is based in law, whereas a promissory estoppel is firmly grounded in equity. A contract requires proof of offer and acceptance, as well as consideration, while promissory estoppel requires no such formalities. A contract claim is based on the reasonable expectations of the contracting parties, while promissory estoppel is based on what is reasonable and fair under the circumstances.

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