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Contracts II
Stetson University School of Law
Fitzgerald, Peter L.

3.      Section C. Promissory Estoppel in the Commercial Context-
§ Commercial promisors seldom intend to be bound unless exchanges are contemplated
§ Given the prevalence of commercial motives in the business world and the rarity of charitable ones, any reliance on gratuitous promises in this context is almost by definition unreasonable
§ under this line of analysis, there is little room in the business world for the doctrine of promissory estoppel
§ Not all jurisdictions have adopted Rt2d § 90 in its entirety under all circumstances
§ most have admitted the possibility of using promissory estoppel to some degree in commercial contexts
§ PE plays its largest role when a K would not otherwise exist
§ Cts use the consideration doctrine, in part, to balance the interests of the promisor and the promisee
§ PE, when consideration is not present, must also serve this role
§ Promissory Estoppel and Commercial Promises-
·         Case p260- East Providence Credit Union v. Geremia, 1968-
·         Case p264- Ypsilanti v. General Motors Corp, 1993-
§ Promissory Estoppel and Commercial Promises: The Specific Example of Employment Disputes-
§ Two scenarios arise for applications of legal rules that ct’s view of policies at stake
§ promises made at the pre-hiring stage
§ promises made at the post-hiring stage
§ some cts distinguish b/w these, some don’t
§ most cts hold strongly to the policies underlying the employment-at-will doctrine
§ employers should not be held to vague promises of employment for an indefinite duration, even in the face of substantial reliance on the part of employees
§ at-will employment relationship:
§ Both sides take some risk in light of the flexibility they gain
§ if they are unwilling to take those risks, they are always free to bargain for an explicit long-term employment contract
·         Case p268- Lord v. Souder, 1999-
·         Notes-
§ Ks that meet the formal elements of offer, acceptance, and consideration may nevertheless be unenforceable if they fail to satisfy the SoF
§ a disappointed plaintiff who has relied on the K may try to enforce it under a theory of PE
§ § 139(1) generally approves this tactic
·         Rt.2d § 139. Enforcement By Virtue of Action in Reliance-
§ (1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce the action or forbearance is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement of the promise. The remedy granted for breach is to be limited as justice requires…
·         Stearns v. Emery-Waterhouse Co.- considered application of Rt2d § 139(1) in the employment context
§ plaintiff worked for two years at $85k/y (after leaving a $99k/y) but was then moved to a different position which paid $68k/y; then 6months later was fired altogether
§ issue- whether an employee may avoid the SoF based solely upon his detrimental reliance on an employer’s oral promise of continued employment
§ Stearns contends that our case law permits him to avoid the SoF under the PE theory of § 139 of Rt2d of K
§ ct disagreed
§ ct declined Stearns invitation to accept PE as permitting avoidance of the statute in employment Ks that require longer than one year to perform
§ policy of the statute commands that the focus remain upon the employer’s conduct rather than upon the employee’s reliance
§ Ct concluded that his action for breach of K is barred by the SoF
§ Promissory Estoppel in Commercial Negotiations-
§ plaintiffs sometimes seek to use PE where no contractual promise has yet been made
§ instead, defendant promises that a K is forthcoming
§ plaintiff might try to argue that an informal K had been reached
§ yet if the defendant has, by its conduct inexorably led the plaintiff down the primrose path, and the plaintiff has suffered thereby, PE may provide some relief
§ plaintiff might be entitled to reimbursement of the expenses it suffered
·         Hoffman v. Red Owl Stores, Inc.-
§ famous case invoking PE in the context of pre-contractual negotiations
§ Hoffmans owned bakery and sought to get into grocery business
§ took multiple steps to prepare themselves for the venture
§ Red Owl projected but increased amount Hoffmans would have to pay
§ then added more to the amount, then finally gave an even bigger amount
·         Hoffmans would have to let father-in-law in as partner to come up w/money
§ Hoffmans finally just gave up 2yrs later, litigation ensued
§ trial ct and jury found Red Owl liable on a theory of PE and Wisconsin Supreme Ct affirmed
§ departure from traditional view that a party is free to break off K negotiations at any time for any reason
§ fair to say that commentators who favored broad-based expansion of the duty to negotiate in good faith have largely been disappointed
§ nevertheless, analysis of this case remains influential, even if its scope of application has not enlarged greatly since the original decision
4.      Section D. Remedies in Promissory Estoppel Actions-
§ PE a species of K action, or is it an independent theory of liability?
§ debate is particularly relevant to the question of remedies
§ if PE is more about enforcing promises, we might expect to see traditional K relief
§ if instead it is about compensating injured plaintiffs, we might see a different measure of recovery, keyed more explicitly to the extent of the detriment the plaintiff suffered
§ “specific pfc”- rarely available
§ damages- generally, the goal of K damages is to compensate for economic losses
§ will vary depending on circumstances
§ return injured to the position they would have been in had the deal gone through
·         “expectation damages”- when cts speak of K damages for PE cases, this is usually what they are referring to
§ § 90- states that “the remedy granted for breach may be limited as justice requires”
·   Wheeler v. White-
§ TX Supreme Ct- party who gave promise cannot afterward be allowed to revert to the previous relationship as if no such promise had been made
§ function of the doctrine of PE is defensive in that it ‘estopped’ a promisor from denying the enforceability of the promise
§ remedy which will enable the injured party to be compensated for his foreseeable, definite and substantial reliance
§ where the promisee has failed to bind the promisor to a legally sufficient K, but where the promisee has acted in reliance upon a promise to his detriment, the promisee is to be allowed to recover no more than reliance damages measured by the detriment sustained
§ put the promisee in the position he would have been in
·          Promissory Estoppel: The Commercial Context and Remedies-
·         Review-
§ Chapter 10 (A) & (B)
§ Promissory Estoppel
·         “This Old Contract”
§ The House of Promise Enforcement: The Front Door-
·         Offer – Acceptance – Consideration
·         Classic Bargain Theory
·         Rt2d of Ks § 17 Requirement of a Bargain-
§ (1) ….the formation of a contract requires a bargain in which there is a manifestation of assent to the exchange and a consideration.
·         Rt2d of Ks § 71 Requirement of Exchange-
§ (1) To constitute consideration, a performance or a return promise must be bargained for.
§ (2) A performance or a return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.
§ (3) The performance may consist of
§ (a) an act other than a promise, or

is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made,
§ (c) his “restitution interest,” which is his interest in having restored to him any benefit that he has conferred on the other party.
·         Rt2d of Ks § 347 Measure of Damages in General-
§ [T]he injured party has a right to damages based upon his expectation interest as measured by:
§ (a) the loss in value to him of the other party’s performance caused by its failure or deficiency
§ (b) And any other loss, including incidental or consequential loss, caused by the breach, less
§ (c) Any cost or other loss that he has avoided by not having to perform.
·         Rt2d of Ks § 349 Damages Based on Reliance Interest-
§ As an alternative to the measure of damages stated in §347 [the expectation measure], the injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed.
·         Remedies-
§ Expectation v. Reliance Damages-
§ Problem 10.2-
·         Problem 10.2-
§ Sylvan Style negotiates sale of business with Maria Marcos
§ In anticipation Maria makes expensive buying trip to Italy
§ Sylvan decides not to sell…
2.      Section B. Promissory Estoppel and Offers-
§ sometimes option Ks simply not practical; no option K, the general principle is that an offer may be freely revoked
§ cts have recognized exceptions to this general principle
·   Rt2d § 45-
§ creates an option K once the offeree begins (or tenders) the requested pfc
§ although the offeree has no obligation to complete her pfc, the offeror has lost the power to w/draw its offer
§ not stated in terms of promissory estoppel or detrimental reliance, but a similar concern for the offeree motivates it
·   Case p286- Drennan v. Star Paving Co., 1958-
§ did not use PE as a substitute for the entire K; instead applying the principle of Rt of Ks § 90, interpreted the subcontractor’s bid to be irrevocable
§ Many states have adopted this reasoning
·   Notes-
§ James Baird Co. v. Gimbel Bros. Inc, 1933-
§ also involved a construction bidding dispute
§ different approach from Drennan case
§ basically, contractor waited until the sub-contractor came to him about the error to ‘formally accept’ offer
·         ct said- since the offer was w/drawn before it was accepted, the acceptance was too late
§ doctrine of “promissory estoppel” is to avoid the harsh results of allowing the promisor in such a case to repudiate, when the promisee has acted in reliance upon the promise
·   Case p291- Pavel Enterprises, Inc. v. A.S. Johnson Co., 1996-
§ ultimately declines to find the requisite elements of K or promissory estoppel
§ Detrimental Reliance evolved since Drennan but has not been picked up as a doctrine by the cts