Contracts II Outline | ID 52749 | University of Kentucky School of Law

CONTRACTS II OUTLINE

PROFESSOR FROST

SPRING 2017

PROMISSORY ESTOPPEL

Does promissory estoppel require a promise? Technically no (Hoffman v. Red Owl), but it’s HIGHLY unlikely you’ll win without one; now courts mostly use it as a sub for consideration.

Promissory Estoppel as a Substitute for Consideration

Construction Bids

Restatement §§ 87 & 90 à offer v. promise à Judges Traynor v. Hand

§87 Option Contract

(2) An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice

Case

Drennan v. Star Paving Co. (Traynor)

P is bidding on a contract and accepting bids from subcontractors; D, a subcontractor, offers that he can do the work for $7k
P is awarded the contract & on attempt to notify D, D attempts to revoke offer
P has to cover with another subcontractor
Rule- It’s only fair that P should have at the very least an opportunity to accept D’s bid after the general contract has been awarded to him (Restatement § 90, Promissory Estoppel applies here)
Bidding process is analogous to a unilateral contract, option for P to accept D’s offer is implied
Court was willing to find an implied promise

§ 90 Promissory Estoppel

A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee & which does induce such action or forbearance is binding if injustice can be avoided only be enforcement of the promise.

Case

James Baird Co. v. Gimbel Bros, Inc. (Hand)

D sent employee to Philly; contractor who computed the amount of linoleum & offered to supply all the linoleum if contractor won the bid; P sued when D refused to supply linoleum as previously discussed terms
Rule- An offer for an exchange isn’t meant to become a promise until consideration has been received, so there was no contract
Hand- An offer isn’t a promise until it has been accepted §90
Holding- No promissory estoppel; court was unwilling to find implied promise

Charitable Subscriptions

Restatement § 90: Promise Reasonably Inducing Action or Forbearance

(2) A charitable subscription or a marriage settlement is binding under subsection (1) without proof that the promise induced action or forbearance

Case

Allegheny College v. National Chautauqua County Bank of Jamestown

Case reviews bargained for consideration

According to § 90, charitable subscriptions are enforceable notwithstanding the absence of detrimental reliance by a charity

P promised to make a donation to commemorate name, P gave $1k, college didn’t commemorate name, P refused to pay rest
Majority- Promissory estoppel didn’t work, so Cardozo finds consideration through implied promise

This isn’t a promissory estoppel case because it lacks reliance
Cardozo- willing to say that acceptance of $1k carries implied promise to commemorate name

Dissent- If P’s letter is viewed as an offer, then it’s an offer that limits acceptance by acts to be done “setting up fund in her name” and because the acceptance wasn’t carried out in the prescribed manner, there wasn’t acceptance and thus no K, which means power of revocation is still applicable

Promissory Estoppel as an Alternative to Breach of Contract

Strict Promissory Estoppel à just plug in to replace consideration; still need a lot of the typical contract shit

Hoffman à promissory estoppel isn’t limited to breach of contract, it may be more broadly applied, it’s its own thing, but the remedy may be limited as justice requires

Restatement (1st): § 90 Promise Reasonably Inducing Action or Forbearance

A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a 3rd person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. Remedy granted for breach may be limited as justice requires.
A charitable subscription or a marriage settlement is binding under subsection (1) without proof that the promise induced action or forbearance.

Case

Goodman v. Dicker

Dicker was led to believe by Goodman, that his application for a “dealer franchise” would be awarded;
Dicker took detrimental action in reliance of this belief; Dicker’s application was denied
Issue- Did Goodman give Dicker reason to take action in preparation to do business?
Rule- Leading another, through conduct or language, to do what he wouldn’t otherwise have done, shall not subject such person to loss or injury by disappointing the expectations on which he acted (equitable estoppel)
Holding –Justice & fair dealing requires that one who acts to his detriment on the faith of conduct of the kind revealed here should be protected by estopping the party who has brought about the situation from alleging anything in opposition to the natural consequences of his own course of conduct
Tort case rather than a Contract case

Restatement (2nd): § 90 Promise Reasonably Inducing Action or Forbearance

If yes, promise in binding BUT

The remedy granted for breach may be limited as justice requires

Part II à A charitable subscription, or a marriage settlement is binding under the above provision WITHOUT PROOF that the promise induced such action

Case

Hoffman v. Red Owl Stores, In

omise and in this case there was no promise to rely on thus the lower court’s judgment was clearly erroneous

Reasonable Reliance

Alden v. Vernon Presley

Issa case bout Elvis
Rule- Limits of Promissory estoppel are:

Detriment suffered must be substantial in an economic sense;
Substantial loss to the promisee in acting in reliance must have been foreseeable by the promisor;
The promisee must have acted reasonably in justifiable reliance on the promise as made

Holding- Plaintiff’s reliance wasn’t reasonably justified because there was the ability to unwind reliance before detriment & if that’s the case you may not enforce promissory estoppel

Injustice of Nonenforcement

Cohen v. Cowles Media Co.

Cohen went to Cowles Media with document about a political candidate. Cohen offered to supply the documents in exchange for anonymity
Cowles agreed, received documents, and the editors forced the disclosure of Cohen’s identity, who was subsequently fired and attacked/ridiculed by the media
Holding- No fraud because the reporters, when they made the promise, were not misrepresenting any facts and intended to uphold their promise

No breach of contract, parties didn’t intend to be bound
No promissory estoppel à enforcement of the promise under a promissory estoppel would violate D’s first amendment rights

Failure to meet “injustice” requirement

Promissory estoppel requires an inquiry into the reasoning behind promisor’s actions to determine if enforcement of promise would be just

Cohen SCOTUS Squib

SCOTUS rules that applying promissory estoppel to enforce the reporters’ promise to maintain confidentially DOESN’T violate 1st Amend. à Reverses & Remanded

Cohen v. Cowles Media Co. II

Court now applied doctrine of promissory estoppel and found that injustice may only be avoided by enforcing the promise

D basically conceded that what they did was wrong and therefore inaction by the court would be unjust

Court weighs harm of nonenforcement and reasons for breach and puts them on the scales of justice to see where the case comes out

Hillman

Promise is as important as reliance in promissory estoppel; “injustice” requirement is relatively unimportant

Delong

Two types of reliance

Performance Reliance- Not relying on expectation of enforcement
Enforcement Reliance – Relying on your belief that the promise will be legally enforceable