Promissory Estoppel Example
If Dan made a promise to Paul, and Dan received something of value, say $100, then there may be an enforceable contract. However, if Dan made the promise and gets nothing in return for that promise, Dan’s promise is still enforceable if Paul relied on that promise.
Many lawyers and academics use “promissory estoppel” and “detrimental reliance” interchangeably. Detrimental reliance is an element of promissory estoppel.
Promissory estoppel binds a promisor when he should reasonably expect a substantial change of position, either by act or forbearance, in reliance of his promise, if justice can be avoided only by its enforcement. (Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935.)
Promissory Estoppel Elements
What elements are required for the promissory? The elements of a promissory estoppel lawsuit are:
- a promise clear and unambiguous in its terms;
- reliance by the party to whom the promise is made;
- the reliance must be both reasonable and foreseeable; and
- the party asserting the estoppel must be injured by his or her reliance [aka: detrimental reliance].
Granadino v. Wells Fargo Bank, N.A. (2015), 236 Cal. App. 4th 411.
“Promissory estoppel applies whenever a promise that the promissor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and that does induce such action or forbearance would result in an injustice if the promise were not enforced. A party plaintiff’s misguided belief or guileless action in relying on a statement on which no reasonable person would rely is not justifiable reliance. If the conduct of the plaintiff in the light of his or her own intelligence and information was manifestly unreasonable, he or she will be denied a recovery. A mere hopeful expectation cannot be equated with the necessary justifiable reliance.” Granadino v. Wells Fargo Bank, N.A. (2015), 236 Cal. App. 4th 411.
Element 1: Clear and Unambiguous Promise
The first element in a complaint for promissory estoppel is a promise that is clear and unambiguous in its terms. (Ibid.)
- Preliminary Negotiations Are Not Enforceable Promises
Promissory estoppel cannot be invoked to enforce preliminary negotiations or discussions between the parties because no clear and unambiguous promise has been made. (Granadino v. Wells Fargo Bank, N.A. (2015) 236 Cal.App.4th 411.) (no promise was created where nothing in lender’s alleged negotiation statements assured the borrowers that the lender would refrain from completing a trustee’s sale in the future).
Where a full commitment between the parties is missing and the offeree is on notice that finalization of the terms will require further negotiations, there is no clear and unambiguous promise by the offeror. (Goldstein v. Comerica Bank (2015) Cal.App.Unpub. LEXIS 8702 citing (Laks v. Coast Fed. Sav. & Loan Ass’n (1976) 60 Cal.App.3d 885).)
- Promising Retire Benefits is an Enforceable Promise
A promise originally intended as a promise to make a retirement gift became enforceable under the doctrine of promissory estoppel when the plaintiff, knowing of the offer, turned down other offers of employment because he did not want to lose the retirement allowance. (Moncada v. West Coast Quartz Corp. (2013) 221 Cal.App.4th 768.)
- General Contractor’s Listing of Subcontractors Not an Enforceable Promise
A general contractor’s listing of subcontractors combined with a statutory restriction on the right to change listed subcontractors did not constitute a clear and unambiguous promise to accept a listed subcontractor’s bid. (Southern Cal. Acoustics Co. v. C.V. Holder, Inc. (1969) 71 Cal.2d 719.)
- Job Application Instructions Not an Enforceable Promise
A representation in job application instructions that industry experience would be “considered” did not constitute a clear and unambiguous promise that previous longshore experience would be the determinative factor in who was registered for full-time permanent longshore work. Aguilar v. International Longshore-men’s Union Local 10, 966 F.2d 443, 446 (9th Cir. 1992).
If extrinsic evidence is needed to interpret a promise, then the promise does not satisfy the requirement of clear and unambiguous. (Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031.)
Element 2: Plaintiff’s actual reliance on the promise made
The promisee must have actually relied on the promise. (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150.)
- No Reliance Where Law Student Worked Hard to Become Eligible for Honors Society
A law student’s hard work to obtain a top ten percent ranking in his law school class, performed in reliance upon the law school’s representation that such ranking would make him eligible for election to the Order of the Coif, was not action of a definite and substantial character necessary for the application of promissory estoppel. (Blatt v. University of Southern California (1970) 5 Cal.App.3d 935.)
- Actual Reliance in Employment Relationships
In matters of employment relationships, courts may make reasonable inferences from the realities of the marketplace concerning the inducement and reliance of employees upon the benefits offered by the employer. Employees need not expressly testify that, but for the promise, they would have left the promisor’s employ or would have never worked there in the first place. (Hill v. Kaiser Aetna (1982) 130 Cal.App.3d 188.)
- Actual Reliance Where Borrower Relies on Bank’s Promise to Modify Loan
A borrower has a promissory estoppel claim against his or her bank when he or she relies on the bank’s promise to work with the borrower to reinstate and modify the loan. As a result, borrower did not attempt to save her home by converting from a Chapter 7 bankruptcy case to a Chapter 13. (Aceves v. U.S. Bank N.A. (2011) 192 Cal.App.4th 218.)
Element 3: Reasonable and Foreseeable Reliance
The promisee’s reliance on the promise must be both reasonable and foreseeable. (US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887.)
Reasonable reliance binds the promisor in lieu of the consideration ordinarily required to make the offer binding. (Flintco Pacific, Inc. v. TEC Management Consultants, Inc. (2016) 1 Cal.App.5th 727.)
- Promisor Deliberately Intends to Induce Reliance
The element of reasonable and foreseeable reliance is satisfied if the promisor, in making the promise, deliberately intended to induce the plaintiff’s reliance on such promise. (Emma Corp. v. Inglewood Unified Sch. Dist. (2004) 114 Cal.App.4th 1018.)
- Intention to Induce Reliance in Employment Relationship
A terminated employee is entitled to economic damages for the lost income the employee suffered as a result of his leaving a secure job due to a supervisor’s false promises regarding the monthly compensation the employee would earn working for the employer. (Helmer v. Bingham Toyota Isuzu (2005) 129 Cal.App.4th 1121.)
- No Reliance Where Promisees are Sophisticated Parties
Where the promisees were experienced business persons and the promisor made nothing more than a conditional offer with essential details missing, the promisees could not legitimately have expected that there was a binding offer and could not reasonably have relied on it. (Laks v. Coast Fed. Sav. & Loan Ass’n (1976) 60 Cal.App.3d 885.)
- No Reliance on Promises that are not Specific and Clear
Reliance on a promise that was not specific and clear was unreasonable and unforeseeable. (Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031.)
- Promissory Estoppel and Third Parties
Although the Restatement (Second) of Contracts §90 does extend the doctrine of promissory estoppel to third parties, it does not extend to price quotations by manufacturers to general contractors. (C.R. Fedrick, Inc. v. Sterling-Salem Corp. (9th Cir. 1974) 507 F.2d 319.) (contractor who used price quotes obtained from supplier could not recover against equipment manufacturer under promissory estoppel doctrine).
- Reliance in Construction Contracts
In construction contracts, if the general contractor has reason to believe that the subcontractor’s bid is erroneous, the general contractor cannot reasonably rely on the bid. (Saliba-Kringlen Corp. v. Allen Eng’g Co. (1971) 15 Cal.App.3d 95.)
ELEMENT 4: Detrimental Reliance / Plaintiff’s Injury
The party asserting the estoppel must be injured by his reliance on the promise. (Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935.)
The purpose of the promissory estoppel doctrine is to make a promise by one party and the resulting detrimental reliance by another party operate as a substitute for consideration under certain circumstances. (Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031.)
The value of the plaintiff’s detrimental reliance need not be identical with, or equated to, the value of the defendant’s promise. (Tomerlin v. Canadian Indem. Co. (1964) 61 Cal.2d 638.)
- Injustice Can Be Avoided Only By Enforcement of the Promise
The plaintiff must show that injustice can be avoided only by enforcement of the promise. (US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887.)
- Oral Promises and Promissory Estoppel
An oral promise that meets the elements of promissory estoppel is enforceable if injustice can be avoided only by enforcement of the promise. (Allied Grape Growers v. Bronco Wine Co. (1988) 203 Cal.App.3d 432.)
- Avoiding Injustice by Enforcement of the Promise
The meaning of “injustice can be avoided only by enforcement of the promise” is substantively the same thing as the requirement of unjust enrichment or unconscionable injury. (Munoz v. Kaiser Steel Corp. (1984) 156 Cal.App.3d 965.)
Unconscionable injury results from denying enforcement of an oral agreement after one party is induced by another party to seriously change position relying upon the agreement. (Allied Grape Growers v. Bronco Wine Co. (1988) 203 Cal.App.3d 432.)