Promissory Estoppel

Promissory estoppel is a legal doctrine used in American law as well as other legal systems, although other legal systems may call it by a different name. Promissory estoppel allows a party to recover on a promise even though that promise was made without consideration. Essentially it prevents, or estops, a person from arguing that his or her promise should not be upheld. It also requires that reliance on the promise was reasonable, and that the person trying to enforce the promise actually relied on the promise to his or her detriment. The precise legal requirements for promissory estoppel may vary between jurisdictions.

An example of promissory estoppel is where an employer orally promises to pay an employee a monthly amount for the remainder of her life as retirement. If the employee reasonably relies on the promise and retires, the employer will likely be estopped, based on the doctrine of promissory estoppel, from reneging on his promise to pay a monthly retirement payment.

Usually, in cases of promises or contracts, the law requires that a party receive consideration for the deal. Consideration is some type of value that is being exchanged between the parties. That "value" can take the form of affirmatively doing something; refraining from doing something, also called forbearance; or making a promise in return. So, in an example where John promises to pay Mary for building him a house, the consideration is the money paid for building a house. Consideration should be adequate, that is, reasonable given the circumstances of the agreement, and cannot be illegal, such as a bribe. Consideration also cannot be for something received in the past. Sometimes, nominal consideration — consideration of insignificant value — is sufficient.

Regardless of the type of consideration required in a given contract, some kind of consideration is generally required in order to make an agreement valid and legally enforceable. But, because the law wants to promote fairness, courts will sometimes apply the doctrine of promissory estoppel. So even though there is no enforceable contract, the law may enforce the promise if the necessary elements (e.g., reasonable reliance and detriment) are proven. Still, the law wants clarity in agreements and therefore, most often consideration is required. The promissory estoppel doctrine is actually limited to cases where it is necessary to prevent an injustice. This means it is used less often than if it were applied to do justice — a nuanced but significant difference.

The doctrine of promissory estoppel is different than a similar sounding doctrine, the doctrine of estoppel. Promissory estoppel relies on a statement of promise while estoppel relies on a statement of fact. These two doctrines point at a bit of a tug of war in the law. On the one hand we want to be certain in our decisions and therefore want to enforce agreements with factual consideration, but at the same time we want to be fair and enforce promises that were reasonably relied on.

Even if an agreement is not based on a consideration, and even if promissory estoppel is not applicable because, say the "agreement" didn't include a promise, the courts can still enforce the "agreement" for the purpose of promoting fairness. The court could do this by imposing obligations on the parties through quasi contract. Quasi contract is a contract implied-in-law. So, for example, say Suzanne paints Joel's house and Joel knows Suzanne is painting his house but Joel doesn't sign a contract and doesn't promise to pay for Suzanne for her services. The court's imposition of a quasi contract in this instance could hold Joel responsible for the cost of Suzanne's services.