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PROMISSORY ESTOPPEL

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RESTATEMENT (SECOND) OF CONTRACTS

 

90. PROMISE REASONABLY INDUCING ACTION OR FORBEARANCE

(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 such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

Comments:

a. Relation to other rules.... This Section is often referred to in terms of "promissory estoppel,"  a phrase suggesting an extension of the doctrine of estoppel. Estoppel prevents a person from showing the truth contrary to a representation of fact made by him after another has relied on the representation....

Certainly reliance is one of the main bases for enforcement of the half-completed exchange, and the probability of reliance lends support to the enforcement of the executory exchange. See Comments to 72, 75. This Section thus states a basic principle which often renders inquiry unnecessary as to the precise scope of the policy of enforcing bargains. Sections 87-89 state particular applications of the same principle to promises ancillary to bargains, and it also applies in a wide variety of non-commercial situations.

b. Character of reliance protected. The principle of this Section is flexible. The promisor is

affected only by reliance which he does or should foresee, and enforcement must be necessary to

avoid injustice. Satisfaction of the latter requirement may depend on the reasonableness of the

promisee's reliance, on its definite and substantial character in relation to the remedy sought, on the

formality with which the promise is made, on the extent to which the evidentiary, cautionary,

deterrent and channeling functions of form are met by the commercial setting or otherwise, and on

the extent to which such other policies as the enforcement of bargains and the prevention of unjust

enrichment are relevant....The force of particular factors varies in different types of cases....

Illustrations:

2. A promises B not to foreclose, for a specified time, a mortgage which A holds on B's land.

B thereafter makes improvements on the land. A's promise is binding and may be enforced by denial

of foreclosure before the time has elapsed.

RESTATEMENT (SECOND) OF CONTRACTS

  p. 20

3. A sues B in a municipal court for damages for personal injuries caused by B's negligence.

After the one year statute of limitations has run,B requests A to discontinue the action and start again

in the superior court where the action can be consolidated with other actions against B arising out

of the same accident. A does so. B's implied promise that no harm to A will result bars B from

asserting the statute of limitations as a defense.

4. A has been employed by B for 40 years. B promises to pay A a pension of $200 per month

when A retires. A retires and forbears to work elsewhere for several years while B pays the pension.

B's promise is binding.

c. Reliance by third persons. If a promise is made to one party for the benefit of another, it

is often foreseeable that the beneficiary will rely on the promise. Enforcement of the promise in such

cases rests on the same basis and depends on the same factors as in cases of reliance by the promisee.

Justifiable reliance by third persons who are not beneficiaries is less likely, but may sometimes

reinforce the claim of the promisee or beneficiary.

d. Partial enforcement. A promise binding under this section is a contract, and full-scale

enforcement by normal remedies is often appropriate. But the same factors which bear on whether

any relief should be granted also bear on the character and extent of the remedy. In particular, relief

may sometimes be limited to restitution or to damages or specific relief measured by the extent of

the promisee's reliance rather than by the terms of the promise.... Unless there is unjust enrichment

of the promisor, damages should not put the promisee in a better position than performance of the

promise would have put him. See 344, 349.

Illustrations:

8. A applies to B, a distributor of radios manufactured by C, for a "dealer franchise" to sell

C's products. Such franchises are revocable at will. B erroneously informs A that C has accepted the

application and will soon award the franchise, that A can proceed to employ salesmen and solicit

orders, and that A will receive an initial delivery of at least 30 radios. A expends $1,150 in preparing

to do business, but does not receive the franchise or any radios. B is liable to A for the $1,150 but

not for the lost profit on 30 radios....

9. The facts being otherwise as stated in Illustration 8, B gives A the erroneous information

deliberately and with C's approval and requires A to buy the assets of a deceased former dealer and

thus discharge C's "moral obligation " to the widow. C is liable to A not only for A's expenses but

also for the lost profit on 30 radios.