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George Mason School of Law

Contracts II. Promissory Estoppel

F.H. Buckley

fbuckley@gmu.edu

Consideration and Promissory Estoppel

If you could, would you abolish the consideration doctrine?

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Consideration and Promissory Estoppel

If you could, would you abolish the consideration doctrine? What kinds of promises should not be

enforced without a consideration?

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What is Estoppel?

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What is Estoppel?

Estoppel by representation of fact (equitable estoppel in the US)

Promissory estoppel (equitable estoppel in GB)

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What we’ll look at

An ideological battle?

Varieties of Promissory Estoppel

The Material Benefits Rule

Option Contracts

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Estoppel: An Ideological Battle?

Oliver Wendell Holmes Samuel Williston Arthur Corbin

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Estoppel: An Ideological Battle?

Grant Gilmore, The Death of Contract (1974)

Restatement § 90(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.

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Restatement § 90(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.

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Distinguish four kinds of duties Things you should do even if you don’t promise

(e.g., pay taxes)

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Distinguish four kinds of duties Things you should do even if you don’t promise

(e.g., pay taxes) Things you should do because you promised to

do so, and provided consideration

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Distinguish four kinds of duties Things you should do even if you don’t promise

(e.g., pay taxes) Things you should do because you promised to

do so, and provided consideration Things you should do because you promised,

and the promisee has relied, and 90(1) is triggered

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Distinguish four kinds of duties Things you should do even if you don’t promise

(e.g., pay taxes) Things you should do because you promised to

do so, and provided consideration Things you should do because you promised,

and the promisee has relied, and 90(1) is triggered

Things you should do because you ought to do them and have promised to do so, notwithstanding the absence of consideration or promisee reliance

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The fourth kind: Restatement § 90(2)

A charitable subscription or a marriage settlement is binding under 90(1) without proof that the promise induced action or forbearance

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Charitable Subscriptions

I promise you $10,000 but renege. Is my promise enforceable?

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Charitable Subscriptions

I promise you $10,000 but renege. Is my promise enforceable? On the basis of the promise, you’ve

bought a car? Enforceable?

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Charitable Subscriptions

I promise you $10,000 but renege. You happen to be a charity. Is my promise enforceable?

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She’ll feel differently when the cheque bounces

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Charitable Subscriptions

What about Restatement § 90(2) A charitable subscription or a

marriage settlement is binding under 90(1) without proof that the promise induced action or forbearance

Just how would one have showed reliance in such cases?

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DeLeo at 156

Why didn’t § 90(2) work?

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DeLeo

The storage room? So what are you going to get for $25K?

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Restatement § 90(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.

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Charitable Subscriptions

You and I meet and agree that we will both donate $5,000 to a third party.

I give. You don’t. Are you liable?

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Charitable Subscriptions

You and I meet and agree that we will both donate $5,000 to a third party.

I give. You don’t. Are you liable? To whom?

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What would action or forbearance look like?

I pledge $500,000 to a college which promises to name a scholarship after me.

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Charitable Subscriptions

Cardozo in Allegheny College p.157 Where was the consideration?

27Allegheny College

Charitable Subscriptions

Why do you think most courts refuse to adopt Restatement § 90(2)?

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Charitable Subscriptions

Which rule produces more charitable giving?

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Charitable Subscriptions

Why so few such cases?

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George Mason School of Law

Contracts II. Promissory Estoppel

F.H. Buckley

fbuckley@gmu.edu

Restatement § 90(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.

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Family Promises

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Family Promises

Do they deserve special consideration? If so, which way does this cut?

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Haase v. Cardoza p.164

Was the promise supported by consideration?

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Haase v. Cardoza p.164

Was the promise supported by consideration?

Did Alice really stiff Rose and Loretta?

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Haase v. Cardoza p.164

Was the promise supported by consideration?

Did Alice really stiff Rose and Loretta? “During a period of illness”

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Haase v. Cardoza

Was the promise supported by consideration?

What about reliance? A change of position?

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Ricketts v. Scothorn p.166

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Ricketts v. Scothorn

Was consideration given by Katie for the promise?

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Ricketts v. Scothorn

Was consideration given by Katie for the promise? “He looked for nothing in return”

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Ricketts v. Scothorn

Was consideration given by Katie for the promise? No promise to do or refrain from doing

anything Is this consistent with Hamer v. Sidway?

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Ricketts v. Scothorn

Why did the grandfather renege (even before he died)?

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Ricketts v. Scothorn

Why did the grandfather renege (even before he died)? “If he could sell his farm…” Let Katie work for Funke and Ogden as a

bookkeeper

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Ricketts v. Scothorn

Was there reliance by Scothorn?

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Ricketts v. Scothorn

Was there reliance by Scothorn? “Having intentionally influenced the plaintiff

to alter her position for the worse … it would be grossly inequitable to permit … the executor … to resist payment”

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Ricketts v. Scothorn

What was the remedy?

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B 100, 100

I100 I DR

0 50 100

The measure of damages

C 100,0 D

A50, 50 50

Time 1 What do we need to give Katie to make her as well off as he would have been had the promise not been made, or had he not relied?

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Family promises

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Why might a promisor want to incur legal liability?

Family promises

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Why might a promisor want to incur legal liability?

And why might he not want to do so?

Family promises

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If we enforce them all, do we make promisees better off?

The Employment Context

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The Employment Context

Feinberg v. Pfeiffer p.173 What was the promise and why was it

made?

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The Employment Context

Feinberg v. Pfeiffer p.173 What was the promise and why was it

made? Was there consideration?

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The Employment Context

Feinberg v. Pfeiffer p.173 What was the promise and why was it

made? Was there consideration? Cf. Restatement § 86 on past

consideration

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The Employment Context

Feinberg v. Pfeiffer What was the promise and why was it

made? What was the reliance?

What would count as reliance?

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The Employment Context

Feinberg v. Pfeiffer What was the promise and why was it

made? What was the reliance?

Did she leave her job right away, like Katie Scothorn?

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The Employment Context

Feinberg v. Pfeiffer What was the promise and why was it

made? What was the reliance?

How old was she in 1947? And for how much longer did she work for

Pfeiffer?

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The Employment Context

Feinberg v. Pfeiffer What was the promise and why was it

made? What was the reliance?

What if she had quit because she was too ill to work?

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The Employment Context

Feinberg v. Pfeiffer What about the equities of the case?

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Why a different result in Hayes?P. 177

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Why a different result in Hayes?

Feinberg retired after the promise; Hayes decided to retire before the promise, and retired a week after it was made

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Why a different result in Hayes?

Feinberg retired after the promise; Hayes decided to retire before the promise, and retired a week after it was made

No formal provision, no board resolution. (So?)

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Why a different result in Hayes?

Did the promisors intend to assume legal liability in this case? In Feinberg?

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Promises to insure

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You DID insure, didn’t you Rhett?

The Typical Case

Spiegel at 190

Insurer: Met Life

Agent: Levy

Insured: Spiegel

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Geremia at 186

Did the lender promise to insure the car?

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Geremia at 185

Did the lender promise to insure the car?

And if it didn’t, did Geremia reasonably rely that it would do so?

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Geremia at 185

Did the lender promise to insure the car?

Cf. Restatement 90, comment e: “applied with caution”

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Varieties of Promissory Estoppel

Chartable Subscriptions Family Promises Employment Contracts Promises to insure So why were we thinking in

categories?

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The Rationale for Liability

The case where the promisor invited reliance?

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The Rationale for Liability

The case where the promisor invited reliance?

The case where he didn’t, but the promisee relied anyway The “reliance monster”

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The Rationale for Liability

The case where the dollars are huge?

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Distinguish four kinds of duties Things you should do even if you don’t promise

(e.g., pay taxes) Things you should do because you promised to

do so, and provided consideration Things you should do because you promised,

and the promisee has relied, and 90(1) is triggered

Things you should do because you ought to do them and have promised to do so, notwithstanding the absence of consideration or promisee reliance

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The Material Benefits Rule

Webb v. McGowin p. 193

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W.T. Smith Lumber Co., Chapman AL

The Material Benefits Rule

Webb v. McGowin

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J. Greeley McGowin

The Material Benefits Rule

Webb v. McGowin Treat this as a contracts case. Is there a

consideration problem?

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The Material Benefits Rule

Webb v. McGowin Treat this as a contracts case. Is there a

consideration problem? The past consideration rule

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The Material Benefits Rule

Webb v. McGowin Treat this as a promissory estoppel

issue. Was there promisee reliance here?

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The Material Benefits Rule

Webb v. McGowin Recall Bailey v. West

Is Webb a suitable case for relief in quasi-contract?

If so, why?

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The Material Benefits Rule

Webb v. McGowin What did the promise add?

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Restatement § 86Promise for Benefit Received

§ 86(1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. 86(2) A promise is not binding under Subsection (1)

(a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or

(b) to the extent that its value is disproportionate to the benefit

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The Material Benefits Rule

Webb v. McGowin Can you distinguish it from Mills v.

Wyman: p.193?

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The Material Benefits Rule

Webb v. McGowin Can you distinguish it from Mills v.

Wyman? What about Boothe v. Fitzpatrick (p. 199)

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The Material Benefits Rule

Why do you think this is called the “material” benefits rule?

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Restatement § 86Promise for Benefit Received

§ 86(1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. (2) A promise is not binding under Subsection (1)

(a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or

(b) to the extent that its value is disproportionate to the benefit

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Pitching ideas: The double trust problem

Desny v. Billy Wilder at 194

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Pitching Ideas

Pitching ideas: Desny v. Wilder Was this simply a valid (conditional)

contract? What if the secretary had not promised?

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Pitching Ideas

Pitching ideas: Desny v. Wilder Was this simply a valid (conditional)

contract? What if the secretary had not promised? Worner Agency at 196

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