Promissory estoppel is a common law doctrine used by courts to enforce promises that have been made and subsequently relied upon. Most of the time, contract law dictates the terms of how promises should be enforced. Promissory estoppel usually comes into play when there is no formal contract, but the parties involved have nevertheless acted as if there was one. Courts use the doctrine in these circumstances to impose a contract on the agreement, usually in the interest of fairness.
In common language, "promissory" means "related to a promise," and "estoppel" is a legal term that essentially means an enforced bar or ban. Judges use the doctrine to ban one person from going back on a promise. Seen from a different angle, the doctrine is a tool to enforce promises, effectively requiring both parties to do the things they said they would. It is often seen as an exception to black-letter contract law.
Importance of Consideration
Under U.S. and English common law, formal contracts have three parts: an offer, an acceptance, and some sort of consideration. "Consideration" is basically any thing of value; it's usually money, but can also be an agreement for services or other favors. Contracts enforced under the doctrine of promissory estoppel are unique in that they are usually missing the consideration piece.
If an employer orally promises to pay an employee a monthly amount for the duration of her retirement, for instance, there may not be an official contract unless the employer stipulates that this is in exchange for something of value — a certain number of years' service for the company, for instance. Just the same, if the employer changes his mind somewhere down the line, the employee stands to be harmed. If the employee relies on the promise and comes to expect the recurring payments, she may have grounds to sue under the doctrine of promissory estoppel should the employer cut her off.
Not all promises are eligible for enforcement under the doctrine. First, the party looking for redress must have relied on the promise in some meaningful way in order to have an actionable claim. Second, that reliance must have proved detrimental. This usually means that the person relying must have lost money or experienced other negative consequences as a direct result of relying on the promise. Simply being inconvenienced is rarely enough.
Reliance is essential primarily because the doctrine is built around the idea of fairness. Fairness in law can be difficult to nail down, but almost always revolves around restoring the status quo. If a person has been injured, the law seeks to remedy the injury. Without harm, it can be hard to paint a picture of unfairness.
Use of the promissory estoppel doctrine is limited to cases where it is necessary to prevent an injustice. This means it is used less often than if it were applied to simply do justice — a nuanced but significant difference. Judges and courts do not usually intervene in personal affairs to make them just, but they can help restore balance when someone has been harmed.
Types of Promises
People make many different kinds of promises: promises to perform certain services, to pay certain sums, and to appear at certain places at certain times. While some promises are more straightforward than others, there is no set requirement with respect to what a promise has to look like or how it needs to be worded in order for a court to consider it valid. When promissory estoppel is at play, courts often have to look hard at the facts to discern whether a promise was actually ever made, and if so, what its terms were.
Courts often identify what is known as a "quasi-contract" when the terms of an agreement are unclear, but the results are nevertheless palpable. A quasi-contract is a contract that is implied in law. For example, say Suzanne paints Joel's house. Joel knows Suzanne is painting his house, allows her access to his property, and enjoys the new look — but doesn't sign a contract and never promises to pay 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 because he (1) knew about them; and (2) benefited from them.
A court might use promissory estoppel against Joel in order to redress the harm to Suzanne. Even though Joel never explicitly offered to pay for the house painting services, his tacit acceptance of Suzanne and her painting gear day after day implies that he knew about the benefit. Here, the doctrine could re-level the playing field, equalizing both parties in terms of costs and gains.
Differences from Traditional Estoppel
The doctrine of promissory estoppel is different from a similar sounding doctrine, the doctrine of estoppel. Estoppel is a doctrine in evidence law that prevents a person from changing his statements about certain facts. Rather then preventing a party from backing out of a promise, it prevents a person from making conflicting testimonies when it would materially change the outcome of a case or harm another person.
These two doctrines point at a bit of a tug of war in the law. On one hand, courts want to be certain in their decisions. They are, therefore, inclined to want to enforce agreements with factual consideration, and take all testimonies at face value. At the same, however, judges must be fair and must identify — and seek to remedy — instances where promises or statements could lead to injustice.