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Promissory Estoppel: Definition, Example and Related Terms

What is Promissory Estoppel ?

Promissory estoppel is a legal doctrine that allows a party to recover on a promise, even in the absence of a formal contract, if they reasonably relied on that promise to their detriment. Essentially, if someone makes you a promise and you act on it, and it would be unjust for the promise-maker to renege, the law might hold them to their word under this principle. Promissory estoppel ensures fairness by recognizing and enforcing such promises, thereby preventing the promisor from arguing that an underlying lack of consideration or formal agreement should void their pledge.

For example, suppose an employer tells an employee that they will pay for the employee's educational course if the employee attends it. Based on this, the employee enrolls and incurs expenses. Despite no formal contract, if the employer later refuses to pay, the employee might invoke promissory estoppel to enforce the promise because they relied on it to their detriment.

Promissory estoppel is crucial for maintaining trust and integrity in business dealings. It encourages parties to act in good faith and fulfill their verbal commitments. However, the party seeking enforcement must demonstrate that they reasonably relied on the promise, and this reliance led to a material or financial detriment.

It's important to remember that promissory estoppel is not applicable in every situation. Certain conditions must be met, including a clear and definite promise, reasonable reliance on the promise, and a resultant detriment. Therefore, when drafting and negotiating contracts, parties should be aware of these principles to avoid inadvertently creating enforceable promises.

Example(s)

  • Scenario Description
    An employer promises an employee a bonus for completing a project, but the promise is not written in their employment contract. The employee relies on the promise, works overtime to complete the project, but later the employer decides not to give the bonus. The employee could claim the bonus under promissory estoppel, arguing they depended on the promise to their detriment.
    A property owner promises a neighbor they can use a portion of their land for a garden, leading the neighbor to spend money on gardening supplies. If the property owner later revokes permission, causing the neighbor a financial loss, the neighbor might use promissory estoppel to enforce the promise.

Related terms