Learning Outcomes
This article explores situations where contract-like obligations arise even without traditional bargained-for consideration. After reading this article, you will understand the key doctrines of promissory estoppel (reliance) and quasi-contract (restitution or unjust enrichment), including their essential elements and the remedies available, enabling you to analyze MBE questions involving promises enforced outside the standard bargain framework.
MBE Syllabus
For the MBE, you are required to understand the principles governing obligations enforceable without a bargained-for exchange. This involves analyzing situations where fairness demands enforcement despite the lack of traditional consideration. You should be prepared to:
- Identify the elements required for promissory estoppel (detrimental reliance).
- Recognize situations where quasi-contract (restitution) applies to prevent unjust enrichment.
- Distinguish between reliance and restitution remedies.
- Understand the limited scope of enforcing promises based on past benefits or moral obligations.
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
-
A promise which the promisor should reasonably expect to induce action or forbearance and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. This statement describes:
- Mutual Assent
- Bargained-for Consideration
- Promissory Estoppel
- Quasi-Contract
-
Which remedy seeks to prevent unjust enrichment by requiring a defendant to pay for a benefit conferred by the plaintiff?
- Expectation Damages
- Specific Performance
- Restitution
- Reliance Damages
-
A homeowner sees a landscaping crew mistakenly begin extensive work on her yard, believing it to be her neighbor's property. The homeowner says nothing. The landscaping company later bills the homeowner for the fair market value of the work. Which doctrine is most likely to allow the landscaping company to recover?
- Express Contract
- Promissory Estoppel
- Quasi-Contract
- Implied-in-Fact Contract
Introduction
While bargained-for consideration is the traditional basis for enforcing promises, contract law recognizes certain situations where obligations are enforceable even without it. These exceptions address circumstances where fairness and justice demand a remedy, primarily through the doctrines of promissory estoppel (reliance) and quasi-contract (restitution). These doctrines provide alternative grounds for enforcing promises or conferring recovery when the elements of a standard contract are absent but denying relief would be inequitable.
Promissory Estoppel (Reliance)
Promissory estoppel, often referred to as detrimental reliance, provides a remedy when a promisee reasonably and foreseeably relies on a promise to their detriment. It acts as a consideration substitute, making a promise enforceable to the extent necessary to prevent injustice, even without a traditional bargain.
Key Term: Promissory Estoppel An equitable doctrine allowing enforcement of a promise that the promisor reasonably should have expected to induce action or forbearance by the promisee, and which did induce such action or forbearance, if injustice can only be avoided by enforcing the promise.
Elements of Promissory Estoppel
To establish a claim based on promissory estoppel, the following elements must generally be shown:
- Promise: There must be a clear and definite promise made by the promisor.
- Reasonable Expectation of Reliance: The promisor must have reasonably expected (or should have reasonably expected) that the promise would induce action or forbearance by the promisee.
- Actual Reliance: The promisee must have actually taken action or refrained from taking action (forbearance) in reliance on the promise.
- Detriment: The promisee's reliance must have been detrimental, meaning the promisee suffered some loss or prejudice as a result of the reliance.
- Injustice: Injustice can only be avoided by enforcing the promise. This element gives the court discretion to consider the fairness of the situation.
Worked Example 1.1
Aunt Agatha told her nephew, Ben, "If you quit your job and go to law school, I will pay your tuition for all three years." Ben, relying on this promise, quit his lucrative job and enrolled in law school. After Ben completed his first year, Aunt Agatha refused to pay any further tuition. Can Ben enforce Aunt Agatha's promise?
Answer: Yes, most likely under the doctrine of promissory estoppel. Aunt Agatha made a clear promise (to pay tuition). She should reasonably have expected Ben to rely on this promise by quitting his job and enrolling (reasonable expectation). Ben did rely on the promise to his detriment (quitting his job and incurring educational expenses). Injustice would result if the promise were not enforced, at least to some extent, given Ben's significant reliance.
Remedy in Promissory Estoppel Cases
The remedy granted for promissory estoppel is flexible and may be limited "as justice requires." Courts often award reliance damages, aiming to restore the promisee to the position they would have been in had the promise never been made (e.g., reimbursing out-of-pocket expenses incurred in reliance). However, some courts may award expectation damages (the value of the promised performance) if justice demands it.
Quasi-Contract (Restitution)
Quasi-contract is not a true contract but an equitable remedy imposed by courts to prevent unjust enrichment. It applies when one party has conferred a benefit upon another under circumstances where it would be unfair for the recipient to retain the benefit without paying for it, even though there is no enforceable contract.
Key Term: Quasi-Contract An obligation imposed by law to prevent unjust enrichment, requiring a defendant to pay the reasonable value of a benefit conferred by the plaintiff, even in the absence of an actual contract.
Key Term: Unjust Enrichment The retention of a benefit conferred by another, without offering compensation, in circumstances where compensation is reasonably expected.
Elements of Quasi-Contract
Recovery in quasi-contract generally requires:
- Benefit Conferred: The plaintiff conferred a measurable benefit on the defendant.
- Reasonable Expectation of Payment: The plaintiff conferred the benefit with the reasonable expectation of being compensated. (Officious intermeddlers or volunteers generally cannot recover).
- Unjust Enrichment: The defendant knowingly accepted and retained the benefit under circumstances that make it inequitable for the defendant to retain the benefit without paying for it.
Worked Example 1.2
Doctor Evans is walking down the street when she sees Pedestrian Pete collapse from a sudden heart attack. Doctor Evans renders emergency medical aid that saves Pete's life. Pete was unconscious and could not consent. Can Doctor Evans recover the reasonable value of her services from Pete?
Answer: Yes, under a quasi-contract theory. Doctor Evans conferred a significant benefit (life-saving medical care) on Pete. She reasonably expected payment for her professional services (doctors typically charge for their services). Pete retained the benefit (his life), and it would be unjust for him to retain this benefit without compensating the doctor, especially since the emergency prevented obtaining consent.
Remedy in Quasi-Contract Cases
The remedy is restitution, measured by the reasonable value of the benefit conferred on the defendant (quantum meruit), not necessarily the cost incurred by the plaintiff or the contract price (if one had been discussed). The focus is on preventing the defendant's unjust enrichment.
Exam Warning
Do not confuse quasi-contract with an implied-in-fact contract. An implied-in-fact contract is a true contract formed by the conduct of the parties (e.g., sitting down in a barber's chair implies a promise to pay for a haircut). Quasi-contract applies where there is no contract, express or implied, but equity demands payment for a benefit received.
Moral Obligation and Past Consideration
As a general rule, a promise made in recognition of a benefit previously received (past consideration) is unenforceable for lack of consideration. Similarly, promises based solely on a moral obligation are typically not enforced.
However, a limited exception exists in some jurisdictions (sometimes called the "Material Benefit Rule") where a promise made in recognition of a significant benefit previously conferred by the promisee on the promisor is binding to the extent necessary to prevent injustice. This exception does not apply if the benefit was conferred as a gift or if the promisor has not been unjustly enriched.
Key Term: Material Benefit Rule A minority rule stating that a promise made in recognition of a substantial benefit previously received by the promisor from the promisee may be enforceable to the extent necessary to prevent injustice, even without traditional consideration.
Summary
While bargained-for consideration is the standard basis for contract enforcement, promises may be enforced without it under specific equitable doctrines. Promissory estoppel enforces promises that induce reasonable, detrimental reliance to prevent injustice. Quasi-contract provides a restitutionary remedy to prevent unjust enrichment when one party confers a benefit on another with a reasonable expectation of payment. Promises based on past consideration or moral obligation are generally unenforceable, with very limited exceptions like the Material Benefit Rule in some jurisdictions.
Key Point Checklist
This article has covered the following key knowledge points:
- Obligations can sometimes be enforced without bargained-for consideration.
- Promissory estoppel requires (1) a promise, (2) reasonably expected reliance, (3) actual detrimental reliance, and (4) injustice absent enforcement.
- Remedies for promissory estoppel may be limited to reliance damages.
- Quasi-contract prevents unjust enrichment.
- Quasi-contract requires (1) a benefit conferred, (2) expectation of payment, and (3) acceptance/retention making it unjust not to pay.
- The remedy for quasi-contract is restitution (reasonable value of benefit conferred).
- Past consideration or moral obligation generally does not support a promise.
- The Material Benefit Rule is a limited exception for enforcing promises based on past benefits.
Key Terms and Concepts
- Promissory Estoppel
- Quasi-Contract
- Unjust Enrichment
- Material Benefit Rule
