Promissory Estoppel: Elements, Leading Cases, and Practical ...

Introduction

Promissory estoppel is a contract-law doctrine courts use to enforce a promise when there isn’t a traditional contract, but someone reasonably relied on that promise and would be harmed if it isn’t kept. In plain terms: if Party A makes a clear promise, expects Party B to act on it, Party B does act, and not enforcing the promise would be unfair, a court can step in.

In the U.S., the most commonly cited rule is Restatement (Second) of Contracts §90. States generally follow it, but the details vary by jurisdiction. You’ll see promissory estoppel in disputes over job offers, retirement promises, construction bids, charitable pledges, and pre-contract negotiations.

What You’ll Learn

• The elements of promissory estoppel under Restatement (Second) of Contracts §90
• How courts weigh “clear promise,” “reasonable reliance,” and “injustice”
• The difference between promissory estoppel and equitable estoppel
• Leading U.S. cases: Ricketts v. Scothorn, Drennan v. Star Paving, Hoffman v. Red Owl Stores, Feinberg v. Pfeiffer, Cohen v. Cowles Media
• How the doctrine interacts with the Statute of Frauds and at-will employment
• Typical remedies (often reliance damages) and how courts limit recovery
• Practical steps for businesses, contractors, nonprofits, employers, and employees

Core Concepts

Elements Under Restatement (Second) of Contracts §90

Courts generally look for these points:

1. Clear and definite promise

   • Vague statements or general plans are usually not enough. The promise should be specific enough that a reasonable person would rely on it.

2. Expected reliance

   • The promisor should reasonably expect the promise to induce action or forbearance (for example, quitting a job, turning down other offers, spending money).

3. Actual reliance

   • The promisee actually relied by acting or not acting.

4. Reasonableness and foreseeability

   • The reliance was reasonable under the circumstances and foreseeable to the promisor.

5. Avoiding injustice

   • Enforcement (or a remedy short of full enforcement) is needed to avoid an unfair result. The Restatement states "the remedy granted for breach may be limited as justice requires."

Tip: Courts often focus on whether the promise was clear and whether the reliance was reasonable. Emails, texts, offer letters, and notes from calls can be decisive.

Remedies: Expectation vs. Reliance

• Expectation damages aim to put the promisee in the position as if the promise had been performed (like full contract damages).
• Reliance damages reimburse the promisee’s out-of-pocket costs or losses caused by relying on the promise (moving costs, lost profits from a business sold in reliance, etc.).
• In promissory estoppel cases, many courts favor reliance damages and tailor the remedy to fairness. Full enforcement does occur in some cases, but courts often keep awards to what’s needed to prevent harm caused by reliance.

Promissory Estoppel vs. Equitable Estoppel

• Promissory estoppel deals with a promise about future conduct that someone relied on.
• Equitable estoppel typically involves a statement of fact or a representation that another party relied on, and the court prevents the speaker from denying it later.

A quick way to tell them apart: promissory estoppel is about promises; equitable estoppel is about factual representations.

Statute of Frauds and “Non-Binding” Disclaimers

• Statute of Frauds: Some contracts must be in writing (e.g., certain agreements that can’t be performed within a year, or contracts for the sale of land). States differ on whether promissory estoppel can work around the Statute of Frauds. Some courts will allow it to prevent unfair outcomes; others won’t. Always check your state’s approach.
• Disclaimers and LOIs: Letters of intent and recruiting materials often include “non-binding” language or “subject to contract” disclaimers. Those help, but they aren’t ironclad. A series of clear statements plus foreseeable steps (like instructing someone to resign or relocate) can still support a claim.

Key Examples or Case Studies

Ricketts v. Scothorn (Neb. 1898)

• Facts: A grandfather promised his granddaughter money so she could quit her job. She relied and resigned.
• Holding: The court enforced the promise because the granddaughter relied on it to her detriment.
• Takeaway: A family promise can be enforceable when reliance is reasonable and expected.

Feinberg v. Pfeiffer Co. (Mo. App. 1959)

• Facts: An employer promised a long-time employee a lifetime pension. She retired in reliance on that promise.
• Holding: The promise was enforced based on promissory estoppel.
• Takeaway: Retirement decisions based on a clear employer promise can support enforcement.

Drennan v. Star Paving Co. (Cal. 1958)

• Facts: A general contractor relied on a subcontractor’s bid in preparing a prime bid. After the GC won, the sub tried to revoke.
• Holding: The sub’s offer became temporarily irrevocable due to reasonable reliance.
• Takeaway: In construction bidding, a sub’s quote can bind the sub for a reasonable time if the GC relied on it.

Hoffman v. Red Owl Stores, Inc. (Wis. 1965)

• Facts: A would-be franchisee followed the company’s repeated assurances—selling his bakery, moving, and making payments—yet no final agreement was signed.
• Holding: Recovery allowed for reliance losses, even without a final contract.
• Takeaway: Pre-contract promises can be enforceable if the reliance was foreseeable and substantial, but recovery may be limited to reliance, not lost profits.

Cohen v. Cowles Media Co. (U.S. 1991)

• Facts: A newspaper promised a source confidentiality, then named him. He sued on a state-law promissory estoppel theory.
• Holding: The First Amendment did not stop a promissory estoppel claim; damages were allowed under state law.
• Takeaway: Media promises can be enforceable if a source relied and suffered harm.

Practical Applications

• For businesses and startups

  • Use clear “non-binding” language during early talks.
  • Avoid instructing a party to take irreversible steps (resign, move, invest) until conditions are met and documented.
  • If you need someone to act early, spell out the conditions and who bears the risk if the deal falls through.

• For contractors and subs

  • Document when and how you relied on bids.
  • Confirm scope and key terms in writing before relying.
  • If you issue quotes, state how long they remain open and any conditions.

• For employers and recruiters

  • Job offers should say whether employment is at-will and whether any contingencies apply (background checks, approvals, start date conditions).
  • Don’t encourage a candidate to resign or relocate until conditions are satisfied. If timing requires it, consider written relocation or sign-on terms that address risk.

• For employees and candidates

  • Keep copies of written promises, emails, and texts.
  • Note any expenses or losses you incur after a promise (moving costs, loss of other offers).
  • If possible, ask for written terms before taking big steps.

• For nonprofits and donors

  • Charitable pledges are sometimes enforced on a promissory estoppel theory (state rules vary).
  • If you will spend based on a pledge, document the pledge and note how funds will be used.

• For litigators

  • Plead promissory estoppel in the alternative when consideration or final agreement is in doubt.
  • Gather evidence on each element: the promise, expected reliance, actual steps taken, and the harm suffered.
  • Be ready to address the Statute of Frauds and how your jurisdiction treats promissory estoppel in that setting.
  • Frame damages with a focus on reliance; courts often limit recovery to what is needed to prevent unfair harm.

Tip: Even short messages can matter. A text or Slack message saying “we’re good—go ahead and quit your job” can be powerful evidence of a clear promise and expected reliance.

Summary Checklist

• Identify a clear, definite promise (not just plans or opinions).
• Show the promisor expected you to act (or not act).
• Prove you actually relied and that your reliance was reasonable.
• Tie specific losses to that reliance (receipts, emails, timelines).
• Explain why only enforcement (or a tailored remedy) avoids an unfair result.
• Check any writing requirements (Statute of Frauds) and your state’s approach to promissory estoppel.
• Consider the likely remedy: full enforcement vs. reliance damages.
• For businesses: use precise “non-binding” language and avoid pushing others into irreversible steps before a final agreement.
• For employees/candidates: try to get key promises in writing before making major life changes.

Quick Reference