Legal Promises and Contracts Overview
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Promissory Estoppel
Richard Warner
Review: Careless Collectors
Expansion City contracts with Careless Collectors to collect its
garbage. Collectors agrees to collect the garbage for five years; and
Expansion agrees to pay $500,000 a year to Collectors. Expansion
City doubles it size in two years after the signing of the contract. At
the beginning of the third year of the contract, Careless Collectors
refuses to collect the garbage and demands more money. Collectors
points out that it now costs it over $500,000 a year to collect the
garbage, so they are losing money. When negotiating the original
contract, Expansion City had supplied Careless Collectors with growth
studies that indicated that Expansion would double its size in two to
five years. Collectors did not take these predictions into account
when setting the $500,000 a year contract price. With the garbage
piling up and constituting a health hazard and with no other company
to turn to other than Collectors, Expansion agrees to a new contract
with Collectors for $700,000 a year. Is the new contract enforceable?
(a) Yes
(b) No
Farmer Fred and Sister Sally
California farmer Fred writes to his sister Sally; the letter
says, "I understand you are quitting your job and moving
to California. If you have any doubts about coming, I
want you to know that, when you get here, I promise to
give you land to farm for as long as you like, and a
house to live in. You know you have always been able to
count on me. I just want to help—no strings attached."
Counting on getting the land and the house from Fred,
Sally quits her job and moves to California. When she
gets there, Fred says he has changed his mind; he will
not give her land or a house. Is Fred’s promise
enforceable under the bargain theory?
(a) Yes
(b) No
Promissory Estoppel
If the promisor should have
reasonably expected the promise to
induce action or forbearance on the part
of the promisee or third person; and
it did induce such action or forbearance,
t
hen, the promise is enforceable to the
extent necessary to avoid injustice.
Farmer Fred and Sister Sally
California farmer Fred writes to his sister Sally; the letter
says, "I understand you are quitting your job and moving
to California. If you have any doubts about coming, I
want you to know that, when you get here, I promise to
give you land to farm for as long as you like, and a
house to live in. You know you have always been able to
count on me. I just want to help—no strings attached."
Counting on getting the land and the house from Fred,
Sally quits her job and moves to California.
There is a strong promissory estoppel argument that
Fred’s promise is enforceable.
(a) Yes
(b
) No
Scrooge
Sally sees Scrooge's daughter about to be run over by a car; she
runs into the street, grabs the girl, and throws her clear of the speeding
vehicle. Sally herself however is hit by the car and severely injured. As
Sally is lying on the street waiting for the ambulance, Scrooge says,
"Don't worry; I'm wealthy; I promise I'll give you $2,000,000 for saving
my daughter's life, so don't worry about money at all." A few days later,
while Sally is lying in the hospital, Scrooge, having recovered from the
transient feeling of gratitude, sends his lawyer to Sally to explain that
Scrooge will not be making the gift of $2,000,000. The lawyer correctly
points out that Sally has in no way relied on the promise to make the
gift. Is Scrooge legally bound by the promise?
(
a
)
Y
e
s
,
b
e
c
a
u
s
e
o
f
p
r
o
m
i
s
s
o
r
y
e
s
t
o
p
p
e
l
(
b
)
Y
e
s
,
b
e
c
a
u
s
e
t
h
e
i
n
j
u
r
y
i
s
a
d
e
t
r
i
m
e
n
t
t
o
S
a
l
l
y
.
(
c
)
N
o
n
e
o
f
t
h
e
a
b
o
v
e
.
Central London Property Trust v. High Trees House
Central London Property Trust entered into a 99
year lease starting on September 29, 1937 for a
block apartments to High Trees House at a base of
rent of £2,500 a year.
World War II ran from 1939 to 1945. Germany
bombed London heavily during the war, and it was
impossible to fully rent the apartments. In light of
this, Central London property promised to reduce
the annual rent from £2,500 to £1250.
The parties made no other changes to the
contract.
“Without Regard To Recent Developments”
“If I were to consider this matter without regard
to recent developments in the law, there is no
doubt that had the plaintiffs claimed it, they
would have been entitled to recover ground rent
at the rate of 2,500
l
. a year from the beginning
of the term.”
Why?
A Preexisting Duty Rule Problem?
Central London property promised to reduce the
annual rent from £2,500 to £1250. That means the
parties exchanged these promises.
High Trees promised to pay £1250.
Central London Properties promised to accept
that as payment in full.
However, High Trees was already obligated to
pay at least £1250 under the initial contract by
virtue of the fact that it was obligated to pay
£2,500.
In Pictures
HT: pay rent
CL: allow use
HT: pay only half
rent as payment
in full
CL: allow use
Original
New
What is the consideration for CL’s promise to allow use in the new agreement?
Consideration in
High Trees
HT: pay rent
CL: allow use
HT: pay only half
rent as payment
in full
CL: allow use
Original
New
This is the consideration for CL’s promise to allow use
B
u
t
H
T
i
s
a
l
r
e
a
d
y
l
e
g
a
l
l
y
o
b
l
i
g
a
t
e
d
t
o
p
a
y
t
h
a
t
a
m
o
u
n
t
(
a
n
d
m
o
r
e
)
u
n
d
e
r
t
h
e
o
r
i
g
i
n
a
l
c
o
n
t
r
a
c
t
.
A Preexisting Duty Rule Problem?
Under the preexisting duty rule, HT’s promise
to pay half the rent cannot be consideration
for CL’s promise to allow use.
(a) True
(b) False
The Court’s Position
“But what is the position in view of developments in the
law in recent years? . . . There has been a series of
decisions over the last fifty years . . . in which a promise
was made which (1) was intended to create legal
relations and which, (2) to the knowledge of the person
making the promise, was going to be acted on by the
person to whom it was made and (3) which was in fact
so acted on.”
Promissory Estoppel
If the promisor should have
reasonably expected the promise to
induce action or forbearance on the part
of the promisee or third person; and
it did induce such action or forbearance,
t
hen, the promise is enforceable to the
extent necessary to avoid injustice.
Analyzing legal scenarios involving promissory estoppel, contractual obligations, and enforceability of promises in business and personal contexts. Discusses cases of contract disputes and promises made with expectations of fulfillment, exploring the principles of fairness and justice in contractual relationships.
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Presentation Transcript
Promissory Estoppel Richard Warner
Review: Careless Collectors Expansion City contracts with Careless Collectors to collect its garbage. Collectors agrees to collect the garbage for five years; and Expansion agrees to pay $500,000 a year to Collectors. Expansion City doubles it size in two years after the signing of the contract. At the beginning of the third year of the contract, Careless Collectors refuses to collect the garbage and demands more money. Collectors points out that it now costs it over $500,000 a year to collect the garbage, so they are losing money. When negotiating the original contract, Expansion City had supplied Careless Collectors with growth studies that indicated that Expansion would double its size in two to five years. Collectors did not take these predictions into account when setting the $500,000 a year contract price. With the garbage piling up and constituting a health hazard and with no other company to turn to other than Collectors, Expansion agrees to a new contract with Collectors for $700,000 a year. Is the new contract enforceable? (a) Yes (b) No
Farmer Fred and Sister Sally California farmer Fred writes to his sister Sally; the letter says, "I understand you are quitting your job and moving to California. If you have any doubts about coming, I want you to know that, when you get here, I promise to give you land to farm for as long as you like, and a house to live in. You know you have always been able to count on me. I just want to help no strings attached." Counting on getting the land and the house from Fred, Sally quits her job and moves to California. When she gets there, Fred says he has changed his mind; he will not give her land or a house. Is Fred s promise enforceable under the bargain theory? (a) Yes (b) No
Promissory Estoppel If the promisor should have reasonably expected the promise to induce action or forbearance on the part of the promisee or third person; and it did induce such action or forbearance, then, the promise is enforceable to the extent necessary to avoid injustice.
Farmer Fred and Sister Sally California farmer Fred writes to his sister Sally; the letter says, "I understand you are quitting your job and moving to California. If you have any doubts about coming, I want you to know that, when you get here, I promise to give you land to farm for as long as you like, and a house to live in. You know you have always been able to count on me. I just want to help no strings attached." Counting on getting the land and the house from Fred, Sally quits her job and moves to California. There is a strong promissory estoppel argument that Fred s promise is enforceable. (a) Yes (b) No
Scrooge Sally sees Scrooge's daughter about to be run over by a car; she runs into the street, grabs the girl, and throws her clear of the speeding vehicle. Sally herself however is hit by the car and severely injured. As Sally is lying on the street waiting for the ambulance, Scrooge says, "Don't worry; I'm wealthy; I promise I'll give you $2,000,000 for saving my daughter's life, so don't worry about money at all." A few days later, while Sally is lying in the hospital, Scrooge, having recovered from the transient feeling of gratitude, sends his lawyer to Sally to explain that Scrooge will not be making the gift of $2,000,000. The lawyer correctly points out that Sally has in no way relied on the promise to make the gift. Is Scrooge legally bound by the promise? (a) Yes, because of promissory estoppel (b) Yes, because the injury is a detriment to Sally. (c) None of the above.
Central London Property Trust v. High Trees House Central London Property Trust entered into a 99 year lease starting on September 29, 1937 for a block apartments to High Trees House at a base of rent of 2,500 a year. World War II ran from 1939 to 1945. Germany bombed London heavily during the war, and it was impossible to fully rent the apartments. In light of this, Central London property promised to reduce the annual rent from 2,500 to 1250. The parties made no other changes to the contract.
Without Regard To Recent Developments If I were to consider this matter without regard to recent developments in the law, there is no doubt that had the plaintiffs claimed it, they would have been entitled to recover ground rent at the rate of 2,500l. a year from the beginning of the term. Why?
A Preexisting Duty Rule Problem? Central London property promised to reduce the annual rent from 2,500 to 1250. That means the parties exchanged these promises. High Trees promised to pay 1250. Central London Properties promised to accept that as payment in full. However, High Trees was already obligated to pay at least 1250 under the initial contract by virtue of the fact that it was obligated to pay 2,500.
In Pictures HT: pay only half rent as payment in full HT: pay rent CL: allow use CL: allow use New Original What is the consideration for CL s promise to allow use in the new agreement?
Consideration in High Trees HT: pay only half rent as payment in full HT: pay rent CL: allow use CL: allow use New Original This is the consideration for CL s promise to allow use But HT is already legally obligated to pay that amount (and more) under the original contract.
A Preexisting Duty Rule Problem? Under the preexisting duty rule, HT s promise to pay half the rent cannot be consideration for CL s promise to allow use. (a) True (b) False
The Courts Position But what is the position in view of developments in the law in recent years? . . . There has been a series of decisions over the last fifty years . . . in which a promise was made which (1) was intended to create legal relations and which, (2) to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made and (3) which was in fact so acted on.
Promissory Estoppel If the promisor should have reasonably expected the promise to induce action or forbearance on the part of the promisee or third person; and it did induce such action or forbearance, then, the promise is enforceable to the extent necessary to avoid injustice.
