Presentation on theme: "Promises. Contracts consist of mutual promises Reciprocal inducement (consideration) formalizes the contract When the promise is unilateral there is a."— Presentation transcript:
Contracts consist of mutual promises Reciprocal inducement (consideration) formalizes the contract When the promise is unilateral there is a promise but no contract When should promises be enforced?
Why does one make a promise about a future transfer rather than an immediate transfer? It may be a conditional gift based upon some event affecting the promisor? It may be a conditional gift based upon some event affecting the promisee? It may intend to affect the behavior of the promisee?
Detrimental Reliance Promise induces action or forbearance on the part of the promisee Reliance was reasonably foreseeable by the promisor Can injustice be avoided by enforcement? Does the promisor benefit from the reliance (contract?)
Promissory Estoppel Exception to the general rule that a promise cannot be enforced without consideration. A doctrine that a typically nonenforceable promise should be enforced in order to avoid an injustice
UCC and Second Restatement of Contracts § 90 Promise Reasonably Inducing Action or Forbearance (1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. (2) A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance.
Elements of Promissory Estoppel A promise that induces action or forbearance on the part of the promisee Was reasonably foreseeable by the promisor Binding if injustice can only be avoided by enforcement.
Promises The present value of a future gift depends upon the probability of enforcement. Suppose the parties want the promise enforced?
What damage measure? Expectation damages Opportunity damages Reliance damages Promises dont create a cooperative surplus, but they can waste resources through detrimental reliance
Where might promissory estoppel apply? A personal or charitable gift A scholarship offer A marriage proposal A job offer
Why not enforce promises to marry? (Breach of promise to marry) There is no longer the view that women suffer greater damage from the termination of an engagement than a man. Society benefits from having an engagement period where either party can terminate the relationship without damages? An engagement is a trial period before entering a more serious arrangement. If promises to marry were enforced, what would be the difference between divorce settlements and engagement settlements? We dont want individuals to enter into an arrangement which would produce a negative cooperative surplus.
Rules of Engagement Women were previously entitled to damages under breach of promise Heart balm statutes were enacted in the 1950s. They abolished breach of promise as a cause of action. Current emphasis is on engagement rings, presents and lost wedding expenses. Is the gift of the ring conditioned on the marriage occurring? –State courts around the nation that have considered the ring issue have reached differing conclusions.
Return of the Engagement Ring Is the ring a conditional gift? Is it conditioned on the acceptance of the proposal or the actual marriage? Should fault play a role in deciding who gets the ring? Engagement Rings - "A gift or a contract? YouTubeYouTube
Ohio Law – Engagement Ring According to Ohio law, engagement rings are considered to be conditional gifts which would be recoverable by the donor if the marriage does not take place, regardless of which party is at fault for ending the engagement. The policy behind this decision is to prevent courts from having to engage in a factual determination of who is at fault. Thus, under Ohio law, it is clear that the modern trend is to find that a gift given in contemplation of marriage remains property of the donor until the condition of marriage is fulfilled. Source: Lexis-Nexus
DeFina v. Scott (NY 2003) The groom-to-be bought an expensive engagement ring - from Tiffany's - for his fiancée and proposed on Valentines Day The couple agreed that the bride-to-be would pay for the wedding-related expenses ($16,000) and that, prior to the marriage, the groom-to-be would provide her with a one-half interest in his condo. The engagement was subsequently broken. She wanted her wedding expenses reimbursed and the half interest in the condo
DeFina v. Scott (NY 2003) Under NY law the groom gets the ring Her wedding expenses were consideration for interest in condo Upon payment of wedding expenses the groom would get his interest in the condo back The value of unreturned gifts should be split
Ferraro v. Singh, (PA 1985) The couple met through a dating service and set a marriage date The fiancé traveled to India for the ostensible purpose of having an elaborate wedding suit made for himself, only to never return to Pennsylvania for the wedding. She then filed a complaint against her fiancé, seeking reimbursement for expenses made in anticipation of the couple's wedding
Ferraro v. Singh, (PA 1985) The wayward fiancé defended against the action by alleging that Pennsylvania's Heart Balm Act, abolished all causes of action for breach of contract to marry. The plaintiff contended that the Heart Balm Act did not bar recovery of sums expended in reliance on an unfulfilled promise to marry. The court found that the act prohibited any cause of action arising out of the breach of the promise to marry.
Ferraro v. Singh, (PA 1985) The court distinguished the plaintiff's claim for reimbursement of wedding expenses from the classic "engagement ring" line of cases, which hold that regardless who breaks off an engagement, the donor of the engagement ring is entitled to the return of the ring. In those cases, the courts have found that the engagement ring is a gift conditioned on the promise of marriage, and the law of conditional gifts creates a cause of action distinct from breach-of-promise-to-marry suits. The court found that the plaintiff did not plead the existence of a gift contract or of any other contract independent of the contract to marry, so the Heart Balm Act barred her cause of action for reimbursement. Findlaw – The Return of the Ring
Divorce Is divorce the termination of a marriage contract? What is the purpose of alimony and child support? Should divorce laws provide optimal incentives for investment in a marriage?
Sex Change and Spousal Support The Moores divorced after 25 years of marriage. Mr. Moore was ordered to pay his ex-wife spousal support that would terminate if she remarried or cohabitated with another male. After the divorce, the ex-Mrs. Moore had a sex change operation and began cohabitating with a female In Moore v. Moore (Ohio 2004), Mr. Moore petitioned for an end to the spousal support payments. This was clearly something that was not contemplated at the time of the initial award. The ex-Mrs. Moore was no longer a female and he was cohabitating with someone of the opposite sex. The court rejected the petition for an end to the spousal payments because the ex-wifes financial circumstances had not changed.
Sex Change and Spousal Support Is the purpose of spousal support to correct gender inequities in our society or is it to reinforce investment in a marriage contract? If the purpose of spousal support is the repayment of investment in a contract that was broken by the other partner, then gender or switching gender should be irrelevant. If the payments are not independent of the ex-wifes financial circumstance, they create a disincentive for future investment in human capital.
Alienation of Affection Interference with the marriage contract? Elizabeth Edwards Threatens Husband's Ex-Aide With LawsuitElizabeth Edwards Threatens Husband's Ex-Aide With Lawsuit Ex-dean to appeal verdict on affair
Promises of employment Should a promise of employment be enforced? –Is there detrimental reliance? Can there be detrimental reliance given at-will employment? At-will employment –Employer can fire an employee for any reason or no reason as long as it is not proscribed by social policy
Landmark Employment Cases John GROUSE v. GROUP HEALTH PLAN, INC. (Minnesota, 1981) Frank LEONARDI v. CITY OF HOLLYWOOD (Florida, 1998)
John GROUSE v. GROUP HEALTH PLAN, INC. (Minnesota, 1981) Grouse was employed as a retail pharmacist Grouse was offered the position at Group Health (GH) He accepted the job and gave his present employer two weeks notice After receiving Group Healths offer he had an alternative offer that he declined
John GROUSE v. GROUP HEALTH PLAN, INC. (1981) GH called back to confirm that Grouse had resigned After offering Grouse the job, GH was unable to obtain favorable references for Grouse When Grouse called GH to report for work, he was told that someone else had been hired Does doctrine of promissory estoppel entitle Grouse to recover damages? If so, how should efficient damages be calculated?
John GROUSE v. GROUP HEALTH PLAN, INC. (1981) Group Health contends that recognition of a cause of action on these facts would result in the anomalous rule that an employee who is told not to report to work the day before he is scheduled to begin has a remedy while an employee who is discharged after the first day does not. We cannot agree since under appropriate circumstances we believe section 90 would apply even after employment has begun. The remedy granted for breach may be limited as justice requires.
John GROUSE v. GROUP HEALTH PLAN, INC. (1981) The conclusion we reach does not imply that an employer will be liable whenever he discharges an employee whose term of employment is at will. What we do hold is that under the facts of this case the appellant had a right to assume he would be given a good faith opportunity to perform his duties to the satisfaction of respondent once he was on the job. He was not only denied that opportunity but resigned the position he already held in reliance on the firm offer which respondent tendered him. Since, as respondent points out, the prospective employment might have been terminated at any time, the measure of damages is not so much what he would have earned from respondent as what he lost in quitting the job he held and in declining at least one other offer of employment elsewhere.
John GROUSE v. GROUP HEALTH PLAN, INC. (1981) Does the decision promote efficiency? Does the decision promote overreliance? What is the efficient standard for damages?
Frank LEONARDI v. CITY OF HOLLYWOOD (1998) At-will employment doctrine barred his claim for lost wages Leonardi was offered the position of assistant city manager After quitting his current position he was informed that the city could not offer him the job
Frank LEONARDI v. CITY OF HOLLYWOOD (1998) The trial court found that Leonardi relied on City's promise of employment to his detriment. It determined that the reasonable amount of his damages as a result of City's actions was $90,400, representing his lost wages at his former job from November 13, 1995, the date his employment with City was supposed to begin, through the date of trial. Nevertheless, it held that the employment at-will doctrine barred an award of such damages. It, thus, denied awarding Leonardi his lost wages, but did award him $10 as nominal damages
Frank LEONARDI v. CITY OF HOLLYWOOD (1998) Despite this case law, we need not look any further than § 90 of the Restatement (Second) of Contracts to conclude that Leonardi's reliance on City's offer was unreasonable. Had City allowed Leonardi to begin working, it could have terminated his employment immediately thereafter, before he accrued any wages. Similarly, had he not quit his prior position, his employer also could have terminated him at will. In either scenario, we do not believe the doctrine of promissory estoppel would allow him to recover his lost wages.
Frank LEONARDI v. CITY OF HOLLYWOOD (1998) Should at-will employment bar recovery for promissory estoppel? What are efficient damages?