1. 1 George Mason School of Law Contracts I XII.Promissory Estoppel F.H. Buckley fbuckley@gmu.edu

2. 2 What is Estoppel?  Estoppel by representation of fact (equitable estoppel in the US)  Promissory estoppel (equitable estoppel in GB)

3. 3 What we’ll look at  An ideological battle?  Varieties of Promissory Estoppel  The Material Benefits Rule  Option Contracts

4. Restatement § 90(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. 4

5. 5 Estoppel: An Ideological Battle? Oliver Wendell Holmes Samuel WillistonArthur Corbin

6. 6 Estoppel: An Ideological Battle? Grant Gilmore, The Death of Contract (1974)

7. Varieties of Promissory Estoppel  Chartable Subscriptions  Family Promises  Employment Contracts  Promises to Insure 7

8. Charitable Subscriptions  I promise you $10,000 but renege. Is my promise enforceable? 8

9. But you’re going to be really upset! 9 She’ll feel differently when the cheque bounces

10. Charitable Subscriptions  I promise you $10,000 but renege. Is my promise enforceable? On the basis of the promise, you’ve bought a car? Enforceable? 10

11. Charitable Subscriptions  You and I meet and agree that we will both donate $5,000 to a third party.  I give. You don’t. Are you liable? 11

12. Charitable Subscriptions  I promise you $10,000 but renege. You happen to be a charity. Is my promise enforceable? 12

13. Restatement § 90(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. 13

14. What would action or forbearance look like? I pledge $500,000 to a college which promises to name a scholarship after me. 14

15. Charitable Subscriptions  Cardozo in Allegheny College p.157 Where was the promise? 15 Allegheny College

16. Charitable Subscriptions  What about Restatement § 90(2) A charitable subscription or a marriage settlement is binding under 90(1) without proof that the promise induced action or forbearance 16

17. Charitable Subscriptions  What about Restatement § 90(2) A charitable subscription or a marriage settlement is binding under 90(1) without proof that the promise induced action or forbearance Just how would one show reliance in such cases? 17

18. Charitable Subscriptions  Is Restatement § 90(2) inconsistent with DeLeo at 156? 18

19. Charitable Subscriptions  Is Restatement § 90(2) inconsistent with DeLeo at 156?  Special circumstances 19

20. DeLeo  The storage room? So what are you going to get for $25K? 20

21. 21 George Mason School of Law Contracts I XII.Promissory Estoppel F.H. Buckley fbuckley@gmu.edu

22. Remember that economist’s joke? 22

23. Eugene Fama applied it to win a Nobel 23 Efficient Capital Market Hypothesis: All the $20 bills on Wall Street have already been picked up

24. Consideration and Promissory Estoppel  If you could, would you abolish the consideration doctrine? 24

25. Consideration and Promissory Estoppel  If you could, would you abolish the consideration doctrine? What kinds of promises should not be enforced? 25

26. Consideration and Promissory Estoppel  What about promissory estoppel? What kinds of promises which should be enforced even if consideration is absent? 26

27. Restatement § 90(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. 27

28. Distinguish four kinds of duties  Things you should do even if you don’t promise (e.g., pay taxes) 28

29. Distinguish four kinds of duties  Things you should do even if you don’t promise (e.g., pay taxes)  Things you should do because you promised to do so, and provided consideration 29

30. Distinguish four kinds of duties  Things you should do even if you don’t promise (e.g., pay taxes)  Things you should do because you promised to do so, and provided consideration  Things you should do because you promised, and the promisee has relied, and 90(1) is triggered 30

31. Distinguish four kinds of duties  Things you should do even if you don’t promise (e.g., pay taxes)  Things you should do because you promised to do so, and provided consideration  Things you should do because you promised, and the promisee has relied, and 90(1) is triggered  Things you should do because you ought to do them and have promised to do so, notwithstanding the absence of consideration or promisee reliance 31

32. The fourth kind: Restatement § 90(2)  A charitable subscription or a marriage settlement is binding under 90(1) without proof that the promise induced action or forbearance 32

33. Charitable Subscriptions  Why didn’t § 90(2) work in DeLeo? 33

34. Restatement § 90(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. 34

35. Charitable Subscriptions  Why do you think most courts refuse to adopt Restatement § 90(2)? 35

36. Charitable Subscriptions  Which rule produces more charitable giving? 36

37. Charitable Subscriptions  Why so few such cases? 37

38. Family Promises  Do they deserve special consideration? If so, which way does this cut? 38

39. Haase v. Cardoza p.164  Was the promise supported by consideration? 39

40. Haase v. Cardoza p.164  Was the promise supported by consideration?  Did Alice really stiff Rose and Loretta? 40

41. Haase v. Cardoza  Was the promise supported by consideration?  What about reliance? A change of position? 41

42. Ricketts v. Scothorn p.166 42

43. Ricketts v. Scothorn p.154  I assume you were as distressed as I was at this example of male chauvinism… 43

44. Ricketts v. Scothorn  Was consideration given by Katie for the promise? 44

45. Ricketts v. Scothorn  Was consideration given by Katie for the promise? “He looked for nothing in return” Really? 45

46. Ricketts v. Scothorn  Was consideration given by Katie for the promise? No promise to do or refrain from doing anything Is this consistent with Hamer v. Sidway? 46

47. Ricketts v. Scothorn  Why did the grandfather renege (even before he died)? 47

48. Ricketts v. Scothorn  Why did the grandfather renege (even before he died)? “If he could sell his farm…” Let Katie work for Funke and Ogden as a bookkeeper 48

49. Ricketts v. Scothorn  Was there reliance by Scothorn? 49

50. Ricketts v. Scothorn  Was there reliance by Scothorn?  “Having intentionally influenced the plaintiff to alter her position for the worse … it would be grossly inequitable to permit … the executor … to resist payment” 50

51. Ricketts v. Scothorn  Is this consistent with Haase? 51

52. Family promises 52  Why might a promisor want to incur legal liability?

53. Family promises 53  Why might a promisor want to incur legal liability?  And why might he not want to do so?

54. Family promises 54  If we enforce them all, do we make promisees better off?

55. B 100, 100 I 100 I DR 0 50 100 The measure of damages C 100,0 D A 50, 50 50 Time 1 What do we need to give Katie to make her as well off as he would have been had the promise not been made, or had he not relied? 55

56. The Employment Context  Feinberg v. Pfeiffer p.173 What was the promise and why was it made? 56

57. The Employment Context  Feinberg v. Pfeiffer p.173 What was the promise and why was it made? Was there consideration? 57

58. The Employment Context  Feinberg v. Pfeiffer p.173 What was the promise and why was it made? Was there consideration? Cf. Restatement § 86 on past consideration 58

59. The Employment Context  Feinberg v. Pfeiffer What was the promise and why was it made? What was the reliance?  What would count as reliance? 59

60. The Employment Context  Feinberg v. Pfeiffer What was the promise and why was it made? What was the reliance?  Did she leave her job right away, like Katie Scothorn? 60

61. The Employment Context  Feinberg v. Pfeiffer What was the promise and why was it made? What was the reliance?  How old was she in 1947?  And for how much longer did she work for Pfeiffer? 61

62. The Employment Context  Feinberg v. Pfeiffer What was the promise and why was it made? What was the reliance?  What if she had quit because she was too ill to work? 62

63. The Employment Context  Feinberg v. Pfeiffer What about the equities of the case? 63

64. Why a different result in Hayes? P. 177 64

65. Why a different result in Hayes?  Feinberg retired after the promise; Hayes decided to retire before the promise, and retired a week after it was made 65

66. Why a different result in Hayes?  Feinberg retired after the promise; Hayes decided to retire before the promise, and retired a week after it was made  No formal provision, no board resolution. (So?) 66

67. Why a different result in Hayes?  What might Hayes have pleaded differently? 67

68. Why a different result in Hayes?  Did the promisors intend to assume legal liability in this case? In Feinberg? 68

69. Promises to insure 69 You DID insure, didn’t you Rhett?

70. The Typical Case  Spiegel at 190 Insurer: Met Life Agent: Levy Insured: Spiegel 70

71. Geremia at 186  Did the lender promise to insure the car? 71

72. Geremia at 185  Did the lender promise to insure the car?  And if it didn’t, did Geremia reasonably rely that it would do so? 72

73. Geremia at 185  Did the lender promise to insure the car?  Cf. Restatement 90, comment e: “applied with caution” 73

74. Varieties of Promissory Estoppel  Chartable Subscriptions  Family Promises  Employment Contracts  Promises to insure  So why were we thinking in categories? 74

75. The Rationale for Liability  The case where the promisor invited reliance? 75

76. The Rationale for Liability  The case where the promisor invited reliance?  The case where he didn’t, but the promisee relied anyway The “reliance monster” 76

77. The Rationale for Liability  The case where there are extra- contractual sanctions for breach? 77

78. The Rationale for Liability  The case where the dollars are huge? 78

79. The Rationale for Liability  The case where the promisor didn’t intend to assume liability? 79

80. The Rationale for Liability  The case where the promisor didn’t intend to assume liability?  The same case, but the promisor wanted to trick the promisee into relying? 80

81. Distinguish four kinds of duties  Things you should do even if you don’t promise (e.g., pay taxes)  Things you should do because you promised to do so, and provided consideration  Things you should do because you promised, and the promisee has relied, and 90(1) is triggered  Things you should do because you ought to do them and have promised to do so, notwithstanding the absence of consideration or promisee reliance 81

82. The Material Benefits Rule  Webb v. McGowin p. 193 82 W.T. Smith Lumber Co., Chapman AL

83. The Material Benefits Rule  Webb v. McGowin 83 J. Greeley McGowin

84. The Material Benefits Rule  Webb v. McGowin Treat this as a contracts case. Is there a consideration problem? 84

85. The Material Benefits Rule  Webb v. McGowin Treat this as a contracts case. Is there a consideration problem?  The past consideration rule 85

86. The Material Benefits Rule  Webb v. McGowin Treat this as a promissory estoppel issue. Was there promisee reliance here? 86

87. The Material Benefits Rule  Webb v. McGowin Recall Bailey v. West  Is Webb a suitable case for relief in quasi-contract?  If so, why? 87

88. The Material Benefits Rule  Webb v. McGowin  What did the promise add? 88

89. Restatement § 86 Promise for Benefit Received  § 86(1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice.  86(2) A promise is not binding under Subsection (1) (a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or (b) to the extent that its value is disproportionate to the benefit 89

90. The Material Benefits Rule  Webb v. McGowin Can you distinguish it from Mills v. Wyman: p.193? 90

91. The Material Benefits Rule  Webb v. McGowin Can you distinguish it from Mills v. Wyman? What about Boothe v. Fitzpatrick (p. 199) 91

92. The Material Benefits Rule  Why do you think this is called the “material” benefits rule? 92

93. Restatement § 86 Promise for Benefit Received  § 86(1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice.  (2) A promise is not binding under Subsection (1) (a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or (b) to the extent that its value is disproportionate to the benefit 93

94. Pitching ideas: The double trust problem  Desny v. Billy Wilder at 193 94

95. Pitching Ideas  Pitching ideas: Desny v. Wilder Was this simply a valid (conditional) contract?  What if the secretary had not promised? 95