17 Promissory Estoppel Examples: Understanding the Concept
Promissory estoppel is a legal principle that prevents a person from going back on a promise made to another, even in the absence of a formal contract. This doctrine plays a crucial role in contract law and can help to ensure fairness between parties. In this blog post, we will explore some real-life examples of promissory estoppel and delve into its essential elements. Additionally, we will answer some commonly asked questions related to promissory estoppel.
See also: 20 Examples of Estoppel in Real Estate: A Comprehensive Guide
What Is Promissory Estoppel?
Promissory estoppel is a legal doctrine that arises when one party relies on a promise made by another party, and that reliance is reasonable and results in a detriment to the party who relied on the promise. The primary purpose of promissory estoppel is to prevent injustice by holding the promisor to their promise, even when there isn’t a formal contract in place.
Promissory Estoppel Examples
To better understand the concept of promissory estoppel, let’s examine some real-life examples:
Example 1: Employer’s Promise to Employee
An employee works for a company for many years and is promised by the employer that they will receive a significant bonus upon retirement. Based on this promise, the employee decides not to seek other job opportunities and remains with the company until retirement. However, when the employee retires, the employer refuses to pay the bonus. In this case, promissory estoppel may apply, and the employee could potentially recover the promised bonus.
Example 2: Landlord’s Promise to Tenant
A tenant has been living in an apartment for several years, and the landlord promises not to increase the rent for the next two years if the tenant renovates the property at their own expense. The tenant spends money and effort to make the improvements, but the landlord decides to increase the rent anyway. Promissory estoppel may prevent the landlord from going back on their promise and require them to honor the original agreement.
Example 3: Family Promise
A father promises his daughter that he will pay for her college education if she maintains good grades and gets accepted into a specific university. The daughter works diligently, meets the requirements, and gets accepted into the university. However, the father then decides not to pay for her education. Promissory estoppel may apply in this situation, holding the father to his promise.
Example 4: Promise to Forgive Debt
A creditor tells a debtor that they will forgive the remaining debt if the debtor makes a large, one-time payment. The debtor, relying on this promise, borrows money to make the payment. After receiving the payment, the creditor decides to demand the remaining balance. Promissory estoppel may apply to prevent the creditor from enforcing the remaining debt.
Example 5: Business Partnership
Two friends agree to start a business together. One friend invests a significant amount of money and time into setting up the business, while the other promises to contribute their expertise and manage daily operations. However, after the business is established, the second friend decides not to participate. Promissory estoppel may protect the first friend’s investment by requiring the second friend to uphold their promise.
Example 6: Charitable Pledge
A wealthy individual promises to donate a large sum of money to a charity if they begin a specific project. The charity, relying on the pledge, starts the project and incurs expenses. However, the wealthy individual later decides not to make the donation. Promissory estoppel may require the individual to fulfill their promise to the charity.
Example 7: Promise of Employment
A company offers a candidate a job, and the candidate, relying on the job offer, resigns from their current position. However, before the candidate starts the new job, the company rescinds the offer. Promissory estoppel may entitle the candidate to damages for the lost job opportunity.
Example 8: Promise to Grant Stock Options
An employer promises an employee stock options as a form of compensation. The employee, believing the promise, stays with the company and passes up other job opportunities. However, the employer later decides not to grant the stock options. Promissory estoppel may require the employer to honor their original promise.
Example 9: Promise to Co-Sign a Loan
A person agrees to co-sign a loan for a friend, enabling the friend to purchase a car. Relying on the promise, the friend selects a car and initiates the purchase process. However, the co-signer later refuses to sign the loan documents. Promissory estoppel may require the co-signer to fulfill their promise.
Example 10: Promise to Pay for Services
A homeowner promises to pay a contractor for renovation work if the contractor begins the project immediately. The contractor, relying on the promise, starts the project and incurs expenses. However, after the work is completed, the homeowner refuses to pay. Promissory estoppel may require the homeowner to compensate the contractor.
Example 11: Promise to Provide a Reference
An employer promises to provide a positive reference for a former employee, who then uses the reference to secure a new job. However, the employer provides a negative reference, causing the former employee to lose the job offer. Promissory estoppel may allow the former employee to recover damages resulting from the broken promise.
Example 12: Promise of a License Agreement
A software company promises a customer that they will provide a license for a specific software product. The customer, relying on the promise, invests time and resources in preparing their systems to use the software. However, the software company later refuses to grant the license. Promissory estoppel may require the software company to honor their promise.
Example 13: Promise to Lease Property
A property owner promises to lease commercial space to a prospective tenant. The tenant, relying on the promise, invests in advertising and prepares to move their business to the new location. However, the property owner later decides to lease the space to another tenant. Promissory estoppel may require the property owner to honor their original promise and lease the space to the first tenant.
Example 14: Promise to Refrain from Legal Action
A person promises not to pursue legal action against another party if they agree to a specific settlement. The other party, relying on the promise, agrees to the settlement and takes action accordingly. However, the first person later decides to file a lawsuit. Promissory estoppel may prevent the first person from pursuing the legal action.
Example 15: Promise to Provide Financial Support
A spouse promises to financially support their partner while they attend school to earn a degree. Relying on the promise, the partner enrolls in classes and incurs student loan debt. However, after the degree is completed, the spouse decides not to provide financial support. Promissory estoppel may require the spouse to uphold their promise and provide the support.
Example 16: Promise to Support a Start-Up
An investor promises to financially back a start-up if the founders reach specific milestones. The founders, relying on the promise, work tirelessly to achieve the milestones and invest their own resources into the venture. However, once the milestones are reached, the investor decides not to provide the financial backing. Promissory estoppel may require the investor to honor their promise and support the start-up.
Example 17: Promise to Share Lottery Winnings
Two friends agree to split any lottery winnings they might receive from jointly purchased tickets. When one of the tickets wins a significant prize, the friend who purchased the ticket refuses to share the winnings. Promissory estoppel may require the friend to honor their promise and split the winnings.
More Promissory Estoppel Examples are coming soon…
People Also Ask
How Can Promissory Estoppel Be Proven in Court?
To prove promissory estoppel in court, the claimant must typically demonstrate the following elements:
- A clear and unambiguous promise was made by the promisor.
- The promisee reasonably relied on the promise.
- The promisee suffered a detriment due to their reliance on the promise.
- Enforcing the promise is necessary to prevent injustice.
What Is the Difference Between Promissory Estoppel and Contractual Estoppel?
Promissory estoppel applies when there is no formal contract in place, whereas contractual estoppel applies when a contract exists but certain terms are unclear or ambiguous. Both doctrines aim to prevent injustice and ensure fairness.
Can Promissory Estoppel Be Used as a Defense?
Yes, promissory estoppel can be used as a defense in certain cases. If a party reasonably relied on a promise made by another party, and that reliance resulted in a detriment, promissory estoppel may be used as a defense to prevent the promisor from going back on their promise or enforcing certain contractual terms.
Conclusion
Promissory estoppel is a powerful legal doctrine that can prevent injustice by holding parties accountable for their promises, even when no formal contract exists. By understanding real-life examples of promissory estoppel, individuals and businesses can better appreciate the importance of this principle and ensure they act fairly in their personal and professional relationships.