Does California Have Promissory Estoppel? Everything One Should Know
California law uses the promissory estoppel theory, which is an argument and lawsuit raised whenever someone made a promise (without compensation or value), and the promisee relied on that by changing a position.
It sounds a little confusing, but this article will break things down into easier-to-understand sections. If one feels that promissory estoppel could pertain to them and their situation, it's wise to consult with a lawyer like the ones at Goss Law that can also advise on Is a verbal threat a crime in California?
Definition of Promissory Estoppel (Contract Law)
Under contract law, the promissory estoppel is simply a legal theory the plaintiff uses in court to help recover damages or the specific promise and performance the opposing party made. The plaintiff relied upon that without offering something of value or consideration. Overall, the plaintiff prevents the defendant from going back on a promise by using promissory estoppel, though there's no contract.
The Rules for a Promissory Estoppel Claim
There are rules for a promissory estoppel claim, which include offering a clear and unambiguous promise, the party relying on that promise, the promise being foreseeable and reasonable, and the party asserting that estoppel to be injured by such reliance.
First Element - Clear and Unambiguous Promise
The first element to consider in a promissory estoppel complaint is that the promise was clear and unambiguous within its terms. In fact, promissory estoppel can't be invoked simply to enforce preliminary negotiations or talks between the parties because no guarantees have been made clearly.
Overall, a full commitment between each party is not there. Therefore, the offeree is on notice for the finalization of the terms, and further negotiations are required. The offeror has no clear or unambiguous promise. In most cases, a conditional letter of commitment does not create such a promise.
In one case, Southern Cal. Acoustics versus C.V. Holder, the general contractor listed his subcontractors and combined that with a statutory restriction to be able to change the subcontractors as needed. This didn't constitute a clear promise to accept one listed subcontractor's bid over another.
Likewise, job application instructions might list that industry experience might be considered. However, that doesn't constitute a clear or unambiguous promise that previous experience would be the ultimate factor in determining who worked permanently and full-time on the job.
Second Element - Actual Reliance (Definite and Substantial Character)
Then, the promisee must actually rely on the promise to have a claim. For example, a law student's hard work to earn a ranking in the top 10 percent of his law class was met. The law school said that could make him eligible to be in the Order of the Coif. However, this wasn't guaranteed, and the Order of the Coif did not promise this. Therefore, no laws were breached.
When focused on employment relationships, the court could make a reasonable inference from the marketplace reality concerning the reliance and inducement of employees upon any benefits the employer offers. Employees don't have to expressly testify to this. However, for the promise to be held, they must leave the promisor's employ or never would have otherwise worked there.
In another case, a wage increase was set forth in a memo, which the union membership approved. This could have constituted a clear promise, and the breach would have caused an injury to the plaintiffs. However, the injury wasn't necessarily a result of relying upon the memorandum.
Third Element - Reasonable and Foreseeable Reliance
Likewise, the promisee's reliance on that promise must be foreseeable and reasonable. Reasonable reliance will bind the promisor regardless of the consideration ordinarily required to make it a binding contract.
The element of foreseeable and reasonable reliance could be satisfied when the promisor makes a promise and deliberately intended to force the plaintiff's reliance on such promise. This happened in West versus Hunt Foods. The employer promised retirement benefits to keep the employee with the company, which is enforceable using the promissory estoppel doctrine.
If an employer assures the employee's future financial security, and it was deliberately intended to ensure the employee stayed at that location, this could be enforceable using the promissory estoppel theory.
Fourth Element - Injury or Detrimental Reliance
The party who asserts the promissory estoppel must have been injured because they relied on that promise. Overall, the purpose of the promissory estoppel is to ensure that the resulting detrimental reliance by the second party and the promise by the first party is the substitute for consideration in some situations.
For example, a law student relies on a law school's statements about eligibility to be admitted into an honors society. They didn't suffer a detriment when it ultimately refused the admission. This is because membership in that society had no bearing on the attorney's income or the type/number of clients the criminal defense attorney had.
The value of a plaintiff's detrimental reliance does not have to equal to or be identical to the value of that defendant's promise, either.
Ultimately, injustice could be avoided through promise enforcement. An oral promise meeting the promissory estoppel elements could be enforceable if the other party simply does what they promised in the beginning.
Overall, the meaning of avoiding injustice through promise enforcement is similar to requiring an unconscionable injury or unjust enrichment.
Unconscionable injury could happen if one party refuses to enforce an oral agreement after another party is induced to change their position because of that guarantee or promise.
How can promissory estoppel be avoided? There are a few options here, such as:
Enforcement of That Promise - The promise insurer used a personal liability policy. It was liable for a judgment against its insured because it made a commitment to be held responsible under the insurance policy for a particular amount of judgment.
Lost Profits - If a person reasonably anticipated their lost profits, this could be considered when determining damages for promissory estoppel actions.
Compensatory Damages - The promisee's recoverable damages for a promissory estoppel could be limited to whatever they got directly from the justifiable reliance upon that promise. In other words, they cannot get more than they would have received if the promise had been upheld.
No Right to Jury Trial - This says that a promissory estoppel cannot be the only reason to go to a jury trial.
Statute of Limitations
Usually, the limitations period is about four years for all written contracts, but it's only two years for an oral agreement. The cause of action against the contract doesn't accrue until that contract is breached.
Typically, lawyers use the discovery rule for breaches of contract. They could be committed in secret. Therefore, the harm following those breaches couldn't be reasonably discovered by a plaintiff without a motion to discover. Goss Law can also explain what insanity test is used in California.
The promisor's conduct could delay the start of an action. In this case, the promisor will be estopped from asserting the statute of limitations defense when it goes to trial or is heard by a judge. Ultimately, the plaintiff will have a reasonable amount of time to bring his action to light after the estoppel expires. This often happens, which is why this rule is in place.
Everyone deserves to have enough time to build their case, and it's unfair if a promisor does something that makes it impossible for the promisee to get the information necessary for their case.
Affirmative Defenses (Plaintiff's Performance Bargained For and Others)
There are a few affirmative defenses available, such as:
Statute of Frauds - Promissory estoppel could be an exception to the statute of frauds if the promisee can prove unconscionable injury and detrimental reliance.
No Promissory Estoppel When Subcontractors Continued Working for More Money - In Healy vs. Brewster, a subcontractor continued excavating cemented soil, which was unexpected. The general contractor promised he'd be compensated for that extra work, which gave him a bargained-for performance.
No Promissory Estoppel When Employees Worked for Their Annual Salary Raises - The promissory estoppel doctrine didn't apply when an employee relied on the promise of an annual merit salary increase when accepting employment. They continued in that job and didn't seek employment elsewhere.
Plaintiff's Performance Is Bargained For - In most cases, promissory estoppel won't apply if the promisee used actual consideration. A cause of action for this would be inconsistent with the cause of action in a breach of contract case based on similar facts.
Overall, the plaintiff has to allege that there's a breach of promise. If a clear and unambiguous promise gets made, the promisee pleads a breach of that promise. However, promises of eligibility don't create a promise.
Recoverable Damages for Promissory Estoppel
Each jurisdiction has its own rules for promissory estoppel. A successful case could result in awarding expectation or reliance damages. Reliance damages focus on what it might cost to restore the person promised to their economic position before relying on the broken promise. However, expectation damages are ultimately based on putting that injured party into the same position as if the promise was fulfilled.
Why Work with a Lawyer for Contract Law Concerns
Promissory estoppel is a legal term that claims parties could be liable for any broken promises they make that result in financial difficulties. These cases are often highly specific, so it's best to request legal services from a reputable attorney like the ones at Goss Law. Please call or use the online contact form to get started!