Promissory estoppel is a doctrine which provides that, under certain circumstances, a person should be liable for breaking a promise, even if we don’t have all the elements necessary to form a contract.
Remember, contracts require, among other things, consideration. By consideration, courts mean each party gives something and each party gets something in exchange. If A promises to pay $100 and B promises to sell his watch, the parties are exchanging promises. We have a contract because there is an agreement and consideration.
But what happens if we have a gratuitous promise? For example, let’s say A promises B $100 but doesn’t ask for anything in return. This is not a contract. If B asks for the money A can tell B he changed his mind and there is no liability for the broken promise.
So far so good. But what if the situation becomes unjust because B relied on A’s promise. For example, let’s say Uncle Unkind tells his nephew, who is working a tough job and going to school, that he’ll give him $100,000. And let’s say Uncle Unkind should reasonably expect that the nephew will quit his job to focus on his studies based on this promise. If the nephew quits his job and asks the Uncle for money, what is the result?
Keep in mind that the Uncle made a gratuitous promise. He didn’t say, “If you agree to quit your job and study harder, I’ll give you $100,000.” Nope. He just promised money. But now the nephew has been injured because he reasonably relied on this promise.
A court is likely to say that if the Uncle does not pay the nephew then the result will be unjust. Promissory estoppel should apply because we have a promise and justifiable reliance on the promise resulting in injury to the plaintiff. How much does the Uncle have to pay? I believe some jurisdictions would say the full $100,000 but others might calculate the damages differently.
Below is a video discussing promissory estoppel.