Contracts are the backbone of the business world, giving parties assurances that certain promises will be fulfilled. But what happens if there is merely an “agreement to agree” rather than an actual contract?
While such an agreement is not enforceable as a contract, it can give rise to another legal doctrine: promissory estoppel. And an aggrieved party who feels that such an agreement was violated could have recourse under promissory estoppel rules.
Promissory estoppel is a crucial concept in business law, ensuring fairness when a promise is made without a valid contract. A promissory estoppel claim can arise when one party relies on the defendant’s promise, leading to reliance damages due to the absence of legal consideration. This legal principle allows courts to enforce promises that otherwise wouldn’t form a binding contract under traditional contract law. Navigating these complex legal issues highlights the importance of a skilled lawyer who can effectively manage and resolve disputes involving promissory estoppel.
The New York business lawyers of Rosenbaum & Taylor examine this important principle.
What Is Promissory Estoppel?
Assume that one party promises something to another, but never reduces that promise to a written contract. The promising party then breaks the promise. Meanwhile, the other party relied upon that promise and spent money in doing so.
Can that party recover compensation for the money it spent? There’s no contract, so the party cannot sue for a breach. But it can sue under a legal doctrine known as promissory estoppel.
When a party suffers some kind of loss by relying on another party’s promises, promissory estoppel could provide monetary relief. That means the ability to recover damages even in the absence of a formal contract. However, a party seeking to invoke this doctrine has the burden of proving a promise was made.
Imagine a scenario involving promissory estoppel claims where two parties, Alex and Ben, are negotiating a business deal. Alex, in good faith, makes an oral promise to Ben that he will pay $10,000 for a service Ben provides. Relying on this promise, Ben, a reasonable person, invests his own money and time into the project, fully occupied with delivering the service as promised. However, Alex later decides not to pay, leaving Ben in financial trouble. Ben’s reasonable reliance on Alex’s promise and subsequent action would typically not be protected by a valid contract. In such a case, Ben can seek a remedy through promissory estoppel to recover his expenses and the expected payment, ensuring fairness and justice in the exchange.
Here are a couple of examples of how this may be done.
- Written correspondence: A party may send an email or letter to another party that summarizes the promises made. Said correspondence may also request confirmation of the agreement.
- Witnesses: Perhaps a witness was present when the promise was made. This individual can confirm not only the existence of the promise but the details of it. The witness should sign something at the time the promise is made to create written documentation of it.
Ask a New York business law attorney if you have evidence such as the above to support your promissory estoppel claim.
Elements of a Successful Promissory Estoppel Lawsuit
The above evidence is helpful, but certain elements must be met to succeed in a promissory estoppel lawsuit. Those elements are:
- The existence of a clear and definite promise
- That the promise was made with the expectation that the other party would rely upon it
- That the other party did, in fact, rely upon the promise and did so to its detriment
- That injustice can be avoided only by enforcing the promise
Your New York business lawyer can explain more about these elements. You should also understand the potential monetary damages you can seek in court. In general, these include expenses associated with performing the promised action.
For instance, the party to whom the promise was made purchased certain products. These products would only be useful if the promise were fulfilled. After the promising party backed out, these products are of no real use to the aggrieved party. Damages could be awarded to compensate the party for what it paid for the products.
The objective is to secure fairness where a contract provides no means of relief. By holding the promising party accountable, promissory estoppel maintains fairness in business dealings. The doctrine can also be raised to expedite the resolution of a business dispute outside of court. That means it can be used in mediation, arbitration, or simply to negotiate an amicable settlement of the matter.
Were Promises Made To Your Company But Then Broken? Ask a New York Business Attorney
In conclusion, promissory estoppel claims serve as a crucial mechanism to prevent injustice when equitable estoppel and reliance on the promise are at play. When a plaintiff takes such action based on the defendant’s promise, and justice requires enforcement, courts may induct action to prevent injustice. By recognizing these claims, statutes ensure that defendants cannot escape liability when their promises induce significant reliance. Thus, promissory estoppel enforces fair dealings, ensuring that promises, even without formal contracts, are honored to avoid injustice.
Having a New York business attorney on your side is crucial for navigating promissory estoppel claims. Contract law can be complex, and promissory estoppel cases require specialized knowledge to effectively argue reliance damages and the remedy sought. An experienced attorney can guide you through the promissory estoppel action, helping the court determine if induct action is necessary to enforce the promise. They ensure that the involved parties’ rights are protected under the statute, making sure the act of reliance is properly presented and justice is served.
Breaking promises can cause a business to unfairly suffer losses. But the courts allow an avenue of relief with the promissory estoppel doctrine. If a promise was broken and you incurred a financial loss as a result, talk to Rosenbaum & Taylor. We can explore your legal rights and options today.
