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.
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.
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
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.