George Mason School of Law Contracts I J

George Mason School of Law Contracts I J. Promissory Estoppel F. H. Buckley fbuckley@gmu. edu 1

Restatement § 90(1) o A promise which: the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person n and which does induce such action or forbearance n is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. n 2

What we’ll look at o An ideological battle? o Varieties of Promissory Estoppel o The Material Benefits Rule 3

Estoppel: An Ideological Battle? Oliver Wendell Holmes 4 Samuel Williston Arthur Corbin

Estoppel: An Ideological Battle? Grant Gilmore, The Death of Contract (1974) 5

Varieties of Promissory Estoppel o o 6 Chartable Subscriptions Family Promises Employment Contracts Promises to Insure

Charitable Subscriptions o I promise you $10, 000 but renege. o Is my promise enforceable? 7

Charitable Subscriptions o I promise you $10, 000 but renege. Is my promise enforceable? n On the basis of the promise, you’ve bought a car? Enforceable? 8

Restatement § 90(1) o A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. 9

Charitable Subscriptions o You and I meet and agree that we will both donate $5, 000 to a third party. o I give. You don’t. Are you liable? 10

What would action or forbearance look like? n I pledge $500, 000 to a college which promises to name a scholarship after me. 11

Charitable Subscriptions o Cardozo in Allegheny College p. 157 n Where was the promise? 12 Allegheny College

Charitable Subscriptions o Does it matter that the college was a 501(c)3? 13

Charitable Subscriptions o What about Restatement § 90(2) n A charitable subscription or a marriage settlement is binding under 90(1) without proof that the promise induced action or forbearance 14

Charitable Subscriptions o What about Restatement § 90(2) n A charitable subscription or a marriage settlement is binding under 90(1) without proof that the promise induced action or forbearance n Suppose the gift is for general purposes? Just how would one show reliance? 15

Charitable Subscriptions o Is Restatement § 90(2) inconsistent with De. Leo at 156? 16

De. Leo o The De. Leo Memorial broom closet n What did you expect for $25 K? 17

Charitable Subscriptions o Is Restatement § 90(2) inconsistent with De. Leo at 156? n How might the absence of a writing be relevant n Why “no injustice”? 18

Charitable Subscriptions o Is Restatement § 90(2) inconsistent with De. Leo at 156? n Why “no injustice”? n Fiduciary relationships o Priest: penitent o Lawyer: client o Trustee: beneficiary 19

Distinguish four kinds of duties o Legal duties you should perform even if you don’t promise (e. g. , pay taxes) 20

Distinguish four kinds of duties o Legal duties you should perform even if you don’t promise (e. g. , pay taxes) o Things you should do because you promised to do so, and provided consideration (obligations) 21

Distinguish four kinds of duties o Legal duties you should perform even if you don’t promise (e. g. , pay taxes) o Things you should do because you promised to do so, and provided consideration o Things you should do because you promised, and the promisee has relied, and 90(1) is triggered 22

Distinguish four kinds of duties o Legal duties you should perform even if you don’t promise (e. g. , pay taxes) o Things you should do because you promised to do so, and provided consideration o Things you should do because you promised, and the promisee has relied, and 90(1) is triggered o Things you should do because you ought to do them and have promised to do so, notwithstanding the absence of consideration or promisee reliance 23

The fourth kind: Restatement § 90(2) o A charitable subscription or a marriage settlement is binding under 90(1) without proof that the promise induced action or forbearance 24

Charitable Subscriptions o Why do you think most courts refuse to adopt Restatement § 90(2)? 25

Charitable Subscriptions o Which rule produces more charitable giving? 26

Charitable Subscriptions o Why so few such cases? 27

Family Promises o Do they deserve special consideration? n If so, which way does this cut? 28

Haase v. Cardoza p. 164 o Was the promise supported by consideration? 29

Haase v. Cardoza p. 164 o Was the promise supported by consideration? o Did Alice really stiff Rose and Loretta? 30

Haase v. Cardoza o Was the promise supported by consideration? o What about reliance? A change of position? 31

Haase v. Cardoza o Was the promise supported by consideration? o What about reliance? A change of position? o What about the equities? 32

Ricketts v. Scothorn p. 166 33

Ricketts v. Scothorn o Was consideration given by Katie for the promise? 34

Ricketts v. Scothorn o Was consideration given by Katie for the promise? n No promise on the part of the plaintiff to do or refrain from doing anything 35

Ricketts v. Scothorn o Why did the grandfather renege (even before he died)? 36

Ricketts v. Scothorn o Why did the grandfather renege (even before he died)? n “If he could sell his farm…” n Let Katie work for Funke and Ogden as a bookkeeper 37

Ricketts v. Scothorn o Was there reliance by Scothorn? 38

Ricketts v. Scothorn o Was there reliance by Scothorn? o “Having intentionally influenced the plaintiff to alter her position for the worse … it would be grossly inequitable to permit … the executor … to resist payment” 39

Family promises o Why might a promisor want to incur legal liability? 40

Family promises o Why might a promisor want to incur legal liability? o And why might he not want to do so? 41

Family promises o If we enforce them all, do we make promisees better off? 42

George Mason School of Law Contracts I J. Promissory Estoppel F. H. Buckley fbuckley@gmu. edu 43

Varieties of Promissory Estoppel o o 44 Chartable Subscriptions Family Promises Employment Contracts Promises to Insure

The Employment Context o Feinberg v. Pfeiffer p. 173 n What was the promise and why was it made? 45

The Employment Context o Feinberg v. Pfeiffer p. 173 n What was the promise and why was it made? n Was there consideration? 46

The Employment Context o Feinberg v. Pfeiffer p. 173 n What was the promise and why was it made? n Was there consideration? n Cf. Restatement § 86 on past consideration 47

Past Consideration Doctrine o Restatement 86(1)(1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. o (2) A promise is not binding under Subsection (1): (a)if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or (b) to the extent that its value is disproportionate to the benefit. 48

The Employment Context o Feinberg v. Pfeiffer n What was the promise and why was it made? n What was the reliance? o What would count as reliance? 49

The Employment Context o Feinberg v. Pfeiffer n What was the promise and why was it made? n What was the reliance? o How old was she in 1947? o And for how much longer did she work for Pfeiffer? 50

The Employment Context o Feinberg v. Pfeiffer n What was the promise and why was it made? n What was the reliance? o What if she had quit because she was too ill to work? 51

The Employment Context o Feinberg v. Pfeiffer n What about the equities of the case? 52

Why a different result in Hayes? P. 177 53

Why a different result in Hayes? o Feinberg retired after the promise; Hayes decided to retire before the promise, and retired a week after it was made 54

Why a different result in Hayes? o Feinberg retired after the promise; Hayes decided to retire before the promise, and retired a week after it was made o No formal provision, no board resolution. (So? ) 55

Why a different result in Hayes? o Did the promisors intend to assume legal liability in this case? In Feinberg? 56

Promises to insure You DID insure, didn’t you Rhett? 57

The Typical Case o Spiegel at 190 Insurer: Met Life Agent: Levy Insured: Spiegel 58

Geremia at 186 o Did the lender promise to insure the car? 59

Geremia at 186 o Did the lender promise to insure the car? n Where was the evidence? 60

Geremia at 185 o Did the lender promise to insure the car? o Cf. Restatement 90, comment e: “applied with caution” 61

Distinguish four kinds of duties o Things you should do even if you don’t promise (e. g. , pay taxes) o Things you should do because you promised to do so, and provided consideration o Things you should do because you promised, and the promisee has relied, and 90(1) is triggered o Things you should do because you ought to do them and have promised to do so, notwithstanding the absence of consideration or promisee reliance 62

The Material Benefits Rule o Webb v. Mc. Gowin p. 193 W. T. Smith Lumber Co. , Chapman AL 63

The Material Benefits Rule o Webb v. Mc. Gowin J. Greeley Mc. Gowin 64

The Material Benefits Rule o Webb v. Mc. Gowin n Treat this as a contracts case. Is there a consideration problem? 65

The Material Benefits Rule o Webb v. Mc. Gowin n Treat this as a contracts case. Is there a consideration problem? o The past consideration rule 66

The Material Benefits Rule o Webb v. Mc. Gowin n Treat this as a promissory estoppel issue. Was there promisee reliance here? 67

The Material Benefits Rule o Webb v. Mc. Gowin n So what’s the basis for a remedy? 68

The Material Benefits Rule o Webb v. Mc. Gowin n Recall Bailey v. West o Is Webb a suitable case for relief in quasi-contract? o If so, why? 69

The Material Benefits Rule o Webb v. Mc. Gowin o Describe the hypothetical bargain, if we could have frozen time before Webb diverted the block? 70

The Material Benefits Rule o Webb v. Mc. Gowin o What did the promise add? 71

Restatement § 86 Promise for Benefit Received o § 86(1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. o § 86(2) A promise is not binding under Subsection (1) n (a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or n (b) to the extent that its value is disproportionate to the benefit 72

The Material Benefits Rule o Webb v. Mc. Gowin n Can you distinguish it from Mills v. Wyman: p. 193? 73

The Material Benefits Rule o Webb v. Mc. Gowin n Can you distinguish it from Mills v. Wyman? n What about Boothe v. Fitzpatrick (p. 199) 74

The Material Benefits Rule o Why do you think this is called the “material” benefits rule? 75

Restatement § 86 Promise for Benefit Received o § 86(1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. o (2) A promise is not binding under Subsection (1) n (a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or n (b) to the extent that its value is disproportionate to the benefit 76

Pitching ideas: The double trust problem o Desny v. Billy Wilder at 194 77

Pitching Ideas o Pitching ideas: Desny v. Wilder n Why is this a past consideration rule problem? 78