party gets consideration from the agreement. Consideration can be money, property, a promise, or some
right. For instance, when a music company sells studio equipment, the promised equipment is the
consideration for the buyer. The seller’s consideration is the money the buyer promises to pay for the
equipment.
Promissory Estoppel
The promissory estoppel doctrine is an exception to the requirement of consideration for contracts.
Promissory estoppel is triggered when one party acts on the other party’s promise. In cases where it is
triggered, there is harm or severe injustice to the party who acted because they relied on the other party’s
broken promise.
The doctrine of promissory estoppel allows aggrieved parties to pursue justice or fairness for the performance
of a contract in court, or other equitable remedies, even in the absence of any consideration. Its legal
application may vary from state to state, but the basic elements include:
•
A legal relationship existed between the parties.
•
A promise was made.
•
There was reliance on the promise that caused one party to act before any real consideration was
exchanged.
•
A substantial and measurable detriment occurred as a result of the failure to perform on the contract.
•
An unconscionable result, or gross injustice, resulted from the broken promise.
If it is found that these elements are satisfied and that the doctrine of estoppel is applicable, then the court will
issue the appropriate damages in the form of reliance damages to restore the aggrieved party to the position
they were in prior to the broken promise. Expectation damages are not usually available if promissory
estoppel is being claimed.
An example of how this principle would apply is:
E X A M P L E  7 . 1
After a bidding war for his services, Bob turns down a job offer with We are the Best, LLC in Miami, Florida
(where he lives), and accepts a dream job offer from MegaCorp Co. in San Francisco, California. The offer
contains a specific start date, compensation terms, benefits outline, and more. However, it does not include
relocation expenses or provisions. The company is aware of his plans to move across the country for the sole
purpose of taking this dream role. Bob breaks his Miami lease with penalty and spends approximately
$13,000 in moving and travel costs. As the cost of living in San Francisco is much higher than in Miami, he
puts down a much pricier first and last month’s rent and security deposit payment than he is used to. Within
two days of his planned start date, he receives a call from management at MegaCorp Co. stating that the
company has changed its mind and decided to go in a different direction. If Bob brings a promissory
estoppel suit, he will likely be entitled to all of the costs that he incurred while anticipating the start of the
promised role (i.e., penalty for the broken lease, moving costs, difference in the rental costs, cost of breaking
the new lease, if necessary, etc.) Following reimbursement of his costs, Bob will be returned to the same
position he was in prior to the broken promise. However, the company will not likely be required to reopen
Chapter 7 Contract Law
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