PROMISSORY LIABILITY CREATING LIABILITY FOR PROMISE Mutual Assent Reliance Benefit Conferred + Promise Offer Acceptance Consideration Promissory Estoppel Restitution Benefit Conferred no Promise Promises w/I Family Charitable Subscriptions Promises w/i Commercial context Copyright©2004 Kenneth D. Ferguson

PROMMISSORY ESTOPPEL 1.We have said more than once in this course that the First Restatement reflects classical contract law doctrine. 2.First Restatement included § 90. That provision provided as follows: a.A promise which the promissory should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. b.For a brief moment, lets separate this provision into its various elements. 1.A promise 2.Which the promisor should reasonably expect to induce action or forbearance 3.Of a definite and substantial character on the part of the promisee 4.And which does induce such action or forbearance is binding 5.If injustice can be avoided only by enforcement of the promise.

PROMMISSORY ESTOPPEL 1.Professor Grant Gilmore in his notable article, "The Death of Contract," stated that the inclusion of § 90 into the First Restatement marked the death of contract. a.He declared that when both § § 90 and 75 were adopted into the First Restatement it proved that the whole document was "schizophrenic." The Restatement was schizophrenic because the bargain-for theory of consideration reflected in then § 75 was antithetical to the liability based on unbargained for reliance found in § 90. These sections were as "antithetical as antimatter would be to the universe we know." As matter and antimatter could not exist in the same universe § § 75 and 90 could not exist in the same universe of contract law, "one must swallow up the other. Why would Gilmore make this statement? 2.The Second Restatement version of § 90 provides: a.A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promissee 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.

PROMMISSORY ESTOPPEL No, your mother did not have to work this hard, Here is a note for $10,000. You should not have To work In response (Reliance) to Uncle’s promise, Niece quits her job. 1.A promise 2.Which the promisor should reasonably expect to induce action or forbearance by promissee or third party. 3.Which does induce action or forbearance. 4.Is binding if justice can be avoided only by enforcing the promise.

PROMMISSORY ESTOPPEL No, your mother did not have to work this hard, Here is a note for $10,000. You should not have To work In response (Reliance) to Uncle’s promise, Niece quits her job. 1.It would appear that the system of contract law would apply equally as well to transaction between family members. However, the bargain-for theory of consideration would "exclude from its sphere most of the dealings between family members."

PROMMISSORY ESTOPPEL No, your mother did not have to work this hard, Here is a note for $10,000. You should not have To work In response (Reliance) to Uncle’s promise, Niece quits her job. 2.Most promises in the context of family relationship may be motivated by feelings of affection rather than by the expectation of a return or a quid pro quo. Promissory estoppel "provides an additional tool for courts to reach what they consider to be equitable result.

PROMMISSORY ESTOPPEL 2.Charitable Subscription a.Consideration, under the bargain-for-exchange theory, provides a mechanism that enables us to distinguish between enforceable bargain-for-exchanges and unenforceable gratuitous exchanges. 1.If that is the case, are charitable subscription enforceable bargain-for-exchanges and unenforceable gratuitous exchanges? 2.In many of the charitable subscription cases, courts have gone to some lengths to find a bargain-for-exchange in the subscriber’s promise to make the gift. 3.Most commentators agree that court’s bargain-for-exchange analysis in the charitable subscription cases reflect the courts desire to enforce the subscriber’s promise, rather than substantiating existence of a bargain. 4.Allegheny College v. National Chautauqua County Bank., 3.First Restatement included § 90. That provision provided as follows:

2.Charitable Subscription b.Allegheny College v. National Chautauqua County Bank., 1.A classic form of statement identifies consideration with detriment to the promisee sustained by virtue of the promise. a.This the half truth 1.The real truth is that “[t]he promise and the consideration must purport to be the motive each for the other, in whole or at least in part. 2.It is not enough that he promise induces the detriment or that the detriment induces the promise if the other half is wanting. b.Half truths of one generation tend at times to perpetuate themselves in the law as the whole truth of another. 1.The doctrine of consideration has not escaped the common lot. PROMMISSORY ESTOPPEL

2.Charitable Subscription b.Allegheny College v. National Chautauqua County Bank., b.Half truths of one generation tend at times to perpetuate themselves in the law as the whole truth of another. 1.The doctrine of consideration has not escaped the common lot. 2.Judge Holmes separated the detriment, which is merely a consequence of the promise from the detriment, which is in truth the motive or inducement. He added, however, that courts have gone far in obliterating this distinction. 3.Promissory Estoppel, the substitute for consideration, is the result of the effacement. c.Consideration c.Section 90(2) 1.A charitable subscription or marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance. PROMMISSORY ESTOPPEL

3.Promises in a Commercial Context a.The materials we have considered in the section on "Obligations in the Absence of Exchange" involved a significant amount of money, they did not concern commercial transactions in the ordinary sense. b.Although contributions made to charitable organizations are generally considered to be gratuitous in nature, does not mean that the charitable organization is not a commercial entity for Article 2 purposes c.See section 2-104’s definition of merchants, and accompanying comment. d. Early in its developmental history, the doctrine of promissory estoppel was thought to be confined to the noncommercial sphere. 1.The one significant exception involve the employee benefit or pension cases where employees sought to enforce the employer's promise of future pension upon retirement. 2.By the 1960, the doctrine of promissory estoppel had outgrown limitations regarding its application in a purely commercial context. In the materials which follow we examine some situation in which courts employed the doctrine of promissory estoppel to enforce commercial promises in the absence of consideration. PROMMISSORY ESTOPPEL