What is Promissory Estoppel?

Introduction

What if someone makes you a promise, you act in reliance of that promise and the person does not come through? Bearing in mind that the promise was made without a formal consideration, it is normal for you to assume that nothing will happen. However, this is not always the case. The principle of promissory estoppel may allow you to recover on a promise without any formal consideration.

Promissory estoppel is a legal doctrine that stops a person from going back on a promise even in the absence of a legal agreement or a contract. It provides that a promise is enforceable by law when a person makes a promise to another person, and that other person relies on that promise to its detriment.

Table of Contents

Promissory Estoppel Example

Let’s say X offers Y a job to start in three weeks. They agree that the contract would be available when party B moves from Sydney to Melbourne. Y then quits his existing job and moves to Melbourne to start his new job. X however, calls the whole thing off and hires someone else for the position.

In this instance, Y may sue X. Y could argue that the court should invoke the doctrine of promissory estoppel to stop X from walking away from the promise of a job without any recompense.

Elements of Promissory Estoppel

There are several legal requirements that you must fulfil in order to trigger a promissory estoppel.

Firstly, some form of legal relationship must exist or should be anticipated between the parties. Most commonly, this will be contractual relationship, meaning that the two parties have formed a legal agreement. The parties may also have a legal relationship if they are in the process of negotiating a contract.

Promise

Then, one of the two parties must make a promise to another or the representation of a fact. For it to hold up in court, the promisor should make a promise in a way that would cause the other party to assume that the promisor would follow through. Furthermore, the promise must be reasonable and believable.

Reliance

Another crucial requirement for the principle of promissory estoppel to apply is that the party receiving the promise or representation must have acted in justifiable reliance on that statement.

Detriment

Consequently, the party that relied upon the promise must have suffered some sort of detriment. Basically, the promisee has to be able to prove that they are worse off than they were prior to the making of the promise.

Unconscionability

Lastly, an element of unconscionability has to be shown in order to enforce promissory estoppel. It must be proven that, if one party doesn’t fulfil their promise made to the other, it would create a circumstance of inequity between the parties. This element is really the backbone of estoppel.

Remedies

The remedies available to someone who relied on a promise to their detriment are equitable. This simply means that the court has the discretion in deciding what to do in order to relieve the detriment. Mostly, the promisee is given an award that covers the cost of the promise that was made. Other times the court simply awards an amount that is deemed sufficient to cover the financial detriment suffered.

Conclusion

In an attempt to deliver justice, the court may enforce a promise without any consideration. To remedy a broken promise, you will need to formulate a clear case. If you are considering doing so, it is a good idea to seek legal advice from one of our contract lawyers.

Find the perfect lawyer to help your business today!

Get a fixed-fee quote from Australia's largest lawyer marketplace.

You may also like
Recent Articles

Get the latest news

By clicking on 'Sign up to our newsletter' you are agreeing to the Lawpath Terms & Conditions

Share:

Register for our free live webinar today!

Tax Strategies for Small Business Success

12:00pm AEDT
Thursday 25th July 2024

By clicking on 'Register for webinar' you are agreeing to the Lawpath Terms & Conditions

You may also like

The 2024 Federal Budget has unveiled a comprehensive package of measures designed to support small to medium enterprises (SMEs) in Australia, while also laying the groundwork for a "Future Made in Australia."
Default interest clauses can help protect lenders' interests, but sometimes they will not be enforceable. Find out more here.
Lying on your resume to get a job is never a good idea. In fact obtaining employment through fraud can actually land you in jail.

Thank you!

Your registration is confirmed. Keep an eye on your inbox for an email with details on how to watch the webinar.