Wednesday, September 30, 2009

Reliance alone is not enough to support a promissory estoppel claim!

A student asks in connection with yesterday's post:
Can promissory estoppel be used as a defense regarding a homeowner who obtained several estimates on a roofing project, then the homeowner accepted the lowest bid, understanding that it is just an estimate, if the actual price of the project at the time of completion is vastly different from the estimate, could a homeowner refuse to pay the full cost, due to the homeowners reliance on a price closer to the original estimate?
The short answer is no, but it would all depend on what really could reasonably be understood by the homeowner about the nature of the "estimate." The reason I suggest the short answer is no is that it is difficult for me to conceive that an "estimate" would be something a homeowner could rely upon as a firm price.

Thus, for example, in Rice v. NN, Inc. Ball & Roller Div., 210 S.W.3d 536, 544 (Tenn. Ct. App. 2006), an employee sued his former employer on, in part, a theory of promissory estoppel, arguing that he left a job and accepted employment with defendant because of, and in reliance on, the defendant's promise to pay him $165,000 at age 65. The trial court granted summary judgment for plaintiff. Reversing and dismissing the complaint, the court of appeals held, among other things, that a term sheet presented to the plaintiff some 20 years earlier as part of the defendant's effort to recruit the plaintiff merely provided an estimate of what the plaintiff could expect to receive, and did not promise or in any way guarantee that the plaintiff would receive $165,000 at age 65; in addition, the plaintiff's claim failed on the issue of justifiable reliance, since the term sheet clearly stated on its face that the $165,00 figure was an estimate, and the plaintiff did not show that he suffered a substantial economic loss by switching his employment. The court stated the following
To successfully state a claim for promissory estoppel, the asserting party must first show that a promise was made and that it reasonably relied upon the promise to its detriment. The promise upon which the party relies “must be unambiguous and not unenforceably vague.” We conclude that any analysis of the plaintiff's promissory estoppel claim ends here. As previously noted, the plaintiff has failed to demonstrate an unambiguous promise to pay $165,000. The term sheet did not promise such a payment. Again, the term sheet merely provided the plaintiff with an estimate of what he could expect to receive from an undefined “Profit Trust” at age 65. The record is devoid of any evidence suggesting that the defendant, either verbally or through its actions, in any way promised to pay the plaintiff $165,000 at age 65. The first, and most essential, element of promissory estoppel is lacking in this case. There was no promise to pay $165,000.
The plaintiff's claim based upon a theory of promissory estoppel must also fail on the issue of justifiable reliance. We would again note that the term sheet, which is the sole basis of the plaintiff's reliance, clearly states on its face that the $165,000 figure is an estimate. The plaintiff has acknowledged that he understands the word “estimated” to mean “a guess.” We also note that the plaintiff has failed to show that he suffered a substantial economic loss by switching his employment from [his former employer to the defendant]. The proof on this latter point is simply lacking.
 Id. at 544 (citations omitted).

So is an "estimate" something that someone can enforce under the doctrine of promissory estoppel? Not unless there are facts giving that someone reason to believe the estimate is in fact a promise and making the reliance reasonable.

But is an estimate that is intentionally wrong then not actionable? Perhaps it could be a fraud. While reliance on the specific amount of the estimate is not reasonable, reliance on its approximate accuracy might be, and intentionally giving an estimate that one knows is not even approximately accurate would be a material misrepresentation upon which the recipient could reasonably rely . . .                                                                                                    

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