Tuesday, October 20, 2009

What do courts really look for in promissory estoppel cases?

Promissory estoppel claims generally fail, for example, when the alleged reliance came before the promise. And promissory estoppel claimants have a substantial chance of prevailing when the defendant has engaged in "opportunistic behavior." An example of opportunistic behavior is when a defendant strings the plaintiff along (inducing the plaintiff to start performing, with the promise that a contract will be forthcoming), only to turn around and contract with another vendor.
In these situations, Kostritsky says, efficiency and general social welfare considerations call for the results generally provided by the courts. If reliance that came before the alleged promise could result in a successful promissory estoppel claim, potential defendants would have to waste a substantial amount of resources trying to insulate themselves from possible promissory estoppel claims.
On the other hand, it often makes sense (and is generally beneficial to society) to have a vendor begin to provide performance while the precise terms of a contract are hammered out. If promisors could walk away from a deal with no liability after stringing a vendor along into starting expensive performance, opportunistic behavior would be rewarded. And the economy would generally suffer as promisees would have to insist on a fully negotiated and signed contract before starting performance.

                                                                                                                  

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