Tag: reliance

Case Name: Pop’s Cones, Inc. v. Resorts International Hotel, Inc.
Plaintiff/Appellant: Pop’s Cones, Inc. (TCBY franchise)
Defendant/Appellee: Resorts International Hotel, Inc.
Citation: 307 N.J. Super. 461 (1998)

Issue: Whether a prima facie case of promissory estoppels existed when the plaintiff relied to its detriment on the promises of defendant that plaintiff would be permitted to relocate its operation to defendant’s location. More specifically, whether the court should require a “clear and definite promise” or just a promise that a reasonable person would rely on it.

Key Facts: Plaintiff, a TCBY franchisee had a number of discussions with Phoenix the executive director of business development and sales for the defendant about relocating the plaintiff’s business to a space owned by the defendant. The plaintiff also received a proposed form of lease from the defendant’s counsel. Based off these discussions, the plaintiff did not renew its current lease, placed its equipment into temporary storage, retained the services of an attorney to finalize the lease with the defendant, and engaged in planning the relocation to defendant’s property. Furthermore, the plaintiff was not able to reopen its store until July 1996 but did not seek speculative lost profits because the lease had not been fully negotiated.

Procedural History: The lower court granted the defendant summary judgment and dismissed the plaintiff’s complaint.

Holding: Based off the allegations of the plaintiff a prima facie case of promissory estoppel existed. This court relaxed the requirement for a clear and definite promise. The case was remanded so that a jury can decide whether the plaintiff’s reliance upon the defendant’s assurances was reasonable.

Reasoning: Plaintiff was not seeking enforcement of the lease nor speculative lost profits had the lease been successfully negotiated. The plaintiff merely seeks to recoup damages it incurred in reasonably relying to its detriment upon the defendant’s promise. When you afford the plaintiff all favorable inferences, the claim raised a jury question and therefore should not have been summarily dismissed.

A promissory estoppel claim will be justified if the plaintiff satisfies its burden of demonstrating the existence of, or for purposes of summary judgment, a dispute as to a material fact with regard to, four separate elements which include:

(1) a clear and definite promise by the promisor;
(2) the promise must be made with the expectation that the promisee will rely thereon (the promisor did or should have foresaw);
(3) the promisee must in fact reasonably rely on the promise, and
(4) detriment of a definite and substantial nature must be incurred in reliance on the promise.

The promise is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

Judgment: Reversed summary judgment and remanded for further proceedings.

Case Name: Drennan v. Star Paving Co.
Plaintiff/Appellant: Drennan (General Contractor)
Defendant/Appellee: Star Paving Co. (Subcontrator)
Citation: 51 Cal. 2d 409, 333 P.2d 757 (1958)

Issue: Whether plaintiff’s reliance on the defendant’s subcontracting bid made the defendant’s offer irrevocable.

Key Facts: The plaintiff, a general contractor, was receiving bids from subcontractors in order to bid on the Monte Vista School Job. The defendant, a subcontractor, contacted the plaintiff by phone and submitted a bid for the paving work for $7,131.60 which was the lowest bid the plaintiff received for this job. The plaintiff won the contract and promptly informed the defendant in person. The defendant then told the plaintiff that they had made a mistake and would not be able to do the paving work for less than $15,000. Plaintiff then had to engage another paving company to do the work for $10,948.60.

Procedural History: The plaintiff won a judgment to recover damages caused by defendant’s refusal to perform the paving work according to its original bid. Defendant appealed.

Holding: The defendant’s offer was irrevocable.

Reasoning: The defendant had reason to expect that if its bid proved the lowest it would be used by the plaintiff and it induced “action…of a definite and substantial character on the part of the promisee. Merely acting in justifiable reliance on an offer may in some cases serve as sufficient reason for making a promise binding (Restatement (First) 90). The purpose of this section is to make a promise binding even though there was no consideration “in the sense of something that is bargained for and given in exchange.”

Defendant had reason not only to expect plaintiff to rely on its bid but to want him to. Also, the mistake made by the defendant was not apparent to the plaintiff. The general contractor’s actions were reasonable because he was following the general practices of the industry. The subcontractor made the mistake originally and had superior knowledge of paving work.

Note: Justice Traynor is associated with more modern approach of interpretation of contracts.