Promises
Promises
• Contracts consist of mutual
promises
• Reciprocal inducement
(consideration) formalizes the
contract
• When the promise is unilateral there
is a promise but no contract
• When should promises be enforced?
Why does one make a promise about a
future transfer rather than an immediate
transfer?
• It may be a conditional gift based
upon some event affecting the
promisor?
• It may be a conditional gift based
upon some event affecting the
promisee?
• It may intend to affect the behavior of
the promisee?
Detrimental Reliance
• Promise induces action or forbearance
on the part of the promisee
• Reliance was reasonably foreseeable by
the promisor
• Can injustice be avoided by
enforcement?
• Does the promisor benefit from the
reliance (contract?)
Promissory Estoppel
Exception to the general rule that a promise
cannot be enforced without
consideration.
A doctrine that a typically nonenforceable
promise should be enforced in order to
avoid an injustice
UCC and Second Restatement of
Contracts
§ 90 Promise Reasonably Inducing Action or
Forbearance
(1) A promise which the promisor should reasonably
expect to induce action or forbearance on the part of
the promisee 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.
(2) A charitable subscription or a marriage settlement is
binding under Subsection (1) without proof that the
promise induced action or forbearance.
Elements of Promissory Estoppel
• A promise that induces action or
forbearance on the part of the
promisee
• Was reasonably foreseeable by the
promisor
• Binding if injustice can only be
avoided by enforcement.
Promises
• The present value of a future gift
depends upon the probability of
enforcement.
• Suppose the parties want the promise
enforced?
What damage measure?
• Expectation damages
• Opportunity damages
• Reliance damages
Promises don’t create a cooperative
surplus, but they can waste resources
through detrimental reliance
Where might promissory estoppel apply?
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A personal or charitable gift
A scholarship offer
A marriage proposal
A job offer
Should the courts enforce a
marriage proposal?
Why not enforce promises to marry?
(Breach of promise to marry)
• There is no longer the view that women suffer
greater damage from the termination of an
engagement than a man.
• Society benefits from having an engagement period
where either party can terminate the relationship
without damages?
• An engagement is a trial period before entering a
more serious arrangement.
• If promises to marry were enforced, what would be
the difference between divorce settlements and
engagement settlements?
• We don’t want individuals to enter into an
arrangement which would produce a negative
cooperative surplus.
Rules of Engagement
• Women were previously entitled to damages
under breach of promise
• Heart balm statutes were enacted in the 1950s.
They abolished breach of promise as a cause of
action.
• Current emphasis is on engagement rings,
presents and lost wedding expenses.
• Is the gift of the ring conditioned on the
marriage occurring?
– State courts around the nation that have considered
the ring issue have reached differing conclusions.
Return of the Engagement Ring
• Is the ring a conditional gift?
• Is it conditioned on the acceptance of
the proposal or the actual marriage?
• Should fault play a role in deciding
who gets the ring?
• Engagement Rings - "A gift or a
contract? YouTube
Ohio Law – Engagement Ring
According to Ohio law, engagement rings are considered
to be conditional gifts which would be recoverable by
the donor if the marriage does not take place,
regardless of which party is at fault for ending the
engagement. The policy behind this decision is to
prevent courts from having to engage in a factual
determination of who is at fault. Thus, under Ohio law,
it is clear that the modern trend is to find that a gift
given in contemplation of marriage remains property
of the donor until the condition of marriage is fulfilled.
Source: Lexis-Nexus
DeFina v. Scott (NY 2003)
•
The groom-to-be bought an expensive
engagement ring - from Tiffany's - for his
fiancée and proposed on Valentine’s Day
The couple agreed that the bride-to-be would
pay for the wedding-related expenses ($16,000)
and that, prior to the marriage, the groom-to-be
would provide her with a one-half interest in
his condo.
The engagement was subsequently broken.
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She wanted her wedding expenses reimbursed and the half
interest in the condo
DeFina v. Scott (NY 2003)
• Under NY law the groom gets the ring
• Her wedding expenses were
consideration for interest in condo
• Upon payment of wedding expenses
the groom would get his interest in the
condo back
• The value of unreturned gifts should be
split
Ferraro v. Singh, (PA 1985)
• The couple met through a dating service and
set a marriage date
• The fiancé traveled to India for the ostensible
purpose of having an elaborate wedding suit
made for himself, only to never return to
Pennsylvania for the wedding.
• She then filed a complaint against her fiancé,
seeking reimbursement for expenses made in
anticipation of the couple's wedding
Ferraro v. Singh, (PA 1985)
• The wayward fiancé defended against the action
by alleging that Pennsylvania's Heart Balm Act,
abolished all causes of action for breach of
contract to marry.
• The plaintiff contended that the Heart Balm Act
did not bar recovery of sums expended in
reliance on an unfulfilled promise to marry.
• The court found that the act prohibited any
cause of action arising out of the breach of the
promise to marry.
Ferraro v. Singh, (PA 1985)
“The court distinguished the plaintiff's claim for
reimbursement of wedding expenses from the classic
"engagement ring" line of cases, which hold that regardless
who breaks off an engagement, the donor of the
engagement ring is entitled to the return of the ring. In
those cases, the courts have found that the engagement
ring is a gift conditioned on the promise of marriage, and
the law of conditional gifts creates a cause of action
distinct from breach-of-promise-to-marry suits. The court
found that the plaintiff did not plead the existence of a gift
contract or of any other contract independent of the
contract to marry, so the Heart Balm Act barred her cause
of action for reimbursement.”
Findlaw – The Return of the Ring
Divorce
• Is divorce the termination of a marriage
contract?
• What is the purpose of alimony and
child support?
• Should divorce laws provide optimal
incentives for investment in a marriage?
Sex Change and Spousal Support
• The Moores divorced after 25 years of marriage.
• Mr. Moore was ordered to pay his ex-wife spousal
support that would terminate if she remarried or
cohabitated with another male. After the divorce, the
ex-Mrs. Moore had a sex change operation and began
cohabitating with a female
• In Moore v. Moore (Ohio 2004), Mr. Moore petitioned
for an end to the spousal support payments. This was
clearly something that was not contemplated at the time
of the initial award. The ex-Mrs. Moore was no longer a
female and he was cohabitating with someone of the
opposite sex. The court rejected the petition for an end
to the spousal payments because the ex-wife’s financial
circumstances had not changed.
Sex Change and Spousal Support
• Is the purpose of spousal support to correct gender
inequities in our society or is it to reinforce investment
in a marriage contract?
• If the purpose of spousal support is the repayment of
investment in a contract that was broken by the other
partner, then gender or switching gender should be
irrelevant.
• If the payments are not independent of the ex-wife’s
financial circumstance, they create a disincentive for
future investment in human capital.
Alienation of Affection
• Interference with the marriage
contract?
• Elizabeth Edwards Threatens
Husband's Ex-Aide With Lawsuit
• Ex-dean to appeal verdict on affair
Promises of employment
• Should a promise of employment be
enforced?
– Is there detrimental reliance?
• Can there be detrimental reliance given
“at-will” employment?
• At-will employment
– Employer can fire an employee for any
reason or no reason as long as it is not
proscribed by social policy
Landmark Employment Cases
• John GROUSE v. GROUP HEALTH
PLAN, INC. (Minnesota, 1981)
• Frank LEONARDI v. CITY OF
HOLLYWOOD (Florida, 1998)
John GROUSE v. GROUP HEALTH
PLAN, INC. (Minnesota, 1981)
• Grouse was employed as a retail pharmacist
• Grouse was offered the position at Group
Health (GH)
• He accepted the job and gave his present
employer two weeks notice
• After receiving Group Health’s offer he had an
alternative offer that he declined
John GROUSE v. GROUP
HEALTH PLAN, INC. (1981)
• GH called back to confirm that Grouse had
resigned
• After offering Grouse the job, GH was
unable to obtain favorable references for
Grouse
• When Grouse called GH to report for work,
he was told that someone else had been
hired
• Does doctrine of promissory estoppel entitle
Grouse to recover damages?
• If so, how should efficient damages be
calculated?
John GROUSE v. GROUP
HEALTH PLAN, INC. (1981)
“Group Health contends that recognition of a cause
of action on these facts would result in the
anomalous rule that an employee who is told not to
report to work the day before he is scheduled to
begin has a remedy while an employee who is
discharged after the first day does not. We cannot
agree since under appropriate circumstances we
believe section 90 would apply even after
employment has begun.”
The remedy granted for breach may be limited as justice
requires.
John GROUSE v. GROUP HEALTH PLAN,
INC. (1981)
• The conclusion we reach does not imply that an employer will
be liable whenever he discharges an employee whose term of
employment is at will. What we do hold is that under the facts
of this case the appellant had a right to assume he would be
given a good faith opportunity to perform his duties to the
satisfaction of respondent once he was on the job. He was not
only denied that opportunity but resigned the position he
already held in reliance on the firm offer which respondent
tendered him. Since, as respondent points out, the prospective
employment might have been terminated at any time, the
measure of damages is not so much what he would have
earned from respondent as what he lost in quitting the job he
held and in declining at least one other offer of employment
elsewhere.
John GROUSE v. GROUP HEALTH
PLAN, INC. (1981)
•Does the decision promote efficiency?
•Does the decision promote overreliance?
•What is the efficient standard for
damages?
Frank LEONARDI v. CITY OF
HOLLYWOOD (1998)
• At-will employment doctrine barred
his claim for lost wages
• Leonardi was offered the position of
assistant city manager
• After quitting his current position he
was informed that the city could not
offer him the job
Frank LEONARDI v. CITY OF
HOLLYWOOD (1998)
• The trial court found that Leonardi relied on
City's promise of employment to his detriment. It
determined that the reasonable amount of his
damages as a result of City's actions was $90,400,
representing his lost wages at his former job from
November 13, 1995, the date his employment
with City was supposed to begin, through the
date of trial.
• Nevertheless, it held that the employment at-will
doctrine barred an award of such damages. It,
thus, denied awarding Leonardi his lost wages,
but did award him $10 as nominal damages
Frank LEONARDI v. CITY OF
HOLLYWOOD (1998)
• Despite this case law, we need not look any further
than § 90 of the Restatement (Second) of Contracts
to conclude that Leonardi's reliance on City's offer
was unreasonable. Had City allowed Leonardi to
begin working, it could have terminated his
employment immediately thereafter, before he
accrued any wages. Similarly, had he not quit his
prior position, his employer also could have
terminated him at will. In either scenario, we do
not believe the doctrine of promissory estoppel
would allow him to recover his lost wages.
Frank LEONARDI v. CITY OF
HOLLYWOOD (1998)
• Should at-will employment bar
recovery for promissory estoppel?
• What are efficient damages?
End