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Contracts • Contract Formation
K#047
Legal Definition
A promise may be enforceable if it is necessary to prevent injustice. This occurs when: (1) the promisor should reasonably expect the promise to induce action or inaction by the promisee; (2) the promisee actually relies on the promise; and (3) injustice can only be avoided by enforcement of the promise.
Plain English Explanation
If you make someone a promise, and it was reasonable to expect them to act upon your promise, and them acting upon your promise causes them to encounter some burden that can only be prevented by you following through with your promise, then you must follow through with your promise.
Hypothetical
Hypo 1: Bob notices that Sam rides his bike every day to work, 10 miles away. Sam is a hard worker, and Bob knows Sam can't afford to purchase a car. Bob, feeling super generous one day, tells Sam, "You are such a hard worker, I want to help you out -- if you go buy a car, I will reimburse you up to $10,000." Sam is brought to tears from Bob's kindness and says, "Thank you! I'll go look right now!" Sam rides his bike to the used car lot and finds a car for $7,000. Sam purchases the car with a credit card and drives over to Bob's house. When he arrives, Bob no longer feels generous and says, "I've changed my mind. Sorry." Result: If you tried to argue that Bob entered into a contract with Sam in which Bob promised to pay for Sam's car if Sam agreed to go buy one, you would be wrong. Bob's promise is completely lacking of consideration and if he had chosen to call Sam up before he bought the car and say, "Never mind, I won't pay you," Sam would have no way to collect from Bob. However, because Sam has already purchased the car, and because Sam only purchased the car because he believed Bob would pay for it, and because it was reasonable for Sam to believe this, then it would be an injustice not to force Bob to fulfill his promise. This is "promissory estoppel."
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