PROMISSORY ESTOPPEL DEFINITION BASIC INFORMATION AND TUTORIALS

WHAT IS PROMISSORY ESTOPPEL?

Promissory estoppel
A doctrine in which a court may enforce a promise made by the defendant even when there is no contract, if the defendant knew that the plaintiff was likely to rely on the promise, the plaintiff did in fact rely, and enforcement of it is the only way to avoid injustice.

A fierce fire swept through Dana and Derek Andreason’s house in Utah, seriously damaging it. The good news was that agents for Aetna Casualty promptly visited the Andreasons and helped them through the crisis.

The agents reassured the couple that all the damage was covered by their insurance, instructed them on which things to throw out and replace, and helped them choose materials for repairing other items. The bad news was that the agents were wrong: the Andreasons’ policy had expired six weeks before the fire.

When Derek Andreason presented a bill for $41,957 worth of meticulously itemized work that he had done under the agents’ supervision, Aetna refused to pay.

The Andreasons sued—but not for breach of contract, because the insurance agreement had expired. They sued Aetna under the legal theory of promissory estoppel:

Even when there is no contract, a plaintiff may use promissory estoppel to enforce the defendant’s promise if he can show that:

• Th e defendant made a promise knowing that the plaintiff would likely rely on it;
• Th e plaintiff did rely on the promise; and
• Th e only way to avoid injustice is to enforce the promise.

Aetna made a promise to the Andreasons, namely, its assurance that all the damage was covered by insurance. The company knew that the Andreasons would rely on that promise, which they did by ripping up a floor that might have been salvaged, throwing out some furniture, and buying materials to repair
the house.

Is enforcing the promise the only way to avoid injustice? Yes, ruled the Utah Court of Appeals.1 Th e Andreasons’ conduct was reasonable, based on what the Aetna agent said.

Under promissory estoppel, the Andreasons received virtually the same amount they would have obtained had the insurance contract been valid.