Promissory Estoppel: Elements, Section 90, Cases and Exam Tips

In this article

Why the doctrine exists
The rule: Restatement (Second) of Contracts § 90
The elements of promissory estoppel
Worked examples
Example 1: the withdrawn job offer
Example 2: the casual promise that fails
The leading cases
Promissory estoppel vs. consideration
How it shows up on the exam
A short IRAC outline
How England and India treat it
Related reading
Sources

Promissory estoppel is a doctrine that lets a court enforce a promise that has no consideration behind it. It applies when the person making the promise should reasonably have expected the other side to rely on it, the other side did rely on it, and the only way to avoid injustice is to enforce the promise, sometimes only to the extent of the loss that reliance caused.

In American law the rule lives in Section 90 of the Restatement (Second) of Contracts. Almost every state applies it (Virginia is a notable exception), and it is a fixture of first-year Contracts and the bar exam. This guide covers the rule, the elements, worked examples, the cases your casebook uses, and how England and India handle the same problem.

Why the doctrine exists

A promise is normally enforceable only if it is part of a bargain: each side gives something in exchange for what the other side gives. That exchange is consideration. A promise to make a gift has none, so the classic rule says it cannot be enforced.

That rule produces ugly results when someone changes their life because of a promise. In Ricketts v. Scothorn (Neb. 1898), a grandfather handed his granddaughter Katie a $2,000 note so that she would not have to work, and she quit her job as a bookkeeper. When his executor refused to pay, the estate argued there was no consideration. The Nebraska Supreme Court held that, having "intentionally influenced the plaintiff to alter her position for the worse on the faith of the note being paid when due, it would be grossly inequitable" to let the estate resist payment. The court called it an equitable estoppel. Later, the scholar Samuel Williston and the courts gave the idea its modern name.

The rule: Restatement (Second) of Contracts § 90

The current version reads:

(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.

The first Restatement (1932) was stricter. It required reliance "of a definite and substantial character" and said nothing about limiting the remedy. As the Hawaii Supreme Court explained in Ravelo v. County of Hawaii (1983), the revision adopted in 1979 (and published in 1981) dropped the "definite and substantial" requirement, added third persons who rely on the promise, allowed partial enforcement, and added subsection (2). Older cases, such as Drennan v. Star Paving (1958), quote the first version, so watch which one a case is applying.

The elements of promissory estoppel

Section 90 is usually broken into three or four elements. This guide uses four:

A promise. A real commitment, not a statement of present intention or a prediction. "I'll probably hire you" is weak; "You start on January 2" is strong.
Reasonable foreseeability of reliance. The promisor should reasonably have expected the promise to cause action or forbearance by the promisee or a third person. The test is objective: what a reasonable person in the promisor's position would expect, not what they privately intended.
Actual reliance. The promise did in fact cause the promisee to act or hold back, such as quitting a job, selling property, moving, or turning down another offer. Reliance must also be reasonable; a promisee who knew or should have known the promise was a mistake cannot rely on it.
Injustice unless the promise is enforced. Comment b to § 90 points to factors such as how substantial the reliance was, how foreseeable it was, whether other remedies (such as restitution) are enough, how formally the promise was made, and whether the promisor was unjustly enriched. As Hoffman v. Red Owl put it, this element involves a policy decision and an element of discretion.

Then comes the remedy question. Section 90 says the remedy "may be limited as justice requires." A court can award the full value of the promise (expectation damages) or only what the promisee lost by relying on it (reliance damages).

Worked examples

Example 1: the withdrawn job offer

Dana works as a nurse in Ohio. A hospital in Arizona sends her a written offer: start on March 1 at $92,000 a year. The offer letter says the employment is at will. Dana resigns, breaks her lease, and pays $6,500 to move. Her old hospital fills her position. On February 25 the hospital withdraws the offer because of a budget freeze.

Promise: yes, a definite offer with a start date and salary.
Foreseeable reliance: yes. Any employer knows an out-of-state hire will quit her current job and move.
Actual, reasonable reliance: yes. She resigned and moved because of the offer.
Injustice: likely yes. She cannot get her old job back.

Courts split on the at-will clause. In many states, including Hawaii (Ravelo) and Minnesota (Grouse v. Group Health Plan, 306 N.W.2d 114 (Minn. 1981)), it limits the remedy rather than defeating the claim: because the hospital could have fired her on her first day, the court awards reliance damages, such as moving costs and wages lost from the job she gave up, not a year's salary. Some courts go further and hold that relying on an at-will offer is unreasonable, which defeats the claim. This is close to the facts of Ravelo, where a police recruit and his wife resigned their jobs after the County of Hawaii accepted his application, only for the County to withdraw a week later. The Hawaii Supreme Court held the complaint stated a promissory estoppel claim.

Example 2: the casual promise that fails

At a family dinner, Raj tells his nephew Arjun, "If you ever want to open a café, I'll back you." Two years later Arjun signs a commercial lease without telling Raj, then asks for $80,000. Raj says no.

Promise: doubtful. "I'll back you" with no amount, terms or timing reads more like encouragement than a commitment.
Foreseeable reliance: weak. A reasonable person would not expect a nephew to sign a lease two years later on the strength of a dinner remark, without confirming.
Reasonable reliance: weak. Signing the lease without asking Raj first is not reasonable reliance on a vague statement.

Arjun loses. The facts that make a strong claim (a specific promise, reliance the promisor can see coming, a change of position that cannot be undone) are all missing.

The leading cases

Case	Facts in one line	Why it matters
Ricketts v. Scothorn, 57 Neb. 51, 77 N.W. 365 (1898)	Grandfather's $2,000 note so his granddaughter could stop working; she quit her job.	Family gift promise enforced on estoppel grounds. The doctrine's origin story.
Drennan v. Star Paving Co., 51 Cal. 2d 409, 333 P.2d 757 (1958)	Subcontractor bid $7,131.60 for paving; the general contractor used it in a winning bid; the sub then refused and the job cost $10,948.60.	Reliance made the sub's bid irrevocable. Judgment of $3,817 for the general contractor.
Feinberg v. Pfeiffer Co., 322 S.W.2d 163 (Mo. Ct. App. 1959)	A board resolution promised a long-serving employee $200 a month for life on retirement; she retired, and years later the company cut the payment to $100.	Retiring and giving up other work in reliance on a pension promise was enough under § 90.
Hoffman v. Red Owl Stores, Inc., 26 Wis. 2d 683, 133 N.W.2d 267 (1965)	Red Owl promised to set Hoffman up in a store for $18,000. After he sold his grocery on its advice, it raised the figure to $24,100, then by another $2,000, and the Hoffmans sold their bakery building on its assurance that this was the last step.	Promissory estoppel can apply to failed negotiations even where no contract was ever formed. Damages limited to actual loss.
Ravelo v. County of Hawaii, 66 Haw. 194, 658 P.2d 883 (1983)	Police job accepted, then withdrawn after the recruit and his wife resigned.	Applies the revised § 90 and explains how it differs from the 1932 version.

Hoffman is the case students most often get wrong. The court did not hold that Red Owl breached a contract. It held that Red Owl's promises and the Hoffmans' reliance supported a promissory estoppel claim even though the deal was never definite enough to be a contract. On damages it was careful. It upheld the awards for the loss on the bakery sale, the $1,000 paid on a lot, rent and $140 of moving costs, but affirmed the trial court's order for a new trial on the $16,735 awarded for selling the grocery business. For that item, the court said, justice did not require damages that "exceed any actual loss sustained measured by the difference between the sales price and the fair market value."

Promissory estoppel vs. consideration

	Consideration (a contract)	Promissory estoppel
What makes the promise binding	A bargained-for exchange	Foreseeable, actual reliance plus injustice
Does the promisor ask for anything?	Yes, the return promise or performance	No. The reliance does not have to be requested
Usual remedy	Expectation damages (the benefit of the bargain)	Whatever justice requires, often reliance damages
Role of the judge	Apply settled contract rules	Weigh fairness; more discretion

A useful way to think about it: consideration looks at the deal the parties made, while promissory estoppel looks at the harm one party suffered by trusting the other. Courts reach for promissory estoppel when a contract claim fails, typically for lack of consideration or, in some states following Hoffman, because the parties never finished negotiating. If you have a valid contract, use contract law.

How it shows up on the exam

Professors like promissory estoppel because it tests whether you can spot a failed contract and keep going. Common traps:

Stopping at "no consideration." If a promise lacks consideration, that is your cue to argue promissory estoppel in the alternative, not the end of the answer.
Forgetting the remedy. Say which measure of damages the court is likely to give and why. At-will employment, a vague promise, or a promisee who got some benefit all point toward reliance damages.
Treating reliance as automatic. Reliance has to be both foreseeable to the promisor and reasonable for the promisee. Argue both.
Missing subsection (2). Under § 90(2), a charitable pledge can be binding without proof of reliance, though not every state follows that subsection (Maryland, for one, has refused to).
Mixing up the Restatements. "Definite and substantial character" is the 1932 language. Use the Second Restatement unless the question says otherwise.
Construction bids. A subcontractor's bid that the general contractor relies on can become irrevocable under Drennan. This shows up in offer-and-acceptance questions too.

A short IRAC outline

Issue: Is the promise enforceable despite the lack of consideration?
Rule: Restatement (Second) § 90: a promise the promisor should reasonably expect to induce reliance, which does induce reliance, is binding if injustice can be avoided only by enforcement; the remedy may be limited as justice requires.
Application: Go element by element on the facts: the words of the promise, what the promisor knew, what the promisee did and when, and whether the loss can be undone.
Conclusion: State the likely outcome and the likely measure of damages.

How England and India treat it

England uses the same name for a narrower idea. In Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130, a landlord agreed during the war to accept half the ground rent (£1,250 instead of £2,500 a year). Denning J held that the promise bound the landlord only while the flats were not fully let. That condition ended early in 1945, so full rent was payable from then, and the landlord recovered it for the two quarters it had sued for. His view that the landlord could not have recovered the arrears for the earlier years is generally treated as obiter. In Combe v Combe [1951] 2 KB 215, the Court of Appeal held that the doctrine cannot create a new cause of action. The usual summary is that it is "a shield, not a sword": you can use it to defend against a claim, not to sue on a promise. Most American courts impose no such limit.

India went the American way. In Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh, decided on 12 December 1978 and reported at (1979) 2 SCC 409, the Supreme Court held that promissory estoppel can found a cause of action. In that case the promisee had set up a vanaspati factory relying on the State's assurance of a sales-tax exemption. The Court also held that the doctrine binds the Government, subject to limits: it cannot compel the Government to act contrary to law, it does not apply against the exercise of legislative power, and the Government can be released if it proves that an overriding public interest makes it inequitable to hold it to the promise. The Court also said the promisee need not prove detriment in a strict sense. It is enough that the promisee altered their position in reliance on the promise. For Indian contract basics, see our guide to meeting of the minds.