In New York, the doctrine of promissory estoppel, a rule applicable only in the absence of an enforceable contract, has three elements: 1. a clear and unambiguous promise; 2. a reasonable and foreseeable reliance by the party to whom the promise is made, and 3. an injury, in some cases elevated to the requirement of an unconscionable injury sustained by the party asserting the estoppel by reason of its reliance. Promissory estoppel is a narrow doctrine designed to enforce a contract in the interest of justice where some contract formation problem would otherwise prevent enforcement.
Despite extended contract negotiations, a formal contract was never reached between the plaintiff sub-contrator and defendant contractor. Based on defendant's assurances that the product would be paid for, plaintiff manufactured some items. When defendant ended the relationship, plaintiff submitted a bill for the completed items, which defendant refused to pay. Plaintiff sub-contractor brought an action against defendant contractor for breach of contract, quantum meruit, and promissory estoppel. Defendant counterclaimed for breach of contract. The court dismissed plaintiff's claims for breach of contract and quantum meruit. The court found for plaintiff on its promissory estoppel claim and awarded reliance damages and pre-judgment interest.
Is defendant liable pursuant to promissory estoppel?
The court found for plaintiff on the promissory estoppel claim because (1) there were clear and unambiguous representations, promises, inducements, and directions to the plaintiff to proceed. (2) Plaintiff had reasonably and foreseeably relied on these promises when it began to manufacture the product. And (3) plaintiff was injured to the amount it spent on building the item. The court awarded reliance damages for actual costs along with pre-judgment interest.