Academic

Jimenez on Empirical Analysis of Promissory Estoppel

By Lawrence Solum

Marco Jimenez (Stetson University College of Law) has posted The Many Faces of Promissory Estoppel: An Empirical Analysis of Promissory Estoppel under the Restatement (Second) of Contracts (UCLA Law Review, Forthcoming) on SSRN. Here is the abstract:

This Article examines over three hundred promissory estoppel cases decided between January 1, 1981, when the Restatement (Second) of Contracts was published, and January 1, 2008, when research for this project began, to explore the manner in which courts conceptualize, decide, and enforce promissory estoppel claims under ¿90 of the Restatement (Second) of Contracts. Specifically, because the drafters of the Restatement (Second) made several important changes to ¿90 of the Restatement (First) with the intent of making promissory estoppel more available, the role of reliance more prominent, and the remedies awarded to successful litigants more flexible, I wanted to test whether these changes had their desired effect on promissory estoppel doctrine as reflected in the case law.

The research presented here can be interpreted to support three major claims. First, these data suggest that promissory estoppel is a much more significant theory of promissory recovery than other commentators have suggested, and seems positioned to continue growing in importance in the coming decades. Second, the data reveal that promissory estoppel cannot be understood exclusively in terms of "promise" or "reliance," as some scholars and judges have suggested. Rather, the data reveal that most judges require the existence of both promise and reliance before allowing a promissory estoppel claim to proceed, although surprisingly few judges require a plaintiff to show that the equitable principle of justice has been satisfied than one might expect. Last, and most significantly, these data reveal that, with respect to remedies, courts tend to treat promissory estoppel actions as traditional breach of contract actions, in that courts generally tend to award the (usually) more generous expectation measure of damages, which is typical for ordinary breach of contracts, over the (usually) less generous reliance measure of damages, which is often awarded where non-contractual obligations have been breached (e.g., tort law).

At this point, the Article then marks a radical departure from the existing treatment of promissory estoppel remedies by scholars and judges alike, and argues that the traditional classification of remedies as either "expectation" or "reliance" damages is potentially misleading for at least three reasons. First, there are some instances in which reliance damages clearly exceed expectation damages. Second, there are cases in which reliance damages and expectation damages are identical. And third, there are instances in which reliance damages are the only damages available to a litigant under any theory of promissory recovery, including contract. Where any of these assumptions hold, it makes little sense to juxtapose "reliance" and "expectation" damages, as though the former were somehow inferior to the latter, because in each of the above-mentioned scenarios, it can readily be seen that a plaintiff awarded reliance damages could not have done any better under any other measure of recovery, including expectation damages.

To be sure, because one really ought to be concerned about the manner in which promissory estoppel damages differ, if they differ at all, from traditional breach of contract damages, it makes more sense to jettison the traditional "expectation" and "reliance" labels in favor of a more functional classificatory scheme by which these damages are reorganized according to whether they are "contractual" or "non-contractual." Under this schema, the former term should be employed whenever a promissory estoppel plaintiff has obtained the highest recovery available under any other theory of promissory recovery, including a traditional breach of contract action, and the latter term should be used wherever the plaintiff has obtained a recovery short of this higher amount. Once the remedies are reclassified in this manner, it becomes clearer than ever before that courts are generally treating promissory estoppel claims as fully contractual causes of action in every meaningful sense of the word.

This last point is significant, not only for the future of promissory estoppel, but for contract law itself. This is because, first, it is usually easier to satisfy the reliance-based elements of promissory estoppel under the Restatement (Second) than it is to prove the existence of a traditional, bargain-based contract. Therefore, as the data will show, a plaintiff usually has a better chance of prevailing in a promissory estoppel action than she does in a traditional, breach of contract claim. This has always been balanced, however, against the fact that the measure of recovery is usually more generous for the breach of traditional, bargain-based contracts that it is for plaintiffs recovering under a theory of promissory estoppel. However, the awarding of a more generous remedy for an easier-to-prove cause of action promises (or threatens, depending on one's view) to do for contract law what antibiotics did for viruses: to create a new strain of super-contracts that can not only more easily invade their hosts (via the promissory estoppel cause of action), but react more violently once inside (by extracting from defendants a higher quantum of recovery) while remaining immune to the host's traditional defenses (here, traditional contract defenses, such as the statute of frauds and the parol evidence rule). Needless to say, this trend, should in continue, will likely revolutionize contracts.

Full post as published by Legal Theory Blog on April 09, 2009 (boomark / email).