First Semester: Ricketts v. Scothorn (1898)

Parties:

Π= Katie Scothorn, decedent's granddaughter

Δ= Andrew D. Ricketts, executor of John C. Ricketts' estate

X= grandfather (JC Ricketts)

Procedural history:

-Π won in district court on an action based on enforcing a promise made by her grandfather in a promissory note

Facts:

-Promissory note, May 1, 1891, read: "I promise to pay Π on demand $2,000 at 6 % annum" and signed

-Decedent is Π's grandfather, gives Π the note at her place of work

-There is a witness who confirms receipt and acknowledgment of note by both grandfather and Π. When he gave the note, grandfather said: "None of my grandchildren work. You should not either."

-After receipt of the note, Π quit her job and collected payments as set up by grandfather for one year

-Π's mother witnessed event at store and also had a conversation after the event with her father (the decedent) who at no point repudiate what happened

-One year later, with permission and help of grandfather, Π gets a job as a bookkeeper for other firm

-June 8, 1894: grandfather dies

-He had paid 1 year interest on note but failed to pay balance

-Still wanted to, however. Told mother of Π that if he could sell his farm in Ohio, he would pay the note out of the proceeds. At no time did he repudiate his obligation

Issue on Appeal:

-Is the promise the decedent made to Π enforceable, as in, was the promise supported consideration? (Or was it enforceable on some alternative basis?)

Π's arguments on appeal (2):

1. Bargained-for exchange

2. Reliance/Promissory Estoppel: Note was given to me to induce me to quit my job, and I did quit in reliance on the note and the annual interest for my support

Rule:

-Usually, gratuitous promises are not enforceable even if there's a promissory note BUT lack of consideration is not fatal to the enforceability of a promise. When money is promised to charities, colleges, etc. where the donee (the charity) has spent the money or assumed liability on the faith of the promise, it can be enforceable…. The idea of the receiving party getting utterly screwed constitutes a valuable and sufficient consideration.

"Doctorine of Estoppel"

Analysis:

First argument:

-Π did not give any consideration to the promise made to her by her grandfather. It was gratuitous. There was no quid pro quo.

-Her abandonment of her job was voluntary, so no consideration flowing back from Π

Second argument:

-However, it would be unjust to cease payments to Π

-It was decedent's intent to alter Π's position for the worst

Elements of cause of action for promissory estoppel for this case:

A promise: X promised to give Π $$ annually
The prormisor reasonably expects to induce action or forbearance by promissee in response to the promise: X expected Π would quit her job and rely on his $$
If promisee actually does that action or forbearance: Π did indeed quit her job
Is enforaceable if injustice can be avoided only by enforcement of the promise: Yes. "Grossly inequitable"

Conclusion:

-Affirmed on the reliance theory.

Notes & Questions:

1. What X could have done to ensure it would be enforced on the theory of bargained-for exchange rather than on the theory of reliance?

-"I promise to pay Π on demand, $2,000 to be at 6% per annum if she quits her job as a bookkeeper at Mayer Bros. (signed)"

Pasted from <file:///C:\Documents%20and%20Settings\Tecla%20Markosky\My%20Documents\LS%20Contracts%20I\Ricketts%20v%20Scothorn%20reliance%20as%20a%20basis%20of%20enforcement.doc>

R2C sect. 90

Cohen v. Cowles Media Group

Minnesota, 1992

Parties:

Π is Dan Cohen, works for ad agency who has gubernatorial candidate as a client

Δ is Cowles Media Group (who presumably owns newspapers Minneapolis Star and the Pioneer Press Dispatch)

PH:

-en banc (full bench trial)

-Π sues for BOC for reporters not keeping their promises to keep his identity as a source confidential

-Trial court jury awarded Π $200,000 in compensatory damages

-Goes to Supreme Ct of Minnesota

_Initial decision of this court: Reversed (for the Δ)

-Then goes to US Supreme Ct b/c it granted certeriori

Sends issue back down on remand

Facts:

-Π leaks juicy info to press on condition of confidentiality as to his identity

Reporters promised to keep the secret

-Reporter's editors overruled and published Π's name

-Π gets fired from job

Issue:

Was the promise made between the parties valid and enforceable? If not a K then under some other theory?

Analysis of MN S. Ct:

1. Though Δ might have ethical and moral obligations to keep its sources confidential, the parties involved were not thinking in terms of a legal K.

2. Allowing Π to collect under doctrine of promissory estoppel would infringe Δ's First Amendment rights

Analysis of US Supreme Ct:

The First Amendment is not offended by use of promissory estoppel to enforce confidentiality agreements because it has only "incidental effects" on news gathering and reporting.

Conclusion by S. Ct: Remanded to the S. Ct of Minnesota

Rule: R2C § 90(1) promissory estoppel

Δ's argument on appealremand: It is unjust to punish Δs (newspapers) for publishing the whole truth

Π's argument on appealremand: It is unjust for law to countenance (formal and explicit approval) the breaking of a promise, particularly of this type

Both parties feel like they would be the victim of injustice if the other party wins.

Analysis:

The MN SCt was persuaded by Π's argument because it was a promise the promisor could reasonably expect Cohen to rely on…It was a long-standing journalistic tradition.… It's not enough for there to be injustice. It has to be a situation where the promisor can reasonably expect the promisee to rely on and then there has to reliance upon that promise.

Analysis:

-It is significant in this case that the Δs themselves recognize importance of keeping promises of confidentiality.

-Reporters who made promise agree with Π that promise should have absolutely been kept

-Reporters acted in good faith… It was their editors who reneged which had never happened before.

-It came out that Π was treated differently because the papers didn't like him personally

-The test for whether to apply the doctrine of promissory estoppel is not whether the promise should be enforced to do justice but whether enforcement would be required to prevent injustice, which is the easier out of the two to recognize.

-Neither side in this case holds a higher moral ground but we conclude that the resultant harm to Π requires a remedy here to avoid an injustice.

-The dirt Cohen dished was that the dirt he dished was sufficient consideration for this promise. (When dealing with a case, first line of attack: go for bargain theory [gold std]. Second, go for reliance theory.)

Conclusion:

Δs are liable to Π for their broken promises

Note 2: Ypsilanti v. General Motors (1992)

The mention of a 'request' in Δ's speech refers to Δ's application for tax break

Facts:

-Π created an industrial dev. dist. For GM plant and gives Δ a series of tax breaks

-In 1988, Δ applied for an abatement on capital expenditures of $75M

Π's argument:

-Terms of granted application

Δ's argument:

-Satisfaction clause? (weak)

-Conditional promise based on expectations of external factors like the market

-Consideration for a promise…

-We didn't benefit from tax breaks

-Instrumental ends: Why are they interfering with business? Businesses need to be able to make rational decisions for themselves. Risk was always present.

Analysis:

-No bargain. Illusory promise.

Conclusion:

-The fact that a manufacturer uses hyperbole and puffery in seeking an advantage or concession does not necess. create a promise.

-GM's statements were "nothing more than the kind of hyperbole that a corp. would use to obtain the tax abatement benefits… offered by the township." They were not a promise

-Even if the finding of a promise could be sustained reliance on the promise would not have been reasonable. The standard is "reasonableness" but it's absent in this promise.

**Illusory promises have only to do with consideration. It does not relate to theory of promissory estoppel.

D & G Stout v. Bacardi Imports

US Court of Appeals 7th Circuit, 1991

Parties:

Π= General Liquors Inc. (now D & G)

Δ=Bacardi, one of Π's former suppliers

Facts:

-Π is a liquor distributor operating in a turbulent market

-Two of its major suppliers jumped ship early 1987 and caused Π to decide whether to sell out at best possible price or continue operating one smaller scale

-Π begins negotiating w/ another Indiana distributor to sell out

-Δ knows about negotiation to sell and promises Π it would continue their business relationship

No "end term" is mentioned

-Based on this promise plus one other major account, Π turns down offer to sell out

-Π checks in repeatedly to ensure promise is ON

-Same day, Δ turns down its offer

-One week later Δ withdrew its account

-As a result, Π loses its only other major account. Its employees also start bailing out.

-Π could not continue to operate so Π had to sell out at $550,000 LESS than first offer (to same buyer)

Issue:

Can Π recover from Δ on a theory of promissory estoppel? (Whether Π has alleged any injury for which Indiana law of promissory estoppel provides redress)

PH:

-Π brings suit under diversity jurisdiction against Δ under promissory estoppel

-Lower ct: summary judgment is granted in favor of Δ, holding that promises Π alleged were not the type upon which one may rely under Indiana law.

-Π appeals

Issue on Appeal:

-Whether Π is barred as a matter of law from recovering under reliance theory?

Δ's argument on appeal: Lower ct's legal analysis of Indiana law

Rules:

-R2C §90(1) for promissory estoppel

-In Indiana, at-will employees cannot sue for lost wages on either K nor promissory estoppel theories because the promise of a job brings no determinable period of employment or corresponding amount of wages.

However, certain damages may be recovered if an employer breaks a promise of employment even if employment is to be terminable at will. An example would be hiring someone for an at-will job, requiring that they move across the country (and dish out a lot of $$) and then not keeping the promise.

So, moving expenses can be recovered under reliance theory but lost future wages cannot.

Analyses:

Lower court's analysis:

-Relationship b/n the parties remained terminable at will, therefore the promise is not legally enforceable (not one that Π may rely upon) No promissory estoppel because it was a terminable (at-will) relationship between the parties. (Elements of prom. estoppel analysis: It was unreasonable for Π to rely on the promise b/c Δ could walk at any time)

Upper court sees, given the context of the promise, the agreement was for a term, that Δ would stay on for at least until the rush towards consolidation had passed.

But not at issue. This court does not want to question lower court's factual analysis.

With the above laws governing at-will employment losses, there are some exceptions where a Π can recover something. Here, the question is whether the damages are more like lost wages or like moving expenses?

-Moving expenses represent an out-of-pocket loss… It's the difference between a loss of expectation and the loss of something that was already in hand. This isn't precise, but it's general. -In Indiana, the line is drawn between expectation and reliance damages.

Expectation: not a COA for prom. Estoppel

Reliance: is a COA

-Here, Π had a reliance interest in Δ's promise based on facts

What Π wants is the difference b/n the original selling price and the offer now. (Determinate loss that Π incurred b/c of reliance on Δ's promise.)… These represent a compensable reliance injury.

More like a claim for moving expenses than lost future wages

Conclusion:

-Reversed. Π is not barred as a matter of law from recovering on a reliance theory the amount by which its business was devalued.

Pasted from <file:///C:\Documents%20and%20Settings\Tecla%20Markosky\My%20Documents\LS%20Contracts%20I\Reliance%20as%20a%20Basis%20of%20Enforcement%20contd.doc>

Notes

Reliance as a basis of enforcement

-way to recover damages not under K theory* (check on this again)

Found in Restatement Second §90:

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

Four categories of situations where reliance as a basis for consideration works:

Promissory estoppel: equitable doctorine declaring that a promise which the promisor should reasonably expect will induce an action or forbearance on the part of the promisee or a 3rd person which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.

This term appears to come from the French
estoupail or a variation, which meant "stopper plug", referring to placing a halt on the imbalance of the situation. The term is related to the verb "estop" which comes from the Old French term estopper, meaning "stop up, impede".

Detriment? Does there have to be detriment for there to be reliance?

Damages

-Bargained-for: expectation damages (gold std. for damages in Ks)

-Promissory estoppel: reliance damages…. Reliance damages generally reimburse the promisee for loss caused by reliance on the promise. The aim is to return the promisee to his/her position before the promise was made (as if promise never happened). See R2C §344(b)

Cases discussed in class:

What did Πs lose by relying on promises?

What did Ms. Feinberg lose? Regular wages from her job with Δ
What did Katie Scothorn lose? Her wages from the time she quit her job to the time she got her new job.
What did Π in Kirksey lose by relying on her brother in law's promise?

Pasted from <file:///C:\Documents%20and%20Settings\Tecla%20Markosky\My%20Documents\LS%20Contracts%20I\Reliance%20as%20a%20basis%20of%20enforcement.doc>

Promissory estoppel brief

Feinberg v. Pfeiffer Co. (part II)—see earlier brief

St. Louis Ct. of Appeals, MO 1959

322 SW 2d 163

-Lower ct- Action on alleged contract brought by P against D to pay specified amount of $ upon her retirement from D's employ. Bench trial. DC rendered judgment for P, D is now appealing.

Facts:

-P worked for D and claims D agreed to pay her $200/mo. for life upon retirement

-Board of Directors of D's company met 12/27/47 and adopted a resolution upping P's salary by $50 and allowing her to retire whenever she wants with a set retirement pay of $200/mo. for life. It was understood that they weren't pushing her out the door but decided to do this for P's sense of security

-P found out through messengers of D

-P was surprised but said she would have cont'd working there regardless of the news

-No contract, oral or written, as to length of P's employment. She was free to quit or be fired at any time.