Promises, it is said, are made to be broken. Absent a valid contract, a broken promise does not typically provide grounds for a lawsuit. However, under certain circumstances, the legal doctrine of detrimental reliance may provide a remedy.
Detrimental reliance occurs when a party is reasonably induced to rely on a promise made by another party. In many states, a detrimental reliance claim is actionable if the reliance itself caused the plaintiff to suffer some detriment, loss, or other harm.
Whether the reliance is reasonable depends on the circumstances. If the defendant is known for making “empty promises”, reliance on their promises will not likely be seen as reasonable.
In Pennsylvania, a cause of action for detrimental reliance is based on promissory estoppel. Detrimental reliance and promissory estoppel claims are treated interchangeably by Pennsylvania courts.
Is this Detrimental Reliance?
An employer promises one of his employees a generous bonus for the employee’s excellent work. Hoping to use that money towards his daughter’s college tuition, the employee speaks with his employer who confirms that the bonus is definitely forthcoming. Based on that assurance, the employer makes a sizable payment on his daughter’s college tuition. If the employer fails to pay the bonus, the employee may have a valid detrimental reliance claim. That is contingent upon several requirements being met.
The Supreme Court of Pennsylvania articulated the necessary elements for a claim of promissory estoppel as requiring:
(1) the promisor made a promise that he should have reasonably expected would induce action or forbearance on the part of the promisee; (2) the promisee actually took action or refrained from taking action in reliance on the promise; and (3) injustice can be avoided only by enforcing the promise.
Damages in a Detrimental Reliance Dispute
In detrimental reliance lawsuits, plaintiffs are generally limited to “reliance” damages, i.e., those losses directly suffered by the plaintiff as a result of their reliance. The damages are designed to restore the injured party to the economic position occupied before the party acted in reasonable reliance on the promise.
If you have a question about detrimental reliance, or another contract law issue, call Comitz Law Firm at 570-829-1111 or email info@comitzlaw.com.