Commercial Lawyer in Philadelphia: Detrimental Reliance

Reliance on Promise to Party’s Detriment is Adequate Consideration Necessary to Form Binding Contract

Embedded in the principles of contract law is the doctrine of promissory estoppel.  Also known as detrimental reliance, promissory estoppel protects a party to a contract who relies upon a false promise from another party.  The basic premise of the doctrine is that when one party of a contract makes a promise that he or she should reasonably expect the other party of the contract to rely upon, and the second party actually does rely upon it to their own detriment, then the promise of the first party will be upheld if no other course to avoid injustice is available. Restatement (Second) of Contracts § 90(1) (1981).  As a part of contract law, the doctrine is subject to a four-year statute of limitations period.

In order for a contract to be formed, there must be an offer, an acceptance (together these are known as mutual assent) and some form of consideration. Consideration in its simplest form is what is given up or received resulting from the agreement in the contract.  According to the doctrine of promissory estoppel, the detriment of relying on the mutual assent is effectively the consideration necessary to form a contract. Travers v. Cameron Cnty. Sch. Dist., 117 Pa. Commw. 606, 544 A.2d 547 (Pa. Commw. 1988).  If two people make an agreement and one of the parties relies upon that agreement and suffers a loss due to the failure of the other party to perform, promissory estoppel may allow the first party to recover damages from the second party.  In Pennsylvania, governmental agencies are not immune to the doctrine of promissory estoppel. Department of Environmental Resources v. Dixon Contracting Co., Inc., 80 Pa. Commw. Ct. 438, 471 A.2d 934 (1984).

For more information, call a commercial lawyer in Philadelphia at Sidkoff, Pincus & Green at 215-574-0600 or contact us online.