Detrimental reliance is a term that is often used to force a party to perform their obligations under a contract, under the theory of promissory estoppel. In a detrimental reliance claim, it must be shown that the reliance was reasonable.
This is done on a case-by-case basis that takes all factors into consideration. Detrimental means that there was some type of harm suffered.
In these types of cases, the remedy often involves a monetary damages award to compensate the party that relied and suffered economic harm as a result.
What Are Some Examples of Detrimental Reliance Claims?
Detrimental reliance examples may arise in many different areas of law, for example:
- Employment law;
- Contract law; and
- Child support law.
Detrimental reliance issues may arise in employment law cases. For example, a court may enforce an employer’s promise to pay an employee a bonus even if a contract is not proven under the theory of detrimental reliance.
It is, however, important to note that a court will reserve the theory of detrimental reliance only for those cases that present the possibility of an injustice being done. In some states, courts recognize a claim of detrimental reliance and in other states, courts do not.
An individual who is seeking to use the theory of detrimental reliance in their case should consult with an experienced contract lawyer to find out the status of detrimental reliance in the state where they work. This theory may be available to an employee who relies on the promise of their employer to pay them a bonus and is detrimentally affected by that reliance, suffering an injury or loss.
For example, suppose that employer A promises employee B a bonus for their past work and contributions. B, hoping to use that money as a downpayment for a home, speaks with A to confirm the bonus and explain the need for the money.
Although B is concerned about the issue, A reassures them that the bonus will be paid. Based on that assurance, B moves forward with the purchase of the home.
In this example, although it is unlikely that a contract was formed, B may still be able to claim detrimental reliance if A fails to pay the bonus. Detrimental reliance issues may also arise in the area of contract law.
What Are Some Other Considerations?
In cases where the Statute of Frauds writing requirement applies, the parties are required to put their contract in a written document. If they fail to satisfy this writing requirement, it may result in negative consequences for all parties involved.
If the agreement is not in writing when required, it may not be enforceable in a court of law. In many cases, the court will determine that a contract does not exist.
This will mean that the court cannot resolve any issues or disputes. If there is a disagreement between the parties, they may not be able to use the legal system to solve their problems.
This can be very bad for a party, especially if, for example, they are owed money. In certain states, an individual may be able to ask the court to enforce an oral contract even though it should have been in writing under the Statute of Frauds rules.
Courts will only do this in limited and specific situations, including cases of detrimental reliance. Child support is another area of law where detrimental reliance clams may arise.
Laws differ by state regarding the step-parent and step-child financial relationship. Typically, an individual would not be held responsible for the child support of their new step-children, unless they have legally adopted them.
It is important to note, however, that even if an individual does not legally adopt their step-children, they may still be liable under the theory of detrimental reliance. If an individual’s wife and children have come to rely on them for support and help to the point where they would find themselves in a worse position if they did not accept the individual’s help, then the individual cannot stop their support.
For example, suppose a wife was offered a job which would pay well and offer her benefits that she needed. Suppose that, due to an understanding that the husband would support her and her children, she declined that job and now has no way to support herself.
In this type of situation, the husband will most likely be barred from stopping child support, even if it involves step-children, as the situation would likely fall under the doctrine of detrimental reliance.
Can Reliance on a Promise Become a Contract?
When there is not a binding contract in place, but one party makes a promise to the other, there may be rare occasions where the promise can be enforced under detrimental reliance contract law. This promissory estoppel theory is rarely accepted by a court.
In addition, it will only apply in cases where enforcing the promises is necessary to avoid an injustice.
What Do I Need to Prove for a Promise to Become a Contract?
As noted above, there are several elements of detrimental reliance that a plaintiff must show in order to prevail in their claim. The detrimental reliance elements include:
- A promise was made;
- Relying on the promise was reasonable or foreseeable;
- There was an actual and reasonable reliance on the promise;
- The reliance was detrimental; and
- If the promise is not enforced, injustice will result.
When Is a Promise Not a Contract?
A promise is different from a contract. A promise is made by an individual without having the other party give them anything in return.
For example, when an individual promises to give another individual a car for their 30th birthday, that promise does not constitute a breach of contract claim because nothing is given by the other individual.
In a binding contract, both parties to the contract incur a legal obligation. Each party’s legal obligation is given in exchange for the other party’s promise to incur a legal obligation.
When Is it Reasonable to Rely on a Promise?
It is reasonable for an individual to rely on a promise when the circumstances surrounding the promise suggest that the individual who is making the promise expects the other party to rely on their promise. For example, it is not reasonable to rely on an individual’s promise to give 1 million dollars if the other party is well aware that they do not have that much money.
What Constitutes Reasonable Reliance?
Even in situations where it is reasonable to rely on another individual’s promise, the reliance itself must also be reasonable. For example, if an individual promises to provide a certain amount of money, it would not be reasonable, in reliance on that promise, for an individual to go spend much more than the amount promised.
Do I Need a Lawyer?
Proving a detrimental reliance claim may be difficult. In addition the laws in each state may be different regarding these issues.
If you believe you have suffered a loss due to detrimental reliance, it is important to consult with a contract lawyer as soon as possible. Your lawyer can review your situation and determine whether you may be able to enforce a promise that was made to you in a court of law.
