Promissory estoppel is a term used in contract law that applies where, although there may not otherwise be a enforceable contract, because one party has relied on the promise of the other, it would be unfair not to enforce the agreement. Promissory estoppel is used to enforce charitable gift pledges where the charity relies on them.
It arises from a promise which the promisor should reasonably expect to induce action or forebearance of a definite and substantial character on the part of the promisee and which does induce such action or forebearance in binding if injustice can be avoided only by enforcement of the promise.
The following is an explanation of promissory estoppel from the Restatement of Contracts 2d:
RESTATEMENT (SECOND) OF CONTRACTS (1981) § 90. Promise Reasonably Inducing Action or Forbearance
- 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.
- A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance.
In courts that follow the above Restatement, a promise to give money to a charity is a classic example of promissory estoppel which will be enforced by a court when the charity makes expenditures or incurs obligations in reliance upon the promise. The promisor is estopped from denying the promise or raising technical legal defenses, such as no consideration or statute of frauds.