Detrimental Reliance Law and Legal Definition

Detrimental reliance is a term commonly used to force another to perform their obligations under a contract, using the theory of promissory estoppel. Promissory estoppel may apply when the following elements are proven:

  • A promise was made
  • Relying on the promise was reasonable or foreseeable
  • There was actual and reasonable reliance on the promise
  • The reliance was detrimental
  • Injustice can only be prevented by enforcing the promise

Detrimental reliance must be shown to involve reliance that is reasonable, which is a determination made on an individual case-by-case basis, taking all factors into consideration. Detrimental means that some type of harm is suffered.

The following is an example of a state statute dealing with detrimental reliance:

Detrimental reliance by taxpayer, effect of.

32.381. In the event the department of revenue enters into an agreement with a taxpayer and said agreement exceeds the department's statutory authority and the taxpayer has relied to his detriment, the department shall be permitted to honor said contract. This section shall only apply to cases where the department has collected sales tax that was not owed by the taxpayer.