Hamer v. Sidway

Court of Appeals of New York

124 N.Y. 538 (1891)

PARKER, J.,

… William E. Story, Sr., was the uncle of William E. Story, 2d; [] at the celebration of the golden wedding of Samuel Story and wife, father and mother of William E. Story, Sr., on the 20th day of March, 1869, in the presence of the family and invited guests, he promised his nephew that if he would refrain from drinking, using tobacco, swearing, and playing cards or billiards for money until he became 21 years of age, he would pay him the sum of $5,000. The nephew assented thereto, and fully performed the conditions inducing the promise. When the nephew arrived at the age of 21 years, and on the 31st day of January, 1875, he wrote to his uncle, informing him that he had performed his part of the agreement, and had thereby become entitled to the sum of $5,000. The uncle received the letter, and a few days later, and on the 6th day of February, he wrote and mailed to his nephew the following letter:

“Buffalo, Feb. 6, 1875. W. E. Story, Jr.—Dear Nephew: Your letter of the 31st ult. came to hand all right, saying that you had lived up to the promise made to me several years ago. I have no doubt but you have, for which you shall have five thousand dollars, as I promised you. I had the money in the bank the day you was twenty-one years old that I intend for you, and you shall have the money certain. Now, Willie, I do not intend to interfere with this money in any was till I think you are capable of taking care of it, and the sooner that time comes the better it will please me. I would hate very much to have you start out in some adventure that you thought all right and lose this money in one year. The first five thousand dollars that I got together cost me a heap of hard work. … Willie, you are twenty-one, and you have many a thing to learn yet. This money you have earned much easier than I did, besides acquiring good habits at the same time, and you are quite welcome to the money. Hope you will make good use of it. I was ten long years getting this together after I was your age. Now, hoping this will be satisfactory, I stop. … Truly yours, W. E. STORY. P. S. You can consider this money on interest.”

The nephew received the letter, and thereafter consented that the money should remain with his uncle in accordance with the terms and conditions of the letter. The uncle died on the 29th day of January, 1887, without having paid over to his nephew any portion of the said $5,000 and interest.

The question which provoked the most discussion by counsel on this appeal, and which lies at the foundation of plaintiff’s asserted right of recovery, is whether by virtue of a contract defendant’s testator, William E. Story, became indebted to his nephew, William E. Story, 2d, on his twenty-first birthday in the sum of $5,000. The trial court found as a fact that “on the 20th day of March, 1869, * * * William E. Story agreed to and with William E. Story, 2d, that if he would refrain from drinking liquor using tobacco, swearing, and playing cards or billiards for money until should become twenty-one years of age, then he, the said William E. Story, would at that time pay him, the said William E. Story, 2d, the sum of $5,000 for such refraining, to which the said William E. Story, 2d, agreed,” and that he “in all things fully performed his part of said agreement.’’ The defendant contends that the contract was without consideration to support it, and therefore invalid. He asserts that the promisee, by refraining from the use of liquor and tobacco, was not harmed, but benefited; that that which he did was best for him to do, independently of his uncle’s promise,—and insists that it follows that, unless the promisor was benefited, the contract was without consideration,—a contention which, if well founded, would seem to leave open for controversy in many cases whether that which the promisee did or omitted to do was in fact of such benefit to him as to leave no consideration to support the enforcement of the promisor’s agreement. Such a rule could not be tolerated, and is without foundation in the law. The exchequer chamber in 1875 defined “consideration” as follows: “A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other.” Courts “will not ask whether the thing which forms the consideration does in fact benefit the promisee or a third party, or is of any substantial value to anyone. It is enough that something is promised, done, forborne, or suffered by the party to whom the promise is made as consideration for the promise made to him.” Anson, Cont. 63. “In general a waiver of any legal right at the request of another party is a sufficient consideration for a promise.” Pars. Cont. *444. … “Consideration’ means not so much that one party is profiting as that the other abandons some legal right in the present, or limits his legal freedom of action in the future, as an inducement for the promise of the first.” [citation omitted]

... Now, applying this rule to the facts before us, the promisee used tobacco, occasionally drank liquor, and he had a legal right to do so. That right he abandoned for a period of years upon the strength of the promise of the testator that for such forbearance he would give him $5,000. We need not speculate on the effort which may have been required to give up the use of those stimulants. It is sufficient that he restricted his lawful freedom of action within certain prescribed limits upon the faith of his uncle’s agreement, and now, having fully performed the conditions imposed, it is of no moment whether such performance actually proved a benefit to the promisor, and the court will not inquire into it; but, were it a proper subject of inquiry, we see nothing in this record that would permit a determination that the uncle was not benefited in a legal sense. …

* * *

Beall v. Beall

Court of Special Appeals of Maryland

45 Md.App. 489 (1980)

MOORE, Judge.

This appeal concerns an alleged option agreement and a suit by Carlton G. Beall for the specific performance thereof. The Circuit Court for Prince George’s County found the agreement unsupported by consideration and dismissed plaintiff’s bill of complaint pursuant to Maryland Rule 535. From that order, he appeals to this Court.

I

In 1968, the plaintiff, Carlton G. Beall, purchased a farm in Prince George’s County from Pearl Beall. At that time, the property was farmed by Pearl’s son, Calvin Beall. The record discloses that Carlton, the plaintiff, and Calvin were second cousins. Calvin was married to Cecelia M. Beall, the defendant herein. Carlton agreed that Calvin could continue to farm the property if he would pay the annual property taxes. Calvin and Cecelia owned and resided on a parcel of about one-half acre that was bordered on three sides by the farm bought by the plaintiff; and it is that parcel that is the subject of this dispute.

On the day that plaintiff contracted to buy Pearl’s farm, he obtained a three-year option to purchase Calvin’s and Cecelia’s parcel for $28,000.00. The option recited a consideration of $100.00 which was paid by check. In 1971, the parties executed a new option, for five years, but on the same terms and reciting an additional $100.00 consideration.

This 1971 option was never exercised by the plaintiff, but prior to its expiration the following language was appended at the bottom of the page:

“As of October 6, 1975, we, Calvin E. Beall and Cecelia M. Beall, agree to continue this option agreement three more years Feb. 1, 1976 to Feb. 1, 1979.

/s/ Calvin E. Beall

/s/ Cecelia M. Beall.”

It is this purported extension that forms the basis for plaintiff’s bill of complaint seeking specific performance of the agreement. Calvin died in August 1977, and Cecelia now holds the fee simple title by right of survivorship. In letters dated May 24, 1978 and September 14, 1978, the plaintiff advised Cecelia that he was electing to exercise the option. He scheduled settlement for October 5, 1978. As the chancellor found:

“It is undisputed in this case that Mr. Carlton Beall did eventually hire attorneys to search the title, set a settlement date, attend the settlement, and was ready, willing and able to perform the contract.”

Cecelia refused to attend settlement, and this suit for specific performance ensued.

At trial, after plaintiff presented his evidence, Cecelia moved to dismiss the bill of complaint. The chancellor granted the motion because she felt that the option agreements were not supported by consideration in that “no benefit . . . flowed to Cecelia Beall.” In addition, as to the 1975 alleged option, the chancellor ruled:

“(T)here is no consideration recited in that extension or purported extension of the original option contract. And the one extension that had occurred in the interim, even then would also fail because there is no consideration stated in the extension. It is clear that consideration must pass for the extension each time, in some form of consideration. None is stated within the written four lines.”

On appeal, the plaintiff contends that the chancellor erred in dismissing the bill of complaint and in excluding certain testimony relative to oral transactions with Calvin, the deceased husband of the defendant.

II

Under Maryland law it is clear that “an option is not a mere offer to sell, which can be withdrawn by the optionor at any time before acceptance, but a binding agreement if supported by consideration.”Blondell v. Turover, 195 Md. 251, 256 (1950). In other words, an option is an agreement to keep an offer open that requires consideration to give it its irrevocable character. Once the option is exercised by the optionee a binding contract is created that may be enforced through a decree commanding specific performance. It is apparent, then, that an option must be supported by consideration in order to be irrevocable for the period provided in the option.

When, however, the consideration allegedly supporting an option fails or is nonexistent, the option is no longer irrevocable but rather it becomes “a mere offer to sell, which can be withdrawn by the optionor at any time before acceptance . . ..” Blondell, supra at 256. The failure of consideration destroys the irrevocability of the option; it nonetheless retains its essential characteristic as an offer to buy or sell for the period stated in the option or until revoked. …

Assuming, arguendo, that the 1975 option was unsupported by consideration, it remained as an offer to sell the parcel for $28,000. The offer was open until February 1, 1979, but it was revocable at any time by action of Calvin and Cecelia Beall. As stated in the case of Holifield v. Veterans' Farm & Home Bd., 218 Miss. 446, 450 (1953): 

“It is well settled that an option is not binding as a contract where there is no consideration, unless it is accepted within the time limit and before the offer is withdrawn. Since there was no consideration paid by the Veterans’ Farm and Home Board and Mauldin for the option, it could have been revoked by the Holifields at any time before the Veterans’ Farm and Home Board and Mauldin notified them that they intended to buy the land; but since the offer was accepted within the time limit and before withdrawal, the contract became binding upon all parties as it was thereafter supported by the consideration of the mutual promises.” (Emphasis added.)

…

The chancellor should, therefore, have determined whether or not there was a valid, unrevoked offer to sell the property in dispute and whether or not there was a proper acceptance of that offer sufficient to create a contract specifically enforceable in equity. These issues of offer and acceptance primarily involve factual determinations that initially must be evaluated by the chancellor. …

Dickinson v. Dodds

2 Ch. Div. 463 (1874)

Decision of Bacon, V.C., reversed.

On Wednesday, the 10th of June, 1874, the Defendant John Dodds signed and delivered to the Plaintiff, George Dickinson, a memorandum, of which the material part was as follows:—

I hereby agree to sell to Mr. George Dickinson the whole of the dwelling-houses, garden ground, stabling, and outbuildings thereto belonging, situate at Croft, belonging to me, for the sum of £800. As witness my hand this tenth day of June, 1874.

£800. (Signed) John Dodds.

P.S.—This offer to be left over until Friday, 9 o’clock, A.M. J. D. (the twelfth), 12th June, 1874.

(Signed) J. Dodds.

The bill alleged that Dodds understood and intended that the Plaintiff should have until Friday 9 a.m. within which to determine whether he would or would not purchase, and that he should absolutely have until that time the refusal of the property at the price of £800, and that the Plaintiff in fact determined to accept the offer on the morning of Thursday, the 11th of June, but did not at once signify his acceptance to Dodds, believing that he had the power to accept it until 9 A.M. on the Friday.

In the afternoon of the Thursday the Plaintiff was informed by a Mr. Berry that Dodds had been offering or agreeing to sell the property to Thomas Allan, the other Defendant. Thereupon the Plaintiff, at about half-past seven in the evening, went to the house of Mrs. Burgess, the mother-in-law of Dodds, where he was then staying, and left with her a formal acceptance in writing of the offer to sell the property. According to the evidence of Mrs. Burgess this document never in fact reached Dodds, she having forgotten to give it to him.

On the following (Friday) morning, at about seven o’clock, Berry, who was acting as agent for Dickinson, found Dodds at the Darlington railway station, and handed to him a duplicate of the acceptance by Dickinson, and explained to Dodds its purport. He replied that it was too late, as he had sold the property. A few minutes later Dickinson himself found Dodds entering a railway carriage, and handed him another duplicate of the notice of acceptance, but Dodds declined to receive it, saying, “You are too late. I have sold the property.”

It appeared that on the day before, Thursday, the 11th of June, Dodds had signed a formal contract for the sale of the property to the Defendant Allan for £800, and had received from him a deposit of £40.

The bill in this suit prayed that the Defendant Dodds might be decreed specifically to perform the contract of the 10th of June, 1874; …

* * *

JAMES, L. J., …

The document, though beginning “I hereby agree to sell,” was nothing but an offer, and was only intended to be an offer, for the Plaintiff himself tells us that he required time to consider whether he would enter into an agreement or not. Unless both parties had then agreed there was no concluded agreement then made; it was in effect and substance only an offer to sell. The Plaintiff, being minded not to complete the bargain at that time, added this memorandum – “This offer to be left over until Friday, 9 o’clock A.M., 12th June, 1874.” That shows it was only an offer. There was no consideration given for the undertaking or promise, to whatever extent it may be considered binding, to keep the property unsold until 9 o’clock on Friday morning; but apparently Dickinson was of opinion, and probably Dodds was of the same opinion, that he (Dodds) was bound by that promise, and could not in any way withdraw from it, or retract it, until 9 o’clock on Friday morning, and this probably explains a good deal of what afterwards took place. But it is clear settled law, on one of the clearest principles of law, that this promise, being a mere nudum pactum, was not binding, and that at any moment before a complete acceptance by Dickinson of the offer, Dodds was as free as Dickinson himself. Well, that being the state of things, it is said that the only mode in which Dodds could assert that freedom was by actually and distinctly saying to Dickinson, “Now I withdraw my offer.” It appears to me that there is neither principle nor authority for the proposition that there must be an express and actual withdrawal of the offer, or what is called a [retraction]. It must, to constitute a contract, appear that the two minds were at one, at the same moment of time, that is, that there was an offer continuing up to the time of the acceptance. If there was not such a continuing offer, then the acceptance comes to nothing. Of course it may well be that the one man is bound in some way or other to let the other man know that his mind with regard to the offer has been changed; but in this case, beyond all question, the Plaintiff knew that Dodds was no longer minded to sell the property to him as plainly and clearly as if Dodds had told him in so many words, “I withdraw the offer.” This is evident from the Plaintiff’s own statements in the bill.

* * *

MELLISH, L.J.:

I am of the same opinion. The first question is, whether this document of the 10th of June, 1874, which was signed by Dodds, was an agreement to sell, or only an offer to sell, the property therein mentioned to Dickinson; and I am clearly of opinion that it was only an offer, although it is in the first part of it, independently of the postscript, worded as an agreement. I apprehend that, until acceptance, so that both parties are bound, even though an instrument is so worded as to express that both parties agree, it is in point of law only an offer, and, until both parties are bound, neither party is bound. … But, if there be no agreement, either verbally or in writing, then, until acceptance, it is in point of law an offer only, although worded as if it were an agreement. But it is hardly necessary to resort to that doctrine in the present case, because the postscript calls it an offer, and says, “This offer to be left over until Friday, 9 o’clock A.M.” Well, then, this being only an offer, the law says – and it is a perfectly clear rule of law – that, although it is said that the offer is to be left open until Friday morning at 9 o’clock, that did not bind Dodds. He was not in point of law bound to hold the offer over until 9 o’clock on Friday morning. * * *

Then Dickinson is informed by Berry that the property has been sold by Dodds to Allan. Berry does not tell us from whom he heard it, but he says that he did hear it, that he knew it, and that he informed Dickinson of it. Now, stopping there, the question which arises is this—If an offer has been made for the sale of property, and before that offer is accepted, the person who has made the offer enters into a binding agreement to sell the property to somebody else, and the person to whom the offer was first made receives notice in some way that the property has been sold to another person, can he after that make a binding contract by the acceptance of the offer? I am of opinion that he cannot. The law may be right or wrong in saying that a person who has given to another a certain time within which to accept an offer is not bound by his promise to give that time; but, if he is not bound by that promise, and may still sell the property to someone else, and if it be the law that, in order to make a contract, the two minds must be in agreement at some one time, that is, at the time of the acceptance, how is it possible that when the person to whom the offer has been made knows that the person who has made the offer has sold the property to someone else, and that, in fact, he has not remained in the same mind to sell it to him, he can be at liberty to accept the offer and thereby make a binding contract? It seems to me that would be simply absurd. … If the rule of law is that a mere offer to sell property, which can be withdrawn at any time, and which is made dependent on the acceptance of the person to whom it is made, is a mere nudum pactum, how is it possible that the person to whom the offer has been made can by acceptance make a binding contract after he knows that the person who has made the offer has sold the property to someone else? … I am clearly of opinion that … once the person to whom the offer was made knows that the property has been sold to someone else, it is too late for him to accept the offer, and on that ground I am clearly of opinion that there was no binding contract for the sale of this property by Dodds to Dickinson, and even if there had been, it seems to me that the sale of the property to Allan was first in point of time. However, it is not necessary to consider, if there had been two binding contracts, which of them would be entitled to priority in equity, because there is no binding contract between Dodds and Dickinson.

Lucht’s Concrete Pumping, Inc. v. Horner

Supreme Court of Colorado, En Banc

255 P.3d 1058 (2011)

Justice EID delivered the Opinion of the Court.

We granted certiorari to determine whether continuing the employment of an existing at-will employee is adequate consideration to support a noncompetition agreement. Petitioner Lucht’s Concrete Pumping seeks to enforce a noncompetition agreement signed by respondent Tracy Horner, a former at-will employee. Because Horner was an existing at-will employee when he signed the agreement, Lucht’s argues that its forbearance from terminating Horner constitutes adequate consideration for the noncompetition agreement.

The court of appeals held that continued employment does not constitute adequate consideration for a noncompetition agreement once an employee has begun working for an employer because the employee is in the same position as he was before he signed the noncompetition agreement.

We granted certiorari and now reverse the court of appeals. We hold that an employer that forbears from terminating an existing at-will employee forbears from exercising a legal right, and that therefore such forbearance constitutes adequate consideration for a noncompetition agreement. We have recognized that continuation of at-will employment is adequate consideration in the context of an employee’s receipt of a benefit, Continental Air Lines, Inc. v. Keenan, 731 P.2d 708, 711 (Colo. 1987), and now apply that reasoning to the context of consideration for a noncompetition agreement.

I.

The case before us arises from an employment dispute between respondent Tracy Horner (“Horner”), an individual, and his former employer, petitioner Lucht’s Concrete Pumping, Inc. (“Lucht’s”). Respondent Everist Materials, LLC (“Everist”), a competitor of Lucht’s and subsequent employer of Horner, is also a party to the case.

Lucht’s is a Colorado corporation in the concrete pumping business with approximately seventy employees. While it is based out of Denver where it does much of its business, Lucht’s began expansion into the Summit County area in 2001.

To implement its expansion, Lucht’s hired Horner as mountain division manager on an at-will basis beginning in 2001. Lucht’s primarily hired Horner as its “key person” with connections to the industry. As such, Horner was solely responsible for establishing and maintaining the relationships in the mountain region upon which Lucht’s relied for business.

On April 15, 2003, Horner was asked to sign, and did sign, a noncompetition agreement. Among other things, the agreement stated that in the event that Horner left his position, he would not “directly or indirectly solicit, induce, recruit or encourage any of [Lucht’s] employees or customers to leave [Lucht’s]” for twelve months following his termination, and he would not divulge any trade secrets or other confidential information to any future employer. Horner was not offered any pay increase, promotion, or additional benefits at the time he signed the agreement.

Horner resigned from Lucht’s on March 12, 2004, and began working for Everist three days later on March 15, 2004. Everist is a supplier of ready-mix concrete and had many of the same customers in the mountain region as Lucht’s. Shortly after Horner started, Everist entered the concrete pumping business in the mountain region, directly competing with Lucht’s, with Horner as its pumping manager.

Lucht’s sued Horner for breach of contract, breach of duty of loyalty, breach of fiduciary duty, and misappropriation of trade value. It also sued Everist for intentional interference with contract, aiding and abetting a breach of duty of loyalty, aiding and abetting a breach of fiduciary duty, and misappropriation of trade value.

The trial court granted summary judgment against Lucht’s on its claims for breach of contract and intentional interference with contract, concluding that the noncompetition agreement was unenforceable due to lack of consideration. Following a bench trial, the trial court issued a judgment that included extensive findings of fact and found in favor of Horner and Everist on the remaining claims.

Lucht’s appealed. As is relevant here, it argued that summary judgment was improperly entered on its breach of contract and interference with contract claims because Horner’s continued employment constituted adequate consideration to support the noncompetition agreement.

The court of appeals concluded that continued employment of an at-will employee cannot, by itself, constitute consideration for a noncompetition agreement if the employee had already begun working for an employer. The court of appeals reasoned that, even though an employer may agree to continue an at-will employee’s employment if the employee agrees to sign the covenant, nothing prevents the employer from discharging the employee at a future date and therefore the employee receives nothing more than what was already promised in the original at-will agreement.

We granted certiorari and now reverse the court of appeals. …

II.

Today we address the validity of a covenant not to compete when an at-will employee signs the agreement after his initial hiring. A covenant not to compete, like any other contract, must be supported by consideration. This court has long held that any benefit to a promisor or any detriment to a promisee at the time of the contract—no matter how slight—constitutes adequate consideration. W. Fed. Sav. & Loan Ass’n of Denver v. Nat’l Homes Corp., 167 Colo. 93, 103 (1968); see also 2 Joseph M. Perillo & Helen H. Bender, Corbin on Contracts § 5.14 at 70 (1995) (concluding that a “peppercorn” is sufficient). Except in extreme circumstances, such as those involving allegations of unconscionability, a court should not judge or attempt to assess the adequacy of the consideration. Therefore, we need only find some consideration, regardless of its relative value, to support a covenant not to compete.

Consideration may take the form of forbearance by one party to refrain from doing something that it is legally entitled to do. [citations omitted]. In the context of employment, an employer has a legal right to terminate an at-will employee at any time because employment at-will is a continuing contract between an employer and an employee that is terminable at the will of either the employer or the employee. Thus, an employer may terminate an at-will employee at any time without incurring any legal liability.

Because an employer may terminate an at-will employee at any time during the employment relationship as a matter of right, its forbearance from terminating that employee is the forbearance of a legal right. As such, we find that such forbearance constitutes adequate consideration to support a noncompetition agreement with an existing at-will employee. In so holding, we join several other jurisdictions that conclude that an employer’s forbearance of the right to terminate an existing at-will employee constitutes adequate consideration to support a noncompetition agreement. [string cite omitted]

We have utilized this same reasoning in the context of an at-will employee’s acceptance of a benefit offered by the employer. In Continental Air Lines, we held that an at-will employee could enforce the termination procedures specified in an employee manual on the theory that the employee’s decision to continue to work constituted “acceptance” of the offer as well as “consideration for those procedures.” 731 P.2d at 711, 712; see also id. at 713 (holding that an at-will employee would have to demonstrate that his willingness to work “provided the requisite consideration”). Accordingly, when the at-will employee continued to work, he not only accepted the employer’s offer of termination procedures, he provided consideration for the exchange to the employer. Stated differently, by continuing to work, the at-will employee decided to forbear from his right to discontinue working. If an at-will employee’s continuation of work constitutes adequate consideration for the acceptance of an employer’s benefit, by the same reasoning, an employer’s forbearance from terminating the at-will employee constitutes adequate consideration for an employee’s acceptance of an employer’s noncompetition agreement. In both cases, consideration is found in the continuation of the at-will relationship.

The court of appeals came to a different conclusion based on the rationale that an employee’s continuation of work is “nothing more than [what] was already promised in the original at-will agreement.” The court of appeals reasoned that, even though an employer may agree to continue an at-will employee’s employment if the employee agrees to sign the noncompetition agreement, nothing prevents the employer from discharging the employee at a future date. Therefore, the court of appeals reasoned, the employee receives nothing more than what was already promised at the beginning of the employment relationship.

There appears to be no question that an employee’s acceptance of an at-will employment arrangement at the time of initial employment is sufficient consideration for a noncompetition agreement. The question becomes whether the result is changed by the fact that the noncompetition agreement is presented to the employee after that initial employment period has ended. We do not believe it is.

At initial employment and during existing employment, both the employer and the employee must decide whether an employment relationship will exist. See Copeco, Inc. v. Caley, 91 Ohio App.3d 474 (1992)  (“As a practical matter every day is a new day for both employer and employee in an at-will relationship.”). For both an initial and an existing at-will employee, the employee and employer have the ability to negotiate. Just as an at-will employee may refuse to accept initial employment if the employer’s conditions are unacceptable, so too may an existing employee leave employment if she does not assent to the terms of a noncompetition agreement. In fact, our case law has made no distinction between the adequacy of consideration made at the initial hiring and consideration made during the relationship. Accordingly, we find no distinction between a decision to agree to a noncompetition agreement offered at the initial hiring period and a decision to agree to such an agreement subsequent to that period.

As applied to the facts of this case, in presenting the noncompetition agreement, Lucht’s was offering to renegotiate the terms of Horner’s employment. Lucht’s had the legal right to discharge Horner; however, it chose not to exercise this right in exchange for Horner’s acceptance of the noncompetition agreement. Horner had the option of either accepting the agreement and continuing his employment, or rejecting the agreement and leaving Lucht’s. By virtue of the nature of at-will employment itself, the presentation of the agreement was an offer to renegotiate the terms of Horner’s at-will employment, which Horner accepted by continuing to work.

Drawing a distinction between covenants not to compete signed on the first day of hire and covenants signed during employment would only induce employers to terminate employees and then rehire them the next day with a covenant not to compete. Therefore, to distinguish between noncompetition agreements signed as a condition of employment and noncompetition agreements signed after employment would create a perverse incentive for employers.

Importantly, we note that all noncompetition agreements must be assessed for reasonableness. And, as with all restrictive covenants, “[w]hat is reasonable depends upon the facts of each case.” For instance, “legitimate consideration for the covenant exists as long as the employer does not act in bad faith by terminating the employee shortly after the employee signs the covenant.” Summits 7, 886 A.2d at 373. To the extent that an employer enters into a noncompetition agreement with an employee with the intention of terminating the employee immediately afterwards, the agreement may fail for lack of consideration. See, e.g., Simko, Inc. v. Graymar Co., 55 Md.App. 561 (1983). (“Were an employer to discharge an employee without cause in an unconscionably short length of time after extracting the employee’s signature to a restrictive covenant through a threat of discharge, there would be a failure of the consideration.”). In this case, because the district court declared the noncompetition agreement invalid due to lack of consideration, no reasonableness assessment has been performed. We therefore remand the case for consideration of whether the noncompetition agreement was reasonable and for further proceedings consistent with this opinion. [editor note: Colorado’s approach to noncompetes has been substantially revised since this opinion was handed down]

III.

For the reasons stated above, we reverse the court of appeals and remand the case for further proceedings consistent with this opinion.

Kirksey v. Kirksey

Supreme Court of Alabama

8 Ala. 131(1845)

ASSUMPSIT by the defendant, against the plaintiff in error. The question is presented in this Court, upon a case agreed, which shows the following facts:

The plaintiff was the wife of defendant's brother, but had for some time been a widow, and had several children. In 1840, the plaintiff resided on public land, under a contract of lease, she had held over, and was comfortably settled, and would have attempted to secure the land she lived on. The defendant resided in Talladega county, some sixty, or seventy miles off. On the 10th October, 1840, he wrote to her the following letter:

“Dear sister Antillico--Much to my mortification, I heard, that brother Henry was dead, and one of his children. I know that your situation is one of grief, and difficulty. You had a bad chance before, but a great deal worse now. I should like to come and see you, but cannot with convenience at present. * * * I do not know whether you have a preference on the place you live on, or not. If you had, I would advise you to obtain your preference, and sell the land and quit the country, as I understand it is very unhealthy, and I know society is very bad. If you will come down and see me, I will let you have a place to raise your family, and I have more open land than I can tend; and on the account of your situation, and that of your family, I feel like I want you and the children to do well.”

Within a month or two after the receipt of this letter, the plaintiff abandoned her possession, without disposing of it, and removed with her family, to the residence of the defendant, who put her in comfortable houses, and gave her land to cultivate for two years, at the end of which time he notified her to remove, and put her in a house, not comfortable, in the woods, which he afterwards required her to leave.

Opinion

ORMOND, J.

The inclination of my mind, is, that the loss and inconvenience, which the plaintiff sustained in breaking up, and moving to the defendant's, a distance of sixty miles, is a sufficient consideration to support the promise, to furnish her with a house, and land to cultivate, until she could raise her family. My brothers, however think, that the promise on the part of the defendant, was a mere gratuity, and that an action will not lie for its breach. The judgment of the Court below must therefore be reversed, pursuant to the agreement of the parties.

Uniform Commercial Code § 2-205. Firms Offers.

An offer by a merchant to buy or sell goods in a signed record which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

OFFICIAL COMMENT

Purposes:

1. This section is intended to modify the former rule which required that “firm offers” be sustained by consideration in order to bind, and to require instead that they must merely be characterized as such and expressed in signed records.

2. The primary purpose of this section is to give effect to the deliberate intention of a merchant to make a current firm offer binding. The deliberation is shown in the case of an individualized document by the merchant’s signature to the offer, and in the case of an offer included on a form supplied by the other party to the transaction by the separate signing of the particular clause which contains the offer. “Signed” here also includes authentication but the reasonableness of the authentication herein allowed must be determined in the light of the purpose of the section. …

Offer/§ 2-205 problem

The DU Bookstore sends an email to all 1L law students stating: “Sale! For the next week: Contracts: Examples and Explanations, only $20!” Three days later, you go to the bookstore and there is a sign posted, stating that all the Contracts E&E books have been sold. The bookstore asserts that it revoked the offer.

Here is the email:

To: Denver Law 1Ls
From: DU Bookstore (bookstore@du.edu)
Re: Sale!!! Contracts E&E
Date: September 1, 2023

Dear Students:

Sale! For the next week: Contracts: Examples and Explanations, only $20!”

Hope to see you soon!

University of Denver Bookstore, Driscoll Commons

bookstore@du.edu

 

(1) You are representing yourself. Make the argument that the email from the bookstore is an offer.

(2) You are still representing yourself. Assuming that that the email constitutes an offer, make the best argument you can that the bookstore may not revoke that offer.

Alaska Packers’ Ass’n v. Domenico

117 F. 99 (9^th Cir. 1902)

ROSS, Circuit Judge.

[This dispute is] based upon a contract alleged to have been entered into between the libelants [ed: this is the term for plaintiffs in a suit brought in admiralty] and the appellant corporation on the 22d day of May, 1900, at Pyramid Harbor, Alaska, by which it is claimed the appellant promised to pay each of the libelants, among other things, the sum of $100 for services rendered and to be rendered. In its answer the respondent denied the execution, on its part, of the contract sued upon, [and] averred that it was without consideration, ….

The evidence shows without conflict that on March 26, 1900, at the city and county of San Francisco, the libelants entered into a written contract with the appellants, whereby they agreed to go from San Francisco to Pyramid Harbor, Alaska, … and to work for the appellant during the fishing season of 1900, at Pyramid Harbor, as sailors and fishermen, agreeing to do “regular ship’s duty, both up and down, discharging and loading; and to do any other work whatsoever when requested to do so by the captain or agent of the Alaska Packers’ Association.” By the terms of this agreement, the appellant was to pay each of the libelants $50 for the season, and two cents for each red salmon in the catching of which he took part.

…The libelants arrived [in Alaska] early in April of the year mentioned, and began to unload the vessel and fit up the cannery. A few days thereafter, to wit, May 19th, they stopped work in a body, and demanded of the company’s superintendent there in charge $100 for services …; stating that unless they were paid this additional wage they would stop work entirely, and return to San Francisco. The evidence showed, and the court below found, that it was impossible for the appellant to get other men to take the places of the libelants, the place being remote, the season short and just opening; so that, … the company’s superintendent … yielded to their demands [and agreed to pay] … the sum of $100 [rather than the originally agreed-upon amounts]. Upon the return of the libelants to San Francisco at the close of the fishing season, they demanded pay in accordance with the terms of the alleged contract of May 22d, when the company denied its validity, and refused to pay other than as provided for by the [original] contracts …

On the trial in the court below, the libelants undertook to show that the fishing nets provided by the respondent were defective, and that it was on that account that they demanded increased wages. On that point, the evidence was substantially conflicting, and the finding of the court was against the libelants the court saying:

“The contention of libelants that the nets provided them were rotten and unserviceable is not sustained by the evidence. The defendants’ interest required that libelants should be provided with every facility necessary to their success as fishermen, for on such success depended the profits defendant would be able to realize that season from its packing plant, and the large capital invested therein. In view of this self-evident fact, it is highly improbable that the defendant gave libelants rotten and unserviceable nets with which to fish. It follows from this finding that libelants were not justified in refusing performance of their original contract.”

* * *

… Assuming that the appellant’s superintendent at Pyramid Harbor was authorized to make the alleged contract of May 22d, and that he executed it on behalf of the appellant, was it supported by a sufficient consideration? From the foregoing statement of the case, it will have been seen that the libelants agreed in writing, for certain stated compensation, to render their services to the appellant in remote waters where the season for conducting fishing operations is extremely short, and in which enterprise the appellant had a large amount of money invested; and, after having entered upon the discharge of their contract, and at a time when it was impossible for the appellant to secure other men in their places, the libelants, without any valid cause, absolutely refused to continue the services they were under contract to perform unless the appellant would consent to pay them more money. Consent to such a demand, under such circumstances, if given, was, in our opinion, without consideration, for the reason that it was based solely upon the libelants’ agreement to render the exact services, and none other, that they were already under contract to render. …

The circumstances of the present case bring it, we think, directly within the sound and just observations of the supreme court of Minnesota in the case of King v. Railway Co., 61 Minn. 482, 63 N.W. 1105:

“No astute reasoning can change the plain fact that the party who refuses to perform, and thereby coerces a promise from the other party to the contract to pay him an increased compensation for doing that which he is legally bound to do, takes an unjustifiable advantage of the necessities of the other party. … There can be no consideration for the promise of the other party, and there is no warrant for inferring that the parties have voluntarily rescinded or modified their contract. The promise cannot be legally enforced, although the other party has completed his contract in reliance upon it.”

In Lingenfelder v. Brewing Co., 103 Mo. 578, 15 S.W. 844, the court, in holding void a contract by which the owner of a building agreed to pay its architect an additional sum because of his refusal to otherwise proceed with the contract, said:

“…That a promise to pay a man for doing that which he is already under contract to do is without consideration is conceded by respondents. The rule has been so long imbedded in the common law and decisions of the highest courts of the various states that nothing but the most cogent reasons ought to shake it. [Citing a long list of authorities.] But it is ‘carrying coals to Newcastle’ to add authorities on a proposition so universally accepted, and so inherently just and right in itself. … * * * What we hold is that, when a party merely does what he has already obligated himself to do, he cannot demand an additional compensation therefor; and although, by taking advantage of the necessities of his adversary, he obtains a promise for more, the law will regard it as nudum pactum, and will not lend its process to aid in the wrong.’

* * *

Angel v. Murray

113 R.I. 482 (1974)

ROBERTS, Chief Justice.

This is a civil action brought by Alfred L. Angel and others against John E. Murray, Jr., Director of Finance of the City of Newport, the city of Newport, and James L. Maher, alleging that Maher had illegally been paid the sum of $20,000 by the Director of Finance and praying that the defendant Maher be ordered to repay the city such sum. The case was heard by a justice of the Superior Court, sitting without a jury, who entered a judgment ordering Maher to repay the sum of $20,000 to the city of Newport. Maher is now before this court prosecuting an appeal.

The record discloses that Maher has provided the city of Newport with a refuse-collection service under a series of five-year contracts beginning in 1946. On March 12, 1964, Maher and the city entered into another such contract for a period of five years commencing on July 1, 1964, and terminating on June 30, 1969. The contract provided, among other things, that Maher would receive $137,000 per year in return for collecting and removing all combustible and noncombustible waste materials generated within the city.

In June of 1967 Maher requested an additional $10,000 per year from the city council because there had been a substantial increase in the cost of collection due to an unexpected and unanticipated increase of 400 new dwelling units. Maher’s testimony, which is uncontradicted, indicates the 1964 contract had been predicated on the fact that since 1946 there had been an average increase of 20 to 25 new dwelling units per year. After a public meeting of the city council where Maher explained in detail the reasons for his request and was questioned by members of the city council, the city council agreed to pay him an additional $10,000 for the year ending on June 30, 1968. Maher made a similar request again in June of 1968 for the same reasons, and the city council again agreed to pay an additional $10,000 for the year ending on June 30, 1969.

The trial justice found that each such $10,000 payment was made in violation of law. His decision, as we understand it, is premised on two independent grounds. … Second, he found that Maher was not entitled to extra compensation because the original contract already required him to collect all refuse generated within the city and, therefore, included the 400 additional units. The trial justice further found that these 400 additional units were within the contemplation of the parties when they entered into the contract. It appears that he based this portion of the decision upon the rule that Maher had a preexisting duty to collect the refuse generated by the 400 additional units, and thus there was no consideration for the two additional payments.

* * *

II.

Having found that the city council had the power to modify the 1964 contract without the written recommendation of the city manager, we are still confronted with the question of whether the additional payments were illegal because they were not supported by consideration.

A

As previously stated, the city council made two $10,000 payments. The first was made in June of 1967 for the year beginning on July 1, 1967, and ending on June 30, 1968. Thus, by the time this action was commenced in October of 1968, the modification was completely executed. That is, the money had been paid by the city council, and Maher had collected all of the refuse. …

B

It is generally held that a modification of a contract is itself a contract, which is unenforceable unless supported by consideration. In Rose v. Daniels, 8 R.I. 381 (1866), this court held that an agreement by a debtor with a creditor to discharge a debt for a sum of money less than the amount due is unenforceable because it was not supported by consideration.

Rose is a perfect example of the preexisting duty rule. Under this rule an agreement modifying a contract is not supported by consideration if one of the parties to the agreement does or promises to do something that he is legally obligated to do or refrains or promises to refrain from doing something he is not legally privileged to do. In Rose there was no consideration for the new agreement because the debtor was already legally obligated to repay the full amount of the debt.

…

The primary purpose of the preexisting duty rule is to prevent what has been referred to as the “hold-up game.” See 1A Corbin, supra. A classic example of the “hold-up game” is found in Alaska Packers Ass’n v. Domenico. There 21 seamen entered into a written contract with Domenico to sail from San Francisco to Pyramid Harbor, Alaska. They were to work as sailors and fishermen out of Pyramid Harbor during the fishing season of 1900. The contract specified that each man would be paid $50 plus two cents for each red salmon he caught. Subsequent to their arrival at Pyramid Harbor, the men stopped work and demanded an additional $50. They threatened to return to San Francisco if Domenico did not agree to their demand. Since it was impossible for Domenico to find other men, he agreed to pay the men an additional $50. After they returned to San Francisco, Domenico refused to pay the men an additional $50. The court found that the subsequent agreement to pay the men an additional $50 was not supported by consideration because the men had a preexisting duty to work on the ship under the original contract, and thus the subsequent agreement was unenforceable.

Another example of the “hold-up game” is found in the area of construction contracts. Frequently, a contractor will refuse to complete work under an unprofitable contract unless he is awarded additional compensation. The courts have generally held that a subsequent agreement to award additional compensation is unenforceable if the contractor is only performing work which would have been required of him under the original contract.

These examples clearly illustrate that the courts will not enforce an agreement that has been procured by coercion or duress and will hold the parties to their original contract regardless of whether it is profitable or unprofitable. However, the courts have been reluctant to apply the preexisting duty rule when a party to a contract encounters unanticipated difficulties and the other party, not influenced by coercion or duress, voluntarily agrees to pay additional compensation for work already required to be performed under the contract. …,

Although the preexisting duty rule has served a useful purpose insofar as it deters parties from using coercion and duress to obtain additional compensation, it has been widely criticized as a general rule of law. With regard to the preexisting duty rule, one legal scholar has stated:

“There has been a growing doubt as to the soundness of this doctrine as a matter of social policy. * * * In certain classes of cases, this doubt has influenced courts to refuse to apply the rule, or to ignore it, in their actual decisions. Like other legal rules, this rule is in process of growth and change, the process being more active here than in most instances. The result of this is that a court should no longer accept this rule as fully established. It should never use it as the major premise of a decision, at least without giving careful thought to the circumstances of the particular case, to the moral deserts of the parties, and to the social feelings and interests that are involved. It is certain that the rule, stated in general and all-inclusive terms, is no longer so well-settled that a court must apply it though the heavens fall.” 1A Corbin, supra.

The modern trend appears to recognize the necessity that courts should enforce agreements modifying contracts when unexpected or unanticipated difficulties arise during the course of the performance of a contract, even though there is no consideration for the modification, as long as the parties agree voluntarily.

Under the Uniform Commercial Code, § 2-209(1), which has been adopted by 49 states, “(a)n agreement modifying a contract (for the sale of goods) needs no consideration to be binding.” Although at first blush this section appears to validate modifications obtained by coercion and duress, the comments to this section indicate that a modification under this section must meet the test of good faith imposed by the Code, and a modification obtained by extortion without a legitimate commercial reason is unenforceable.

The modern trend away from a rigid application of the preexisting duty rule is reflected by § 89D(a) of the American Law Institute’s Restatement Second of the Law of Contracts, which provides: “A promise modifying a duty under a contract not fully performed on either side is binding (a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made * * *.”

We believe that § 89D(a) is the proper rule of law and find it applicable to the facts of this case.  It not only prohibits modifications obtained by coercion, duress, or extortion but also fulfills society’s expectation that agreements entered into voluntarily will be enforced by the courts. Section 89D(a), of course, does not compel a modification of an unprofitable or unfair contract; it only enforces a modification if the parties voluntarily agree and if (1) the promise modifying the original contract was made before the contract was fully performed on either side, (2) the underlying circumstances which prompted the modification were unanticipated by the parties, and (3) the modification is fair and equitable.

The evidence, which is uncontradicted, reveals that in June of 1968 Maher requested the city council to pay him an additional $10,000 for the year beginning on July 1, 1968, and ending on June 30, 1969. This request was made at a public meeting of the city council, where Maher explained in detail his reasons for making the request. Thereafter, the city council voted to authorize the Mayor to sign an amendment to the 1964 contract which provided that Maher would receive an additional $10,000 per year for the duration of the contract. Under such circumstances we have no doubt that the city voluntarily agreed to modify the 1964 contract.

Having determined the voluntariness of this agreement, we turn our attention to the three criteria delineated above. First, the modification was made in June of 1968 at a time when the five-year contract which was made in 1964 had not been fully performed by either party. Second, although the 1964 contract provided that Maher collect all refuse generated within the city, it appears this contract was premised on Maher’s past experience that the number of refuse-generating units would increase at a rate of 20 to 25 per year. Furthermore, the evidence is uncontradicted that the 1967-1968 increase of 400 units “went beyond any previous expectation.” Clearly, the circumstances which prompted the city council to modify the 1964 contract were unanticipated. Third, although the evidence does not indicate what proportion of the total this increase comprised, the evidence does indicate that it was a “substantial” increase. In light of this, we cannot say that the council’s agreement to pay Maher the $10,000 increase was not fair and equitable in the circumstances.

The judgment appealed from is reversed, and the cause is remanded to the Superior Court for entry of judgment for the defendants.

Restatement Second of Contracts § 89: Modification of Executory Contract

A promise modifying a duty under a contract not fully performed on either side is binding

1. if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or

2. to the extent provided by statute; or

3. to the extent that justice requires enforcement in view of material change of position in reliance on the promise.

Uniform Commercial Code § 2-209. Modification, Rescission and Waiver.

(1) An agreement modifying a contract within this Article needs no consideration to be binding.

(2) A signed agreement which excludes modification or rescission except by a signed writing or other signed record cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.

* * *

Purposes of Changes and New Matter:

 * * *

2. Subsection (1) provides that an agreement modifying a sales contract needs no consideration to be binding.

However, modifications made thereunder must meet the test of good faith imposed by this Act. The effective use of bad faith to escape performance on the original contract terms is barred, and the extortion of a “modification” without legitimate commercial reason is ineffective as a violation of the duty of good faith. Nor can a mere technical consideration support a modification made in bad faith.

The test of “good faith” between merchants or as against merchants includes “observance of reasonable commercial standards of fair dealing in the trade” (Section 2-103), and may in some situations require an objectively demonstrable reason for seeking a modification. But such matters as a market shift which makes performance come to involve a loss may provide such a reason even though there is no such unforeseen difficulty as would make out a legal excuse from performance under Sections 2-615 and 2-616.

Harrington v. Taylor

225 N.C. 690 (1945)

PER CURIAM.

The plaintiff in this case sought to recover of the defendant upon a promise made by him under the following peculiar circumstances:

The defendant had assaulted his wife, who took refuge in plaintiff’s house. The next day the defendant gained access to the house and began another assault upon his wife. The defendant’s wife knocked him down with an axe, and was on the point of cutting his head open or decapitating him while he was laying on the floor, and the plaintiff intervened, caught the axe as it was descending, and the blow intended for defendant fell upon her hand, mutilating it badly, but saving defendant’s life.

Subsequently, defendant orally promised to pay the plaintiff her damages; but, after paying a small sum, failed to pay anything more. So, substantially, states the complaint.

The defendant demurred to the complaint as not stating a cause of action, and the demurrer was sustained. Plaintiff appealed.

The question presented is whether there was a consideration recognized by our law as sufficient to support the promise. The Court is of the opinion that, however much the defendant should be impelled by common gratitude to alleviate the plaintiff's misfortune, a humanitarian act of this kind, voluntarily performed, is not such consideration as would entitle her to recover at law.

The judgment sustaining the demurrer is

Affirmed.

Mills v. Wyman

20 Mass. (3 Pick.) 207 (1825)

PARKER C. J.

… This was an action of assumpsit brought to recover a compensation for the board, nursing, &c., of Levi Wyman, son of the defendant, from the 5th to the 20th of February, 1821. The plaintiff then lived at Hartford, in Connecticut; the defendant, at Shrewsbury, in this county. Levi Wyman, at the time when the services were rendered, was about 25 years of age, and had long ceased to be a member of his father's family. He was on his return from a voyage at sea, and being suddenly taken sick at Hartford, and being poor and in distress, was [cared for] by the plaintiff … . On the 24th of February, after all the expenses had been incurred, the defendant wrote a letter to the plaintiff, promising to pay [his] expenses. There was no consideration for this promise, except what grew out of the relation which subsisted between Levi Wyman and the defendant, ….

General rules of law established for the protection and security of honest and fair-minded men, who may inconsiderately make promises without any equivalent, will sometimes screen men of a different character from engagements which they are bound in foro conscientiæ to perform. This is a defect inherent in all human systems of legislation. The rule that a mere verbal promise, without any consideration, cannot be enforced by action, is universal in its application, and cannot be departed from to suit particular cases in which a refusal to perform such a promise may be disgraceful.

The promise declared on in this case appears to have been made without any legal consideration. The kindness and services towards the sick son of the defendant were not bestowed at his request. The son was in no respect under the care of the defendant. He was twenty-five years old, and had long left his father's family. On his return from a foreign country, he fell sick among strangers, and the plaintiff acted the part of the good Samaritan, giving him shelter and comfort until he died. The defendant, his father, on being informed of this event, influenced by a transient feeling of gratitude, promises in writing to pay the plaintiff for the expenses he had incurred. But he has determined to break this promise, and is willing to have his case appear on record as a strong example of particular injustice sometimes necessarily resulting from the operation of general rules.

It is said a moral obligation is a sufficient consideration to support an express promise; and some authorities lay down the rule thus broadly; but upon examination of the cases we are satisfied that the universality of the rule cannot be supported … What a man ought to do, generally he ought to be made to do, whether he promise or refuse. But the law of society has left most of such obligations to the interior forum, as the tribunal of conscience has been aptly called. … Is not a wealthy father under strong moral obligation to advance the interest of an obedient, well disposed son, to furnish him with the means of acquiring and maintaining a becoming rank in life, to rescue him from the horrors of debt incurred by misfortune? Yet the law will uphold him in any degree of parsimony, short of that which would reduce his son to the necessity of seeking public charity. Without doubt there are great interests of society which justify withholding the coercive arm of the law from these duties of imperfect obligation, as they are called; imperfect, not because they are less binding upon the conscience than those which are called perfect, but because the wisdom of the social law does not impose sanctions upon them.

A deliberate promise, in writing, made freely and without any mistake, one which may lead the party to whom it is made into contracts and expenses, cannot be broken without a violation of moral duty. But if there was nothing paid or promised for it, the law, perhaps wisely, leaves the execution of it to the conscience of him who makes it. It is only when the party making the promise gains something, or he to whom it is made loses something, that the law gives the promise validity. And in the case of the promise of the adult to pay the debt of the infant, of the debtor discharged by the statute of limitations or bankruptcy, the principle is preserved by looking back to the origin of the transaction, where an equivalent is to be found. An exact equivalent is not required by the law; for there being a consideration, the parties are left to estimate its value: though here the courts of equity will step in to relieve from gross inadequacy between the consideration and the promise.

Webb v. McGowin

27 Ala.App. 82 (1935)

BRICKEN, Presiding Judge.

This action is in assumpsit. …

A fair statement of the case presenting the questions for decision is set out in appellant’s brief, which we adopt.

“On the 3d day of August, 1925, appellant while in the employ of the W.T. Smith Lumber Company, a corporation, and acting within the scope of his employment, was engaged in clearing the upper floor of mill No. 2 of the company. While so engaged he was in the act of dropping a pine block from the upper floor of the mill to the ground below; this being the usual and ordinary way of clearing the floor, and it being the duty of the plaintiff in the course of his employment to so drop it. The block weighed about 75 pounds.

“As appellant was in the act of dropping the block to the ground below, he was on the edge of the upper floor of the mill. As he started to turn the block loose so that it would drop to the ground, he saw J. Greeley McGowin, testator of the defendants, on the ground below and directly under where the block would have fallen had appellant turned it loose. Had he turned it loose it would have struck McGowin with such force as to have caused him serious bodily harm or death. Appellant could have remained safely on the upper floor of the mill by turning the block loose and allowing it to drop, but had he done this the block would have fallen on McGowin and caused him serious injuries or death. The only safe and reasonable way to prevent this was for appellant to hold to the block and divert its direction in falling from the place where McGowin was standing and the only safe way to divert it so as to prevent its coming into contact with McGowin was for appellant to fall with it to the ground below. Appellant did this, and by holding to the block and falling with it to the ground below, he diverted the course of its fall in such way that McGowin was not injured. In thus preventing the injuries to McGowin appellant himself received serious bodily injuries, resulting in his right leg being broken, the heel of his right foot torn off and his right arm broken. He was badly crippled for life and rendered unable to do physical or mental labor.

“On September 1, 1925, in consideration of appellant having prevented him from sustaining death or serious bodily harm and in consideration of the injuries appellant had received, McGowin agreed with him to care for and maintain him for the remainder of appellant’s life at the rate of $15 every two weeks from the time he sustained his injuries to and during the remainder of appellant’s life; it being agreed that McGowin would pay this sum to appellant for his maintenance. Under the agreement McGowin paid or caused to be paid to appellant the sum so agreed on up until McGowin’s death on January 1, 1934. After his death the payments were continued to and including January 27, 1934, at which time they were discontinued. Thereupon plaintiff brought suit to recover the unpaid installments accruing up to the time of the bringing of the suit.”

…

In other words, the complaint as amended averred in substance: (1) That on August 3, 1925, appellant saved J. Greeley McGowin, appellee’s testator, from death or grievous bodily harm; (2) that in doing so appellant sustained bodily injury crippling him for life; (3) that in consideration of the services rendered and the injuries received by appellant, McGowin agreed to care for him the remainder of appellant’s life, the amount to be paid being $15 every two weeks; (4) that McGowin complied with this agreement until he died on January 1, 1934, and the payments were kept up to January 27, 1934, after which they were discontinued.

…

The averments of the complaint show that appellant saved McGowin from death or grievous bodily harm. This was a material benefit to him of infinitely more value than any financial aid he could have received. Receiving this benefit, McGowin became morally bound to compensate appellant for the services rendered. Recognizing his moral obligation, he expressly agreed to pay appellant as alleged in the complaint and complied with this agreement up to the time of his death; a period of more than 8 years.

Had McGowin been accidentally poisoned and a physician, without his knowledge or request, had administered an antidote, thus saving his life, a subsequent promise by McGowin to pay the physician would have been valid. Likewise, McGowin’s agreement as disclosed by the complaint to compensate appellant for saving him from death or grievous bodily injury is valid and enforceable.

Where the promisee cares for, improves, and preserves the property of the promisor, though done without his request, it is sufficient consideration for the promisor’s subsequent agreement to pay for the service, because of the material benefit received.

… Any holding that saving a man from death or grievous bodily harm is not a material benefit sufficient to uphold a subsequent promise to pay for the service, necessarily rests on the assumption that saving life and preservation of the body from harm have only a sentimental value. The converse of this is true. Life and preservation of the body have material, pecuniary values, measurable in dollars and cents. Because of this, physicians practice their profession charging for services rendered in saving life and curing the body of its ills, and surgeons perform operations. The same is true as to the law of negligence, authorizing the assessment of damages in personal injury cases based upon the extent of the injuries, earnings, and life expectancies of those injured.

…

It is well settled that a moral obligation is a sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit, although there was no original duty or liability resting on the promisor. [string cite omitted] …

3. Some authorities hold that, for a moral obligation to support a subsequent promise to pay, there must have existed a prior legal or equitable obligation, which for some reason had become unenforceable, but for which the promisor was still morally bound. This rule, however, is subject to qualification in those cases where the promisor, having received a material benefit from the promisee, is morally bound to compensate him for the services rendered and in consideration of this obligation promises to pay. In such cases the subsequent promise to pay is an affirmance or ratification of the services rendered carrying with it the presumption that a previous request for the service was made.

Under the decisions above cited, McGowin’s express promise to pay appellant for the services rendered was an affirmance or ratification of what appellant had done raising the presumption that the services had been rendered at McGowin’s request.

4. The averments of the complaint show that in saving McGowin from death or grievous bodily harm, appellant was crippled for life. This was part of the consideration of the contract declared on. McGowin was benefited. Appellant was injured. Benefit to the promisor or injury to the promisee is a sufficient legal consideration for the promisor’s agreement to pay. …

Reversed and remanded.

Webb v. McGowin

Supreme Court of Alabama

232 Ala. 374 (1936)

FOSTER, Justice.

* * *

The opinion of the Court of Appeals here under consideration recognizes and applies the distinction between a supposed moral obligation of the promisor, based upon some refined sense of ethical duty, without material benefit to him, and one in which such a benefit did in fact occur. We agree with that court that if the benefit be material and substantial, and was to the person of the promisor rather than to his estate, it is within the class of material benefits which he has the privilege of recognizing and compensating either by an executed payment or an executory promise to pay. The cases are cited in that opinion. The reason is emphasized when the compensation is not only for the benefits which the promisor received, but also for the injuries either to the property or person of the promisee by reason of the service rendered.

Webb v. McGowin

27 Ala.App. 82 (1935)

Certiorari denied by Supreme Court in Webb v. McGowin (3 Div. 170) 168 So. 199.

BRICKEN, Presiding Judge.

This action is in assumpsit. …

A fair statement of the case presenting the questions for decision is set out in appellant’s brief, which we adopt.

“On the 3d day of August, 1925, appellant while in the employ of the W.T. Smith Lumber Company, a corporation, and acting within the scope of his employment, was engaged in clearing the upper floor of mill No. 2 of the company. While so engaged he was in the act of dropping a pine block from the upper floor of the mill to the ground below; this being the usual and ordinary way of clearing the floor, and it being the duty of the plaintiff in the course of his employment to so drop it. The block weighed about 75 pounds.

“As appellant was in the act of dropping the block to the ground below, he was on the edge of the upper floor of the mill. As he started to turn the block loose so that it would drop to the ground, he saw J. Greeley McGowin, testator of the defendants, on the ground below and directly under where the block would have fallen had appellant turned it loose. Had he turned it loose it would have struck McGowin with such force as to have caused him serious bodily harm or death. Appellant could have remained safely on the upper floor of the mill by turning the block loose and allowing it to drop, but had he done this the block would have fallen on McGowin and caused him serious injuries or death. The only safe and reasonable way to prevent this was for appellant to hold to the block and divert its direction in falling from the place where McGowin was standing and the only safe way to divert it so as to prevent its coming into contact with McGowin was for appellant to fall with it to the ground below. Appellant did this, and by holding to the block and falling with it to the ground below, he diverted the course of its fall in such way that McGowin was not injured. In thus preventing the injuries to McGowin appellant himself received serious bodily injuries, resulting in his right leg being broken, the heel of his right foot torn off and his right arm broken. He was badly crippled for life and rendered unable to do physical or mental labor.

“On September 1, 1925, in consideration of appellant having prevented him from sustaining death or serious bodily harm and in consideration of the injuries appellant had received, McGowin agreed with him to care for and maintain him for the remainder of appellant’s life at the rate of $15 every two weeks from the time he sustained his injuries to and during the remainder of appellant’s life; it being agreed that McGowin would pay this sum to appellant for his maintenance. Under the agreement McGowin paid or caused to be paid to appellant the sum so agreed on up until McGowin’s death on January 1, 1934. After his death the payments were continued to and including January 27, 1934, at which time they were discontinued. Thereupon plaintiff brought suit to recover the unpaid installments accruing up to the time of the bringing of the suit.”

…

In other words, the complaint as amended averred in substance: (1) That on August 3, 1925, appellant saved J. Greeley McGowin, appellee’s testator, from death or grievous bodily harm; (2) that in doing so appellant sustained bodily injury crippling him for life; (3) that in consideration of the services rendered and the injuries received by appellant, McGowin agreed to care for him the remainder of appellant’s life, the amount to be paid being $15 every two weeks; (4) that McGowin complied with this agreement until he died on January 1, 1934, and the payments were kept up to January 27, 1934, after which they were discontinued.

…

The averments of the complaint show that appellant saved McGowin from death or grievous bodily harm. This was a material benefit to him of infinitely more value than any financial aid he could have received. Receiving this benefit, McGowin became morally bound to compensate appellant for the services rendered. Recognizing his moral obligation, he expressly agreed to pay appellant as alleged in the complaint and complied with this agreement up to the time of his death; a period of more than 8 years.

Had McGowin been accidentally poisoned and a physician, without his knowledge or request, had administered an antidote, thus saving his life, a subsequent promise by McGowin to pay the physician would have been valid. Likewise, McGowin’s agreement as disclosed by the complaint to compensate appellant for saving him from death or grievous bodily injury is valid and enforceable.

Where the promisee cares for, improves, and preserves the property of the promisor, though done without his request, it is sufficient consideration for the promisor’s subsequent agreement to pay for the service, because of the material benefit received.

… Any holding that saving a man from death or grievous bodily harm is not a material benefit sufficient to uphold a subsequent promise to pay for the service, necessarily rests on the assumption that saving life and preservation of the body from harm have only a sentimental value. The converse of this is true. Life and preservation of the body have material, pecuniary values, measurable in dollars and cents. Because of this, physicians practice their profession charging for services rendered in saving life and curing the body of its ills, and surgeons perform operations. The same is true as to the law of negligence, authorizing the assessment of damages in personal injury cases based upon the extent of the injuries, earnings, and life expectancies of those injured.

…

It is well settled that a moral obligation is a sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit, although there was no original duty or liability resting on the promisor. [string cite omitted] …

3. Some authorities hold that, for a moral obligation to support a subsequent promise to pay, there must have existed a prior legal or equitable obligation, which for some reason had become unenforceable, but for which the promisor was still morally bound. This rule, however, is subject to qualification in those cases where the promisor, having received a material benefit from the promisee, is morally bound to compensate him for the services rendered and in consideration of this obligation promises to pay. In such cases the subsequent promise to pay is an affirmance or ratification of the services rendered carrying with it the presumption that a previous request for the service was made.

Under the decisions above cited, McGowin’s express promise to pay appellant for the services rendered was an affirmance or ratification of what appellant had done raising the presumption that the services had been rendered at McGowin’s request.

4. The averments of the complaint show that in saving McGowin from death or grievous bodily harm, appellant was crippled for life. This was part of the consideration of the contract declared on. McGowin was benefited. Appellant was injured. Benefit to the promisor or injury to the promisee is a sufficient legal consideration for the promisor’s agreement to pay.

…

Reversed and remanded.

232 Ala. 374

Supreme Court of Alabama

WEBB

v.

McGOWIN et al.

May 14, 1936

FOSTER, Justice.

* * *

The opinion of the Court of Appeals here under consideration recognizes and applies the distinction between a supposed moral obligation of the promisor, based upon some refined sense of ethical duty, without material benefit to him, and one in which such a benefit did in fact occur. We agree with that court that if the benefit be material and substantial, and was to the person of the promisor rather than to his estate, it is within the class of material benefits which he has the privilege of recognizing and compensating either by an executed payment or an executory promise to pay. The cases are cited in that opinion. The reason is emphasized when the compensation is not only for the benefits which the promisor received, but also for the injuries either to the property or person of the promisee by reason of the service rendered.

Restatement (Second) Contracts § 86. Promise for Benefit Received

(1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice.

(2) A promise is not binding under Subsection (1)

     (a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or

     (b) to the extent that its value is disproportionate to the benefit.

Restatement Second of Contracts § 90

Promise Reasonably Inducing Action or Forbearance

1. 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.

2. A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance.

Ricketts v. Scothorn

57 Neb. 51 (1898)

SULLIVAN, J.

In the district court of Lancaster County the plaintiff, Katie Scothorn, recovered judgment against the defendant, Andrew D. Ricketts, as executor of the last will and testament of John C. Ricketts, deceased. The action was based upon a promissory note, of which the following is a copy:

“May the first, 1891. I promise to pay to Katie Scothorn on demand, $2,000, to be at 6 per cent. per annum. J. C. Ricketts.”

… The material facts are undisputed. They are as follows: John C. Ricketts, the maker of the note, was the grandfather of the plaintiff. Early in May––presumably on the day the note bears date––he called on her at the store where she was working. What transpired between them is thus described by Mr. Flodene, one of the plaintiff’s witnesses:

“A. Well, the old gentleman came in there one morning about nine o’clock, probably a little before or a little after, but early in the morning, and he unbuttoned his vest, and took out a piece of paper in the shape of a note; that is the way it looked to me; and he says to Miss Scothorn, “I have fixed out something that you have not got to work any more.” He says, none of my grandchildren work, and you don’t have to. Q. Where was she? A. She took the piece of paper and kissed him, and kissed the old gentleman, and commenced to cry.”

It seems Miss Scothorn immediately notified her employer of her intention to quit work, and that she did soon after abandon her occupation. … For something more than a year the plaintiff was without an occupation, but in September, 1892, with the consent of her grandfather, and by his assistance, she secured a position as bookkeeper with Messrs. Funke & Ogden. On June 8, 1894, Mr. Ricketts died. He had paid one year’s interest on the note, and a short time before his death expressed regret that he had not been able to pay the balance. In the summer or fall of 1892 he stated to his daughter, Mrs. Scothorn, that if he could sell his farm in Ohio he would pay the note out of the proceeds. He at no time repudiated the obligation. …The testimony of Flodene and Mrs. Scothorn, taken together, conclusively establishes the fact that the note was not given in consideration of the plaintiff pursuing, or agreeing to pursue, any particular line of conduct. There was no promise on the part of the plaintiff to do, or refrain from doing, anything. Her right to the money promised in the note was not made to depend upon an abandonment of her employment with Mayer Bros., and future abstention from like service. Mr. Ricketts made no condition, requirement, or request. He exacted no quid pro quo. He gave the note as a gratuity, and looked for nothing in return. So far as the evidence discloses, it was his purpose to place the plaintiff in a position of independence, where she could work or remain idle, as she might choose. The abandonment of Miss Scothorn of her position as bookkeeper was altogether voluntary. It was not an act done in fulfillment of any contract obligation assumed when she accepted the note. The instrument in suit, being given without any valuable consideration, was nothing more than a promise to make a gift in the future of the sum of money therein named. …

Under the circumstances of this case, is there an equitable estoppel which ought to preclude the defendant from alleging that the note in controversy is lacking in one of the essential elements of a valid contract? We think there is. An estoppel in pais is defined to be “a right arising from acts, admissions, or conduct which have induced a change of position in accordance with the real or apparent intention of the party against whom they are alleged.” Mr. Pomeroy has formulated the following definition:

“Equitable estoppel is the effect of the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might, perhaps, have otherwise existed, either of property, of contract, or of remedy, as against another person who in good faith relied upon such conduct, and has been led thereby to change his position for the worse, and who on his part acquires some corresponding right, either of property, of contract, or of remedy.” 2 Pom. Eq. Jur. 804.

According to the undisputed proof, as shown by the record before us, the plaintiff was a working girl, holding a position in which she earned a salary of $10 per week, Her grandfather, desiring to put her in a position of independence, gave her the note, accompanying it with the remark that his other grandchildren did not work, and that she would not be obliged to work any longer. In effect, he suggested that she might abandon her employment, and rely in the future upon the bounty which he promised. He doubtless desired that she should give up her occupation, but, whether he did or not, it is entirely certain that he contemplated such action on her part as a reasonable and probable consequence of his gift. Having intentionally influenced the plaintiff to alter her position for the worse on the faith of the note being paid when due, it would be grossly inequitable to permit the maker, or his executor, to resist payment on the ground that the promise was given without consideration. The petition charges the elements of an equitable estoppel, and the evidence conclusively establishes them. …

Pettersen v. Monaghan Safar Ducham PLLC

214 Vt. 269 (2021)

Attorneys and Law Firms

William Pettersen of Pettersen Law PLLC, Pro Se, Colchester, Plaintiff-Appellant.

Eric D. Jones and Justin G. Sherman of Langrock Sperry & Wool, LLP, Burlington, for Defendant-Appellee.

Opinion

REIBER, C.J.

Plaintiff William J. Pettersen appeals the trial court’s decision granting summary judgment to his former law firm, defendant Monaghan Safar Ducham PLLC. He argues that sufficient evidence exists to raise a genuine issue of material fact as to his claims for promissory estoppel, unjust enrichment, intentional misrepresentation, and wrongful termination in violation of public policy, and thus contends that summary judgment was inappropriate. We conclude that the trial court properly granted summary judgment and affirm.

The following information is drawn from the statements of facts submitted by the parties in connection with defendant’s motion for summary judgment. Defendant hired plaintiff as an associate attorney in February 2016. Throughout his nearly two-year employment with defendant, plaintiff believed that he was underpaid. His starting salary was $55,000 per year, as well as a $3000 annual stipend for health insurance, and other benefits. When defendant’s managing partner, Attorney Monaghan, initially offered the job to plaintiff, plaintiff expressed concern with the salary but nevertheless accepted the job. Plaintiff signed an employment letter stating that his employment was at will, incorporating the above starting salary, and noting the potential for bonuses based on his performance and defendant’s revenues. After plaintiff worked for defendant for about six months, defendant conducted a performance review and gave plaintiff a nine-percent raise, increasing his base salary to $60,000 per year. Plaintiff was still not satisfied. Throughout his time working for defendant, plaintiff looked for other jobs in Vermont.

Soon after the performance review, plaintiff spoke with Attorney Monaghan regarding his compensation concerns. Plaintiff told Attorney Monaghan that he was uncomfortable with his salary and sought more information regarding defendant’s typical partnership track. Attorney Monaghan asked plaintiff what he thought was a reasonable trajectory. Plaintiff responded that he thought becoming a partner and earning $100,000 annually after five years was reasonable, if his good performance continued. In response, Attorney Monaghan said that trajectory was reasonable. Plaintiff clarified that to reach this salary, it would be reasonable that his raises would need to increase as a percentage of his salary, and Attorney Monaghan agreed this was reasonable. Plaintiff asserted that he decided to continue working for defendant based on this conversation, as he viewed Attorney Monaghan’s statements as a promise that defendant made to him concerning compensation and partnership.

During his time working for defendant, plaintiff received additional raises and bonuses. In December 2016, defendant gave him a $6000 bonus. He received another $6000 bonus in December 2017. Upon seeing the check, plaintiff told partners that he was “hoping for a bit more.” In response, defendant gave him an additional $1100 bonus. In March 2018, defendant conducted plaintiff’s second performance review and plaintiff received a four-percent raise, increasing his base salary to $62,500 per year.

After receiving this raise, plaintiff decided that he needed to leave his job with defendant because he believed that defendant breached its “partnership track” promise to him. Later that month, plaintiff copied client files to his personal computer. He also downloaded his emails, calendars, and contact list. He obtained trial accounts with Westlaw and LexisNexis. On April 10, 2018, plaintiff wrote a letter to Attorney Monaghan asserting that he believed he had legal claims against defendant and offering to settle. Plaintiff stated, “I must now look for different employment at a law firm where I will be starting anew,” but ended the letter saying, “I will continue my excellent service to [defendant] and its clients in the meantime.”

…

In February 2019, plaintiff filed suit, asserting claims for promissory estoppel, unjust enrichment, intentional misrepresentation, wrongful termination, defamation, and tortious interference with contractual relations. As relevant to this appeal, he first alleged that defendant promised him “a partnership-track position that would earn compensation of $100,000 within five years” and that he would receive “larger raises each of those years.” He argued that he relied on this promise and continued to work for defendant when he otherwise would have left, and thus sought recovery under a promissory estoppel theory. …

The court granted defendant’s motion for summary judgment. As to the promissory estoppel claim, the court concluded on the undisputed facts that Attorney Monaghan’s statement—that plaintiff’s proposed career trajectory was “reasonable”—was a vague statement that was not actionable as a promise. Even if the statement were a promise, the court concluded that plaintiff had shown neither reliance upon nor detriment from it. …This appeal followed.

I. Promissory Estoppel

To prevail on his promissory estoppel claim, plaintiff must show that: (1) defendant made a promise to plaintiff that defendant should have reasonably expected to induce action or forbearance; (2) plaintiff relied on the promise to his detriment; and (3) injustice can be avoided only by enforcement of the promise.

Plaintiff argues that Attorney Monaghan’s statement—that plaintiff’s proposed five-year trajectory towards partnership and $100,000 annual compensation was “reasonable”—was an enforceable promise based on the context of the conversation. Plaintiff asserts that because he told Attorney Monaghan that he needed more specific information on his career trajectory to feel comfortable continuing to work for defendant, defendant should have known that plaintiff was seeking a specific assurance and was not just discussing his general career path. Plaintiff also argues that the statement was a “specific five-year compensation plan that accounted for all variables”: the minimum compensation, the method of determining raises, the timeline, and the requirement of continued good performance.

We disagree that defendant’s statement constituted an actionable promise as a matter of law. “Courts have generally required a promise of a specific and definite nature before holding an employer bound by it.” Dillon v. Champion Jogbra, Inc., 175 Vt. 1, 10, 819 A.2d 703, 710 (2002). A “vague assurance” is insufficient. Id. “The promise must be more than a mere expression of intention, hope, desire, or opinion, which shows no real commitment.” Nelson v. Town of St. Johnsbury Selectboard, 2015 VT 5, ¶ 56, 198 Vt. 277, 115 A.3d 423 (quotation omitted).

The undisputed facts before the trial court do not support plaintiff’s contention that defendant promised him a specific five-year compensation plan. Defendant did nothing more than agree that plaintiff’s proposed trajectory was “reasonable.” This is exactly the type of “hope” or “opinion” that “shows no real commitment” and does not suffice to create a promise. Id. (quotation omitted). At best, Attorney Monaghan was expressing his opinion that it was reasonable that plaintiff might have the opportunity to become a partner and earn $100,000 annually in five years.

Because plaintiff has failed to show that defendant made an enforceable promise, we need not address the other elements of promissory estoppel. However, we note that even if defendant’s statement constituted a promise, on this record plaintiff failed to demonstrate detrimental reliance and injustice. The record shows that plaintiff continued to look for other jobs in Vermont, undermining his claim that he stayed at his job with defendant and gave up other opportunities in reliance on defendant’s alleged promise. Although plaintiff asserts that he forewent applying to more lucrative jobs out of state, plaintiff points to no cases—and this Court knows of none—suggesting that an employee is harmed by merely foregoing a job search in certain markets while continuing in another. Thus, plaintiff made no “detrimental change of position in reliance on the claimed promise” as our law requires. Likewise, given the vague nature of the alleged promise and the fact that plaintiff continued to look for other jobs in Vermont, plaintiff has failed to show that injustice could be avoided only if the alleged promise were enforced. Accordingly, the court properly granted summary judgment on this claim.

* * *

Weitz v. Hands, Inc.

294 Neb. 215 (2016)

Connolly, J.

I. SUMMARY

The Weitz Company, LLC (Weitz), a general contractor, received an invitation to bid on a planned nursing facility. Hands, Inc., doing business as H & S Plumbing and Heating (H & S), submitted a bid to Weitz for the plumbing work, as well as the heating, ventilation, and air conditioning (HVAC) parts of the job. Weitz’ bid to the project owner incorporated the amount of H & S’ bid. After the owner awarded the project to Weitz, H & S refused to honor its bid. Weitz completed the project with different subcontractors at greater expense.

At trial, Weitz sought to enforce H & S’ bid under promissory estoppel. The court determined that Weitz reasonably and foreseeably relied on H & S’ bid, and it therefore estopped H & S from reneging. The court measured Weitz’ damages as the difference between H & S’ bid and the amount Weitz paid to substitute subcontractors. H & S appeals. We affirm the judgment and the amount of damages.

II. BACKGROUND

1. Weitz Is Invited to Bid

In 2011, the Evangelical Lutheran Good Samaritan Society (Good Samaritan) invited four “prequalified General Contractors,” including Weitz, to bid on a proposed nursing facility in Beatrice, Nebraska. Good Samaritan chose the four prequalified general contractors based on “prior relationships” recommendations from its architect and its own research.

Good Samaritan is a “big player” in the retirement living market. Weitz is a “dominant contractor” in the same market. Alan Kennedy, a Weitz executive, said that Weitz had sought to build a relationship with Good Samaritan that would lead to “negotiated work,” meaning that Good Samaritan would work with Weitz without inviting other general contractors to bid. Kennedy testified that negotiated work is “one of the best places to be as a contractor.” When Good Samaritan invited Weitz to bid on the Beatrice project, Weitz knew of another potential project with Good Samaritan in Sarpy County, Nebraska.

Good Samaritan’s “Invitation to Bid” stated that it would not consider bids received after 2 p.m. on August 30, 2011 (bid day). The invitation incorporated certain “Instructions to Bidders,” which provided that Good Samaritan and its architect could object to a general contractor’s proposed subcontractors. The invitation stated that “[n]o bids may be withdrawn for a period of 60 days after opening of bids.” If a general contractor refused to enter into a contract, the instructions provided to bidders state that the general contractor would forfeit its bid security as liquidated damages. A bid security is a bond that “assures the owner that [it] can rely upon the bids.” But Good Samaritan did not ask for bid securities, because it prequalified the general contractors.

2. Bid–Day Madness

Before bid day, Weitz assigned “lead person[s]” to the different categories of work on the project, referred to as “tickets.” The ticket leaders reviewed the project specifications and created a “scope checklist” that described the work for each ticket. Weitz prepared scope checklists because subcontractors sometimes excluded certain work from their bid.

On bid day, Weitz assembled its people in a conference room to collect and organize the hundreds of bids from subcontractors. Ticket leaders called out the bids after comparing them with the scope checklist. Weitz then added the numbers to a “bid day spreadsheet.”

Subcontractors in the mechanical, engineering, and plumbing fields typically submit their bids within 15 minutes of the deadline. As a result, Weitz is often “at the wire turning in [its] number to an owner.” Brian Mahlendorf, a project executive for Weitz, oversaw Weitz’ bid for the Good Samaritan project. Mahlendorf said that Weitz received H & S’ bid “less than 15 minutes or so” before the 2 p.m. deadline.

Kennedy, who had been involved in “well over a hundred bids,” testified that it was “customary for general contractors to rely on bids submitted by subcontractors” and that subcontractors submit bids because they want the job. Mahlendorf, who had more than 20 years of experience in the construction industry, testified that it was customary for Weitz to rely on subcontractors’ bids, that subcontractors knew that Weitz relied on their bids, and that subcontractors submitted bids because they wanted to procure work. Mahlendorf said it was “very rare” for a subcontractor to refuse to honor its bid.

3. H & S Submits a Bid to Weitz

On bid day, H & S sent Weitz a bid for the plumbing and HVAC parts of the project. H & S’ base bid was $2,430,600. For alternate duct and radiant heating work, H & S quoted $39,108 and $52,500, respectively. …

Kennedy and Mahlendorf would confirm a subcontractor’s bid if it looked “funny” or “off,” but H & S’ bid did not seem unusual to them. Weitz had estimated what each ticket would cost based on historical data, and H & S’ bid was above Weitz’ estimate. Mahlendorf was also comfortable with H & S because Weitz had worked with H & S before. Furthermore, Mahlendorf assumed that H & S was “actually looking at [its] number” because it sent Weitz a revised bid. …

Kennedy and Mahlendorf testified that the market for construction services was weak in 2011. Subcontractors were “aggressively seeking work” and making low bids to “keep their people busy.” Kennedy said that subcontractors’ bids had “ranges that you hadn’t traditionally seen in the marketplace.” A difference of 15 percent between the lowest and second-lowest bids was not uncommon.

4. Weitz Submits Its Bid to Good Samaritan

Mahlendorf said that Weitz used H & S’ bid in its own bid to Good Samaritan. Weitz chose H & S’ bid because it included the “complete scope with the lowest cost.” Mahlendorf said that H & S’ bid was “comprehensive” and that Weitz was “willing to take it as is.” Mahlendorf added H & S’ base bid to Weitz’ bid-day spreadsheet for the plumbing and HVAC tickets.

On bid day, Weitz sent Good Samaritan a base bid of $9.2 million. Kennedy and Mahlendorf testified that Weitz’ base bid of $9.2 million included H & S’ $2,430,600 bid. Weitz promised Good Samaritan that it would execute a contract for its base bid if offered the project within 60 days. Weitz’ bid to Good Samaritan included a list of “Major Sub–Contractors.” For the plumbing subcontractor, Weitz wrote “HEP or H & S.” For the HVAC subcontractor, Weitz wrote “Falcon or H & S.”

Mahlendorf explained that he used a disjunctive list of major subcontractors because H & S’ bid “came in late enough after this form had been basically ready to send out, and we had to add [its] name to those two line items.” Mahlendorf said that Weitz did not use the bids of the other plumbing and HVAC subcontractors, “HEP” and Falcon Heating and Air Conditioning (Falcon), to reach its $9.2 million base bid. Even if Weitz could have used HEP and Falcon instead of H & S, Mahlendorf said that Weitz intended to use H & S.

5. Good Samaritan Awards the Project to Weitz

On September 1, 2011, Weitz received “early indications” that Good Samaritan would select its bid. Weitz received “[f]inal notification” on September 2. Mahlendorf called H & S on September 6 and told the head of H & S’ engineering department that Weitz had won the bidding and had “carried the H & S number.” He said that he told H & S that “we used [its] number in our bid, and we were prepared to enter into a contract with [H & S] and move forward.”…

Weitz signed a contract with Good Samaritan for the base bid of $9.2 million plus six additional areas of work not included in the base bid. The opening paragraph of the contract states that it was “made and entered” on, and has an “Effective Date” of, September 7, 2011. But “Date: 9–19–11” appears below the signature of Good Samaritan’s representatives.

Under the contract, Good Samaritan and its architect had the right to reject Weitz’ proposed subcontractors. But Good Samaritan did not veto H & S or any of Weitz’ other subcontractors. Good Samaritan’s architect could not recall having a “conversation of significance” about subcontractors. …

6. H & S Reneges on Its Bid

Hugh Sieck, Jr., H & S’ owner and chief executive officer, was fishing in Alaska on bid day. Sieck testified that he told his team of estimators before he left for Alaska not to send a bid to Weitz. He had “bitter feelings” for Weitz because it had a “history of bid shopping,” meaning that Weitz would “get a bid, ... look at it, and [it] will go to another contractor to get a lower number.” Sieck said every general contractor “bid shops,” but he thought Weitz did more than most.

John Sampson, who worked for one of the other prequalified general contractors, called Sieck on bid day and suggested that Sieck review H & S’ bid. Sampson noticed a “considerable difference” between H & S’ bid and the other subcontractors’ bids, although he did not say what the difference was or whether the scope of the subcontractors’ bids differed. Asked what might prompt him to confirm a bid with a subcontractor, Sampson said a difference of 10 or 15 percent between bids might be enough “if I had to pull a number out of the air,” but “when it gets 20 or 30 percent then you really start getting concerned.”

According to Sieck, he ordered a member of H & S’ estimating team to “[p]ull your bid” after Sieck spoke with Sampson. But when Sieck returned to H & S’ offices on September 6, 2011, he learned that his employees had, contrary to orders, submitted a bid to Weitz and had failed to withdraw the bid. He “surmised” that H & S’ bid contained errors, so he “told [his] team to go out and find a mistake.”

Lloyd Ness, the person responsible for preparing the plumbing and piping parts of H & S’ bid, said that Sieck was upset after bid day because H & S “left too much money on the table.” Ness testified that H & S’ estimating team reviewed its bid after Sieck returned but concluded there “was not a hair out of place.” So, according to Ness, Sieck told him to “lie to Weitz and tell Weitz that we forgot travel time and we missed showers.” Ness refused to lie and resigned because of the incident. Sieck denied asking Ness to lie. Another member of H & S’ estimating team, Thomas Santillan, Jr., said that Sieck did not ask him to lie.

Sieck personally took a hand in looking for a mistake and ultimately landed on a miscalculation involving shower units. He told Santillan to inform Weitz of H & S’ “belief of the mistake.”

On September 8, 2011, Santillan sent an e-mail with a letter attachment to Mahlendorf stating that H & S had found two errors after “thoroughly reviewing” its bid: (1) a miscalculation of the cost of shower installation and (2) the omission of travel time from the cost of labor. The collective magnitude of the claimed errors exceeded $250,000.

Santillan later took another look at H & S’ bid and concluded that the original calculation of the cost for shower installation was, in fact, correct. But Santillan maintained that H & S had underbid travel costs. And Santillan said that H & S eventually unearthed “numerous mistakes” in its bid. Specifically, “the material was just not accurate,” “the dollar amount did not appear to be accurate,” and “there wasn’t enough material.”

Mahlendorf came to H & S’ offices for a meeting on September 9, 2011. According to Sieck, Mahlendorf mentioned, “I’ve got to get to Beatrice because I haven’t got all my shopping done.” Sieck understood Mahlendorf’s statement to mean that “as per usual, they are out shopping the bids.”

But Mahlendorf said that Sieck’s recollection did not “comport with [Mahlendorf’s] memory.” Asked if Weitz would ever “carry one number but you continue negotiating and replace it with a different bidder,” Mahlendorf said he was “sure that has happened for some reason or another.” But he said that Weitz did not intend to shop H & S’ bid. H & S’ bid was “comprehensive,” and Weitz was “willing to take it as is.”

Weitz and H & S could not come to terms. The magnitude of H & S’ error kept growing and eventually ballooned to more than $430,000. In October 2011, Weitz informed H & S that it would use other subcontractors.

7. Weitz Honors Its Bid to Good Samaritan

Weitz did not try to withdraw its bid from Good Samaritan because of its dispute with H & S. Instead, it completed the project with other plumbing and HVAC subcontractors. Kennedy and Mahlendorf testified that the bidding documents prohibited Weitz from withdrawing or modifying its bid for 60 days. And the contract between Weitz and Good Samaritan was “already in progress” by the time Weitz learned that H & S would not honor its bid.

Business reasons also prevented Weitz from abandoning the project. Kennedy testified that the “integrity of our bids” was particularly important if the owner selected Weitz as a prequalified general contractor. Mahlendorf explained that backing out would have harmed Weitz’ reputation in its industry:

On a project like this where the architect and owner have preselected general contractors, if we wouldn’t honor our bid, we would be at risk for future work from the design firm that did it and in addition to the owner group. From a business standpoint, we do a lot of [business with] senior living [clients], and it would be detrimental if we were starting to be excluded from senior living clients like the Good Samaritan Society.

Withdrawal would have also lowered Weitz’ standing with Good Samaritan’s architect, with which Weitz had an “ongoing business relationship.”

8. Weitz Measures Its Losses

After H & S made it clear that it would not stand by its bid, Weitz asked for bids from other subcontractors. Weitz selected the subcontractors Falcon and “MMC” for the plumbing and HVAC portions of the project because their bids had the “lowest cost complete scope that we could obtain.” The amount Weitz paid Falcon and MMC under their subcontracts was $1,187,900 and $1,626,800, respectively. The subcontract prices did not include any “change orders,” which could have affected the total amount Weitz ultimately paid to the subcontractors. H & S’ bid did not include change orders either.

To calculate Weitz’ damages, Mahlendorf added Falcon’s and MMC’s subcontract prices for the sum of $2,814,700. From that sum, Mahlendorf subtracted H & S’ base bid of $2,430,600 and its bids of $39,108 and $52,500 on optional work which Good Samaritan ultimately asked Weitz to perform. The difference is $292,492.

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V. ANALYSIS

1. Promissory Estoppel

H & S argues that the court should not have enforced its bid under promissory estoppel. Courts often use promissory estoppel to hold a subcontractor to its bid until the general contractor has had a reasonable length of time to accept the bid after receiving the prime contract. The leading case is Drennan v. Star Paving Co. There, the California Supreme Court held that because the general contractor was bound by its bid, fairness required that the general contractor have an opportunity to accept the subcontractor’s bid after receiving the prime contract. Drennan has had a “very broad following.”

In Nebraska, a claim of promissory estoppel requires a plaintiff to show: (1) a promise that the promisor should have reasonably expected to induce the plaintiff’s action or forbearance, (2) the promise did in fact induce the plaintiff’s action or forbearance, and (3) injustice can only be avoided by enforcing the promise. The promise need not be definite enough to support a unilateral contract, but it must be definite enough to show that the plaintiff’s reliance on it was reasonable and foreseeable.⁸ Here, we start our review of the court’s judgment by asking if H & S’ bid was a promise on which it should have foreseen reliance.

(a) H & S’ Bid Was a Promise on Which Reliance Was Foreseeable

H & S’ bid was a promise to perform the work described in the bid. H & S said it was “bidding the Plumbing, Hydronic Piping, & HVAC portion” of the Good Samaritan project and specifically listed the work that it was willing to perform. H & S asked for the general contractors’ “consideration” and hoped to “be of service” to them.

And H & S should have foreseen that Weitz would rely on its bid. Kennedy and Mahlendorf testified that subcontractors generally expect (and hope) that general contractors will rely on their bids. Usages of trade are strong evidence of the foreseeability of reliance. Furthermore, Weitz received H & S’ bid about 15 minutes before the 2 p.m. deadline. Evidence that a promisee had little time to act on the promise shows that the promisee’s reliance was foreseeable. And, as noted, H & S expressly asked Weitz to consider its bid. Having determined that H & S should have expected Weitz to rely on its bid, our next question is whether Weitz in fact relied on the bid and, if so, whether its reliance was reasonable.

(b) Weitz Reasonably Relied on H & S’ Bid

Weitz relied on H & S’ bid by including the base amount of H & S’ bid in Weitz’ own bid to Good Samaritan. Mahlendorf testified that he slotted H & S’ bid into the plumbing and HVAC tickets, which is reflected in the bid-day spreadsheet. Although Weitz disjunctively listed the major subcontractors in its bid to Good Samaritan, the evidence shows that Weitz actually relied on H & S’ bid. Both Kennedy and Mahlendorf testified that Weitz’ $9.2 million base bid incorporated H & S’ base bid of $2,430,600.

We further conclude that Weitz’ reliance on H & S’ bid was reasonable. The evidence shows that general contractors customarily rely on subcontractors’ bids. Mahlendorf testified that it was “very rare” for a subcontractor to refuse to honor its bid. In particular, Weitz had worked with H & S 10 or 15 times before without incident. Weitz’ reliance was also reasonable because it had only 15 minutes to review H & S’ bid. Weitz could not independently verify every item in H & S’ bid in a quarter of an hour. How could competitive bidding function at all if general contractors did not rely on subcontractors’ bids?

H & S marshals a number of arguments why Weitz did not reasonably rely on its bid, which we consolidate into five that merit discussion. First, H & S argues that the bidding documents “absolutely precluded any reliance.” Specifically, H & S emphasizes that Good Samaritan had the right to veto subcontractors.

But the bare fact that Good Samaritan could have, in theory, rejected H & S’ bid did not make Weitz’ reliance on H & S’ bid unreasonable. Good Samaritan did not object to any of Weitz’ subcontractors. Mahlendorf testified that despite an owner’s reservation of the right to veto subcontractors, owners generally do not exercise that right “[i]n the real world.” If the chance that Good Samaritan would nix H & S were significant, Weitz’ reliance on H & S’ bid might not have been reasonable. But the record lacks this evidence.

We similarly reject H & S’ second argument, which is that Weitz’ reliance was unreasonable because Weitz “did not require any quotation be kept open for any period of time as a precondition to its consideration.” General contractors customarily rely on subcontractors’ bids, as discussed above, and the record lacks any evidence that prudent general contractors turn away bids that do not have such a provision. We cannot find any authority that conditions promissory estoppel, as a matter of law, on a demand by the general contractor that subcontractors insert such clauses into their bids. The only case that H & S cites is from a jurisdiction that allowed parties to use promissory estoppel only as a defense. That case is an outlier.

H & S’ third argument is that Weitz did not reasonably rely on its bid because it could have pulled out of the project without any consequences. H & S notes that, although the invitation to bid required Weitz to hold its bid open for 60 days, Good Samaritan did not ask for a bid security. Furthermore, Weitz knew that H & S had cold feet before Weitz and Good Samaritan formally signed a contract.

But H & S could not expect Weitz to abandon the project because H & S decided its bid was too low. Weitz promised Good Samaritan that it would hold its bid open for 60 days, and breaking that promise would have sullied Weitz’ reputation. In particular, Good Samaritan might have been reluctant to work with Weitz again. Losing Good Samaritan’s business would have been a significant loss to Weitz because Weitz and Good Samaritan are both active in the retirement living market. Pulling out of the project would also have jeopardized Weitz’ preexisting relationship with the project architect. Good Samaritan selected the prequalified general contractors based, in part, on the architect’s recommendations. Weitz did not have to tell Good Samaritan that, as things turned out, it would not build the facility because of a squabble with a plumbing and HVAC subcontractor.

The fourth reason why, according to H & S, Weitz did not reasonably rely on its bid is that Weitz “attempted to accept quotations on materially different terms.” H & S argues, restated, that Weitz did not rely on its subcontractors’ bids, because it later asked subcontractors to sign a subcontract that did not mirror the terms of the subcontractors’ bids. H & S backed out before Weitz could send it a subcontract. But H & S suggests that Weitz would have sent it a subcontract similar to the one that Weitz sent to its other subcontractors and that this hypothetical subcontract would have been materially different from H & S’ bid.

A general contractor can reasonably rely on a subcontractor’s bid even if the general contractor and subcontractor contemplate signing a formal subcontract with additional standard terms after the bidding process ends. But a general contractor cannot demand that a subcontractor agree to unusual and onerous terms while still holding the subcontractor to its original bid. For example, in Hawkins Constr. Co. v. Reiman Corp., a general contractor demanded that a subcontractor agree to multiple “nonstandard additional conditions which could be considered onerous.” After the subcontractor refused to accept the terms, the general contractor tried to enforce the subcontractor’s bid under promissory estoppel. We held that the general contractor’s reliance was not reasonable because it could not assume that the subcontractor would acquiesce to onerous nonstandard terms.

But differences between a subcontractor’s bid and the subcontract do not matter if they are an “afterthought” raised by a subcontractor that wants to avoid its promise for other reasons. Here, H & S reneged because its bid was too low, and it did so before Weitz sent it a subcontract. So, H & S’ dispute with the terms of the subcontract is even less than an afterthought: It is imaginary. Plus, Sieck testified that Weitz had always accepted H & S’ revisions to the subcontract.

Finally, we reach H & S’ fifth argument as to why Weitz did not reasonably rely on its bid: It was so low that Weitz was on notice that H & S had made mistakes. Differences between the scope of H & S’ bid and the scopes of the other bids make a dollar-for-dollar comparison difficult, but H & S asserts that its bid was “considerably lower” than the those of its rivals.

We conclude that H & S’ bid was not so low that Weitz’ reliance on it was unreasonable. If a bid is so low that a mistake should be apparent, a general contractor cannot reasonably rely on the bid. But H & S’ bid was higher than what Weitz had budgeted based on historical data. Furthermore, the market for construction services was weak in 2011 and subcontractors were bidding aggressively. Kennedy and Mahlendorf testified that bids during this period could be unusually low compared to years in which the market was more robust. H & S sent its bid to all four of the prequalified general contractors. Two of the general contractors, including Weitz, chose H & S without first checking to see if H & S had made a mistake.

So, H & S’ bid was a promise on which reliance was foreseeable and Weitz reasonably relied on the bid. One question remains: Did the court have to enforce H & S’ bid to prevent injustice?

(c) Enforcement of H & S’ Bid Was Necessary to Prevent Injustice

We conclude that the court could avoid injustice only by enforcing H & S’ bid. As discussed above, many courts have recognized the unfairness of allowing a subcontractor to renege after the general contractor has relied on the subcontractor’s bid in the general contractor’s own successful bid to the owner. H & S argues that it is not fair to enforce its bid, because it made mistakes. But Weitz should not have to bear the cost of H & S’ errors: “As between the subcontractor who made the bid and the general contractor who reasonably relied on it, the loss resulting from the mistake should fall on the party who caused it.”

H & S argues that we should not enforce its bid, because Weitz engaged in the “unethical practice of bid shopping.” A general contractor bid shops by taking the lowest subcontractor’s bid to other subcontractors and asking them to undercut it. Courts are reluctant to use promissory estoppel if the general contractor bid shopped, either because bid shopping shows that the general contractor did not rely on the bid, or because injustice no longer requires enforcement of the bid, or both.

But the record does not show that Weitz shopped H & S’ bid. Sieck testified that he had “bitter feelings” about an earlier project in which Weitz bid shopped. That project, however, involved a bidding process different from the competitive process used by Good Samaritan. The only direct evidence that Weitz bid shopped during the Beatrice project is Sieck’s testimony about Mahlendorf’s aside about “shopping” in Beatrice. Mahlendorf did not remember making that statement. He testified that Weitz had no intent to shop H & S’ bid. In a credibility battle, Mahlendorf has the better of the admittedly bitter Sieck, who candidly testified about “toying with” his memory of the communications between H & S and Weitz.

In conclusion, H & S’ bid was a promise on which reliance was foreseeable. Weitz actually and reasonably relied on the bid. And justice required the court to enforce H & S’ bid. So the court did not err by entering a judgment for Weitz on its promissory estoppel claim.

2. Damages

H & S does not agree with the amount of damages. It argues that the court erred by “awarding benefit of the bargain / contract damages rather than reliance damages.” H & S further contends that Weitz did not prove its damages with reasonable certainty and that its damages are necessarily zero, because Good Samaritan did not ask for a bid security.

No single measure of damages applies in every promissory estoppel case. The commentary to the Restatement (Second) of Contracts explains that the ultimate standard for enforcing the promise—the prevention of injustice—also guides the measurement of damages. The damages that the promisor ought to pay are those that justice requires. In some cases, justice requires only reliance damages.

…

We did not limit damages to the extent of the promisee’s reliance in every promissory estoppel case. As we said in Rosnick, promissory estoppel provides for damages as justice requires. Remedial flexibility is consistent with promissory estoppel’s equitable roots. Justice does not require the same measure of damages in every context.

In the construction bidding context, courts have “consistently and uniformly” measured the general contractor’s damages as the difference between the reneging subcontractor’s bid and the amount the general contractor paid to replacement subcontractors. Here, the court measured Weitz’ damages in a consistent manner. It is “plain that justice required this measure of damages.”

We reject H & S’ argument that Weitz did not prove its damages with enough exactitude. A plaintiff’s burden is to prove his or her damages to a reasonable certainty, not beyond all reasonable doubt. Nor were Weitz’ damages zero simply because Good Samaritan did not ask for a bid security. As we explained above, H & S could not demand that Weitz walk away from the project because H & S was unhappy with its bid.

3. Election of Remedies

Finally, H & S waived its argument that the court should have required Weitz to elect between its contract and promissory estoppel claims. The election of remedies doctrine is an affirmative defense. A party must specifically plead an affirmative defense for the court to consider it. H & S did not specifically plead election of remedies as a defense, so we will not consider it.

VI. CONCLUSION

We affirm the judgment for Weitz on its promissory estoppel claim. H & S’ bid was a promise, and it should have foreseen that Weitz, as was usual in the construction industry, might rely on the bid. Weitz reasonably relied on the bid by incorporating it in Weitz’ own bid to the project owner. And the court could avoid injustice only by enforcing H & S’ bid. We further conclude that the court correctly measured Weitz’ damages.

Affirmed.

Garwood Packaging, Inc. v. Allen & Co., Inc.

378 F.3d 698 (7^th Cir. 2004)

Posner, Circuit Judge.

This is a diversity suit, governed by Indiana law, in which substantial damages are sought on the basis of promissory estoppel. The suit pits Garwood Packaging, Inc., which created a packaging system designed to increase the shelf life of fresh meat, and its two principals, Garwood and McNamara, against Allen & Company (an investment company) and a vice-president of Allen named Martin. We shall refer to the plaintiffs collectively as “GPI” and the defendants collectively as “Allen.” The district court granted summary judgment in favor of Allen and dismissed the suit.

* * *

GPI had flopped in marketing its food-packaging system and by 1993 had run up debts of $3 million and was broke. It engaged Martin to help find investors. After an initial search turned up nothing, Martin told GPI that Allen (Martin’s employer, remember) would consider investing $2 million of its own money in GPI if another investor could be found who would make a comparable investment. The presence of the other investor would reduce the risk to Allen not only by augmenting GPI’s assets but also by validating Allen’s judgment that GPI might be salvageable, because it would show that someone else was also willing to bet a substantial sum of money on GPI’s salvation. To further reduce its risk Allen decided to off-load half its projected $2 million investment on other investors.

Martin located a company named Hobart Corporation that was prepared to manufacture $2 million worth of GPI packaging machines in return for equity in the company. Negotiations with Hobart proved arduous, however. There were two sticking points: the amount of equity that Hobart would receive and the obtaining of releases from GPI’s creditors. Hobart may have been concerned that unless the creditors released GPI the company would fail and Hobart wouldn’t be able to sell the packaging systems that it manufactured. Or it may have feared that the creditors would assert liens in the systems. All that is clear is that Hobart insisted on releases. They were also important to the other investors whom Allen wanted to bring into the deal, the ones who would contribute half of Allen’s offered $2 million.

Martin told Garwood and McNamara (GPI’s principals) that he would see that the deal went through “come hell or high water.” Eventually, however, Allen decided not to invest, the deal collapsed, and GPI was forced to declare bankruptcy. The reason for Allen’s change of heart was that the investors who it thought had agreed to put up half of “Allen’s” $2 million had gotten cold feet. When Allen withdrew from the deal, no contract had been signed and no agreement had been reached on how much stock either Allen or Hobart would receive in exchange for their contributions to GPI. Nor had releases been obtained from the creditors.

GPI’s principal claim on appeal, and the only one we need to discuss (the others fall with it), is that Martin’s unequivocal promise to see the deal through to completion bound Allen by the doctrine of promissory estoppel, which makes a promise that induces reasonable reliance legally enforceable. If noncontractual promises were never enforced, reliance on their being enforceable would never be reasonable, so let us consider why the law might want to allow people to rely on promises that do not create actual contracts and whether the answer can help GPI.

The simplest answer to the “why” question is that the doctrine merely allows reliance to be substituted for consideration as the basis for making a promise enforceable. On this view promissory estoppel is really just a doctrine of contract law. The most persuasive reason for the requirement of consideration in the law of contracts is that in a system in which oral contracts are enforceable—and by juries, to boot—the requirement provides some evidence that there really was a promise that was intended to be relied on as a real commitment. Actual reliance, in the sense of a costly change of position that cannot be recouped if the reliance turns out to have been misplaced, is substitute evidence that there may well have been such a promise. The inference is especially plausible in a commercial setting, because most businesspeople would be reluctant to incur costs in reliance on a promise that they believed the promisor didn’t consider himself legally bound to perform.

In other words, reasonable reliance is seen as nearly as good a reason for thinking there really was a promise as bargained-for reliance is. In many such cases, it is true, no promise was intended, or intended to be legally enforceable; in those cases the application of the doctrine penalizes the defendant for inducing the plaintiff to incur costs of reliance. The penalty is withheld if the reliance was unreasonable; for then the plaintiff’s wound was self-inflicted—he should have known better than to rely.

A relevant though puzzling difference between breach of contract and promissory estoppel as grounds for legal relief is that while the promise relied on to trigger an estoppel must be definite in the sense of being clearly a promise and not just a statement of intentions, its terms need not be as clear as a contractual promise would have to be in order to be enforceable. Indiana may go furthest in this direction: “Even though there were insufficient terms for the enforcement of an express oral contract, and unfulfilled pre-existing conditions prohibiting recovery for breach of a written contract ..., we are not precluded from finding a promise under these circumstances. Indeed, it is precisely under such circumstances, where a promise is made but which is not enforceable as a ‘contract,’ that the doctrine of promissory estoppel is recognized.” First National Bank of Logansport v. Logan Mfg. Co., supra, 577 N.E.2d at 955.

The reason for this difference between breach of contract and promissory estoppel is unclear. A stab at an explanation is found in Rosnick v. Dinsmore, 235 Neb. 738, 457 N.W.2d 793, 800 (1990), where the court said that “promissory estoppel only provides for damages as justice requires and does not attempt to provide the plaintiff damages based upon the benefit of the bargain. The usual measure of damages under a theory of promissory estoppel is the loss incurred by the promisee in reasonable reliance on the promise, or ‘reliance damages.’ Reliance damages are relatively easy to determine, whereas the determination of ‘expectation’ or ‘benefit of the bargain’ damages available in a contract action requires more detailed proof of the terms of the contract.” The only problem with this explanation is that its premise is mistaken; if the promise giving rise to an estoppel is clear, the plaintiff will usually be awarded its value, which would be the equivalent of the expectation measure of damages in an ordinary breach of contract case. The rationale in both cases is that the benefit of the contract to the promisee is a good proxy for the opportunities that he forewent in making the contract. Of course, if the promise is unclear, damages will be limited to expenses incurred in reasonable reliance on the vague promise, but that would be equally true in a breach of contract case in which the promise that the defendant had broken was unclear.

But even though the court is “not precluded from finding a promise” by its vagueness, the vaguer the alleged promise the less likely it is to be found to be a promise. And if it is really vague, the promisee would be imprudent to rely on it—he wouldn’t know whether reliance was worthwhile. The broader principle, which the requirement that the promise be definite and at least minimally clear instantiates, is that the promisee’s reliance must be reasonable; if it is not, then not only is he the gratuitous author of his own disappointment, but probably there wasn’t really a promise, or at least a promise intended or likely to induce reliance. The “promise” would have been in the nature of a hope or possibly a prediction rather than a commitment to do something within the “promisor’s” power to do (“I promise it will rain tomorrow”); and the “promisee” would, if sensible, understand this. He would rely or not as he chose but he would know that he would have to bear the cost of any disappointment.

We note, returning to the facts of this case, that there was costly reliance by GPI, which forewent other opportunities for salvation, and by Garwood and McNamara, who moved from Indiana to Ohio to be near Hobart’s plant where they expected their food-packaging system to be manufactured, and who forgave their personal loans to GPI and incurred other costs as well. The reliance was on statements by Martin, of which “come hell or high water” was the high water mark but is by no means an isolated example. If GPI’s evidence is credited, as it must be in the procedural posture of the case, Martin repeatedly confirmed to GPI that the deal would go through, that Allen’s commitment to invest $2 million was unconditional, that the funding would be forthcoming, and so on; and these statements induced the plaintiffs to incur costs they would otherwise not have done.

But were these real promises, and likely to be understood as such? Those are two different questions. A person may say something that he intends as merely a prediction, or as a signal of his hopes or intentions, but that is reasonably understood as a promise, and if so, as we know (this is the penal or deterrent function of promissory estoppel), he is bound. But what is a reasonable, and indeed actual, understanding will often depend on the knowledge that the promisee brings to the table. McNamara, with whom Martin primarily dealt, is a former investment banker, not a rube. He knew that in putting together a deal to salvage a failing company there is many a slip ‘twixt cup and lips. Unless blinded by optimism or desperation he had to know that Martin could not mean literally that the deal would go through “come hell or high water,” since if Satan or a tsunami obliterated Ohio that would kill the deal. Even if Allen had dug into its pockets for the full $2 million after the investors who it had hoped would put up half the amount defected, the deal might well not have gone through because of Hobart’s demands and because of the creditors. GPI acknowledges that the Internal Revenue Service, one of its largest creditors, wouldn’t give a release until paid in full. Some of GPI’s other creditors also intended to fight rather than to accept a pittance in exchange for a release. Nothing is more common than for a deal to rescue a failing company to fall apart because all the creditors’ consent to the deal cannot be obtained—that is one of the reasons for bankruptcy law. Again these were things of which McNamara was perfectly aware.

The problem, thus, is not that Martin’s promises were indefinite, which they were not if GPI’s evidence is credited, but that they could not have been reasonably understood by the persons to whom they were addressed (mainly McNamara, the financial partner in GPI) to be promises rather than expressions of optimism and determination. To move to Ohio, to forgive personal loans, to forgo other searches for possible investors, and so forth were in the nature of gambles on the part of GPI and its principals. They may have been reasonable gambles, in the sense that the prospects for a successful salvage operation were good enough that taking immediate, even if irrevocable, steps to facilitate and take advantage of the expected happy outcome was prudent. But we often reasonably rely on things that are not promises. A farmer plants his crops in the spring in reasonable reliance that spring will be followed by summer rather than by winter. There can be reasonable reliance on statements as well as on the regularities of nature, but if the statements are not reasonably understood as legally enforceable promises there can be no action for promissory estoppel.

Suppose McNamara thought that there was a 50 percent chance that the deal would go through and believed that reliance on that prospect would cost him $100,000, but also believed that by relying he could expect either to increase the likelihood that the deal would go through or to make more money if it did by being able to start production sooner and that in either event the expected benefit of reliance would exceed $100,000. Then his reliance would be reasonable even if not induced by enforceable promises. The numbers are arbitrary but the example apt. GPI and its principals relied, and may have relied reasonably, but they didn’t rely on Martin’s “promises” because those were not promises reasonably understood as such by so financially sophisticated a businessman as McNamara. So we see now that the essence of the doctrine of promissory estoppel is not that the plaintiff have reasonably relied on the defendant’s promise, but that he have reasonably relied on its being a promise in the sense of a legal commitment, and not a mere prediction or aspiration or bit of puffery.

One last point. Ordinarily the question whether a plaintiff reasonably understood a statement to be a promise is a question of fact and so cannot be resolved in summary judgment proceedings. But if it is clear that the question can be answered in only one way, there is no occasion to submit the question to a jury.

Affirmed.