Promissory Estoppel Basics
PROMISSORY ESTOPPEL BASICS
By: Robert S. Tanner, Esq.
About the Author: Larry Leiby, Esq. was the founder and first chairman of the Florida Bar Construction Law Committee in 1976. He is the author of the Florida Construction Law Manual. He is Board Certified in Construction Law and was on the Construction Law Certification Committee that creates and grades the tests for construction law board certification. He was awarded the lifetime achievement award by the Florida Bar Construction Law Committee and teaches construction law at the Florida International University College of Law. He can be reached at [email protected]. For more information, please visit www.mkpalaw.com.
Those promise can you rely on might not be as important as the kind of promise can you rely on, at least from a legal perspective where being able to rely on a promise means being able to hold the person to it. Of course, promises are the foundation for contracts, but there are times when a person makes a promise but that promise does not give contractual rights to the person who relies on the promise. In such instances, the law may provide the person relying on the promise with the right to enforce the promise.
In Criterion Leasing Group v. Gulf Coast Plastering & Drywall, 582 So. 2d 799 (Fla. 1 st DCA 1991), Evans & Blount Stucco (“Evans Blount”) had a sub-subcontract with Gulf Coast Plastering & Drywall (“Subcontractor”). Robert Bruce (“Employee”) worked for Evans Blount and was injured on the job. Evans Blount had provided Subcontractor with proof of workers’ compensation coverage issued by Hartford Insurance Group (“Hartford”). Subcontractor (and its insurer) initially accepted Employee’s claim but thereafter sought reimbursement from Evans Blount and Hartford.
Hartford’s insurance coverage did not name Subcontractor as an insured and, therefore, Subcontractor did not have contract rights against Hartford. Subcontractor advanced the argument that Hartford was liable based on the certificate of insurance it had issued (i.e., Hartford’s promise) because, by it, Hartford had induced Subcontractor to rely on Hartford to insure losses covered by its policy. Subcontractor argued that it would have procured the proper insurances if Hartford had not issued the certificate of insurance.
Subcontractor’s argument was based on the legal theory called “promissory estoppel.” Under promissory estoppel, a person may be held for making a promise which he reasonably should expect would induce action or forbearance by another person, and which does reasonably induce such action or forbearance to his detriment.
The court found that Hartford should reasonably have foreseen that Subcontractor would rely upon the certificate of insurance because it represented that Evans Blount as covered by a workers’ compensation policy. The court also found that Hartford’s certificate of insurance reasonably induced Subcontractor’s reliance because under the workers’ compensation law if Evans Blount did not have coverage, Subcontractor was required to procure it. Finally, Subcontractor had relied to its detriment upon Hartford’s certificate of insurance because Subcontractor was personally exposed to liability when it did not procure coverage.
Promissory estoppel may be used in a variety of situations, including bid situations. For example, in W.R. Townsend Contracting, Inc. v. Jensen Civil Construction, Inc., 728 So. 2d 297 (Fla. 1 st DCA 1999), a subcontractor provided a price to a contractor submitting a bid on a public project based upon the contractor’s promise to award a sub-contract to the subcontractor if the contractor won the bid. The subcontractor had only reluctantly provided the price to the contractor because the subcontractor had also provided the price to one of the contractor’s competitors. The contractor won the bid and the contractor’s competitor was the second lowest bidder. Despite its promise, the contractor refused to award the subcontract to the subcontractor, which excluded the subcontractor from participating in the project. The court allowed the subcontractor to sue the reneging contractor on the theory of promissory estoppel.
If you are going to rely on someone’s promise, it is preferable to have that promise in a contract. However, if there is not a contract, a promise might still be enforceable.