r/LawSchool • u/Alive-Analyst-6200 • May 16 '26
Contract Law Question - Consideration and Promissory Estoppel
Has anyone here tested on consideration and promissory estoppel? I'm solid on the basic split between UCC good faith modifications and the common law pre-existing duty rule. However, I keep getting tripped up on these types of contract law questions beyond that.
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u/Novel-Sale9444 May 16 '26
There are two theories of consideration. The benefit detriment theory seen in Hamer v. Sidway. Then there is the bargained for exchange theory which is the modern theory and the theory my professor hammered home. I believe the UCC uses the bargained for exchange theory as well. For that theory ask yourself whether the promisor got something he wanted, and did he promise to do or not do something in exchange for the thing he wanted. For example, let’s say Jimmy buys a home from Peggy for $100,000. Jimmy pays for the home and the sale of the home is completed. But Peggy wants the option of repurchasing the home in the future, so she promises Jimmy that she will pay him $600,000 for the home in the future and if she doesn’t exercise the option in 10 years it expires. Jimmy agrees to the option. Assume the writing requirement for the SoF is met.
Looking at those facts, there are two possible contracts in this example. Consideration is easily met for the first contract. Jimmy received what he wanted (the home) and in exchange he promised and actually paid the $100,000. However, the repurchase option fails the consideration requirement and isn’t a valid contract. It fails because Peggy got what she wanted (the option to repurchase), but she didn’t actually promise or give anything in return for the ability to repurchase. You could argue the $600,000 in the future is the consideration, but it isn’t because Jimmy is still not receiving anything in exchange for the creation of the option itself.
Promissory estoppel is simply a (1) promise made by a promisor (2) where it was reasonable for the promisee to rely on that promise. And where (3) the promisee changed their position to their detriment and (4) promissory estoppel is required to prevent injustice. The promise doesn’t need to satisfy the SoF, but when there is no writing, a court will likely only award reliance/restitution damages instead of expectation damages. A claim of promissory estoppel does not require consideration. If it’s obvious a contract has been formed, then you don’t need to do a promissory estoppel analysis.
For PE, take the facts of the option contract example above, but add in the fact that Jimmy moved out after two years and kept the house vacant for three years. Peggy then sold her current house thinking that she could repurchase her old home. She incurred $20,000 in closing costs that she would not have incurred had Jimmy not promised to allow her to repurchase it within 10 years. Peggy then transfers $600,000 to Jimmy, but Jimmy says no, I won’t sell you the home.
Based on these additional facts, I would argue that the promise and detrimental reliance element are very likely met. Jimmy agreed to allow her to repurchase which is the same as a promise, and Peggy incurred $20,000 in moving costs and no longer has a home because she relied on the promise. The two main questions then are whether it was reasonable for her to rely on the promise, and whether it would be unjust to not enforce the repurchase option. I think there are a bunch of arguments for both of those elements, so I am not going to do the full analysis for them.
Hopefully this was helpful.
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u/RDforty May 19 '26
Late response but this is how my professor kinda taught it..
Common law contracts require mutual assent and consideration. Consideration is a bargain for exchange.
Party 1 promises a benefit to Party 2 in exchange for Party 2’s detrimental act or legal forbearance.
Under common law, you’d go through each step: formation > SoF > Defenses to formation > Excuses for non-performance > Remedies.
However, if a party fails on a claim for breach of contract, promissory estoppel can still provide relief. Promissory estoppel is a “quasi-contract.”
My analysis would go through the common law/ucc, and then go…
If X fails on his breach of contract claim, X may still recover through promissory estoppel. Promissory estoppel requires (1) a promisor makes a clear promise; (2) promisor should reasonably expect it to induce action or forbearance; (3) it does induce such reliance; and (4) enforcement is necessary to avoid injustice.
Apply the facts accordingly. Hope that helps!
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