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Contracts: Reliance

The next topic is reliance. The first case is Kirksey v. Kirksey. Here, a man invited his widowed sister-in-law and her family to his property and said he’d provide a home and land for them. Initially he did this, but he moved them twice; they eventually ended up in a place slightly better than a shack that was located in the woods. The court said that there wasn’t consideration, but one judge, in his dissent, said that the sister-in-law’s reliance on the brother-in-law’s promise should be sufficient consideration. Because courts started thinking this way, they found ways to get around the question of reliance as consideration.

The first way is estoppel in pais or equitable estoppel. Here, if A makes a statement of fact to B and B has foreseeably relied on the statement, A is prevented from denying the truth of the statement. So, using Kirksey as an example, the brother-in-law said he’d take care of his sister-in-law, and since the sister relied on that statement, the brother couldn’t deny he’d made the statement.

The second way is promissory estoppel, also known as detrimental reliance. Promissory estoppel occurs when 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. (Res. 2d. § 90). Basically, if someone makes you a promise and you act on that promise, then the promise is binding. Thus, reliance is a form of consideration.

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January 9, 2007 - Posted by | Contracts

1 Comment »

  1. Thank you that make a lot of sense!
    I could not get it the way book describes.
    Keep up with a good work.

    Comment by Oxa | March 19, 2013 | Reply


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