Promissory
Estoppel
The
question of the extent of a court’s power to award damages
in a promissory estoppel case is not one that is likely to be
resolved soon.
At
its heart, the issue involves a topic of great division on the
Wisconsin Supreme Court — the distinction between tort and
contract. See Linden v. Cascade Stone Co., Inc., 2005 WI 113,
283 Wis.2d 606, 699 N.W.2d 189 (debating whether contract law
is drowning in a sea of tort, or whether tort law is drowning
in a sea of contract).
The
“traditional” view of promissory estoppel is that it
serves as merely a substitute for consideration in contract cases.
S. Williston, “The Law of Contracts” sec. 139, at 307
(1920).
Yet
another view is that, “promissory estoppel is promissory
estoppel,” an equitable form of relief that sits on its own
bottom. Eric Mills Holmes, “The Four Phases of Promissory
Estoppel,” 20 Seattle U.L.Rev. 45, 46 n.5 (1996).
The
most “progressive” view has all but ceased to recognize
any difference between contract and tort: “People make promises,
people break promises, other people get hurt. Is this tort? Is
this contract? As Karl Llewellyn once pungently remarked, ‘What
the hell!’” Charles L. Knapp, “Rescuing Reliance:
The Perils of Promissory Estopppel,” 49 Hastings L.J. 1191,
1244 n.6 (1998).
In
Hoffman v. Red Owl Food Stores, 26 Wis.2d 683, 133 N.W.2d 267
(1965), the Wisconsin Supreme Court rejected the “traditional”
view. It is still not clear, however, where exactly promissory
estoppel sits: all alone; or somewhere on a tort/contract continuum.
The
most recent Wisconsin Supreme Court case to consider the issue
is Scott v. Savers Property & Casualty Ins. Co., 2003 WI 60,
262 Wis.2d 127, 663 N.W.2d 715.
Writing
for the court, Chief Justice Shirley S. Abrahamson took a progressive
view of the matter. Id., 663 N.W.2d at 729-730.
In
a concurrence, then-Justice Diane S. Sykes took a very traditional
view. Id., at 731-732.
However,
the case produced five separate opinions in all, and the promissory
estoppel issue was rather tangential to the governmental immunity
issue, so it may not be the best indicator of what would happen
if the classification of promissory estoppel was dispositive of
a case.
The
issue is relevant, because, as noted above, where to draw the
line between contract and tort is a subject of enormous contention
in Wisconsin.
At
some point, the court will face a case with the following facts:
there is no contract, but the elements of promissory estoppel
are met. The plaintiff’s damages far exceed what he could
be awarded in contract, and specific performance is insufficient
to produce an equitable result.
The
question is, “Can the court really award whatever damages
are necessary to prevent injustice, even though that award would
exceed what could have been awarded if a contract did exist, and
exceeds what could be ordered via specific performance?”
Suppose
in the case at bar, for example, the plaintiff could have shown
that the defendant’s failure to pay him the $250,000 was
the proximate cause of $500,000 in damages.
If
there was an actual contract, the court could not award that much.
But the language of the court — “A court, in fashioning
a remedy, can consider any equitable or legal remedy which will
‘prevent injustice.’” (emphasis in original) —
suggests that it could.
Given
the vehement disagreement on the Supreme Court over the distinction
between tort and contract in the economic loss doctrine context,
this issue may present a fertile battleground, as well.
-
David Ziemer
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David
Ziemer can be reached by email.
