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

Brief Fact Summary.

Garwood Packaging, Incorporated (Garwood), sued Allen & Company for failing to carry out a promise to invest in Garwood as promised. 

Synopsis of Rule of Law.

A promisee’s reliance on a promise must be reasonable to satisfy promissory estoppel. 

Facts.

Garwood Packaging, Inc. (Garwood), created a food packaging system that was not succeeding and accrued $3 million in debt. Garwood sought investment from Allen & Company (Allen) who promised to invest $2 million if Garwood found other companies to match their investment. At the recommendation of Allen, Garwood sought out the Hobart Corporation (Hobart) to invest. Hobart, along with other companies who were contributing to Allen’s investment, claimed that they would not invest unless they received written releases from Garwood’s creditors. Allen assured Garwood that they could continue with the agreement to invest “come hell or high water.” Garwood ultimately sued Allen after Allen withdrew their investment. The district court granted summary judgment to Allen and Martin, Garwood appealed. 

Issue.

Whether a promisee’s reliance on a promise must be reasonable to satisfy promissory estoppel?

Held.

Yes. Garwood knew that their creditors were not likely to grant releases and that the deal would not go through, despite Allen’s assurances. Allen’s promise that the deal would go through “come hell or high water” could not induce reasonable reliance on the part of Garwood. The judgment of the district court is affirmed. 

Discussion.

A promise that induces reasonable reliance is enforceable under the doctrine of promissory estoppel. A contract is established under promissory estoppel if the promisee takes a substantial action in reliance of the promise.