Brief Fact Summary. Company 1 was a manufacturer of lathes that are used to make metal products. Company 1 was encouraged by a representative of company 2 to construct a lathe fitted to make a component for one of company 2's products, and to lease an office to house the machine.
Synopsis of Rule of Law. To recover under promissory estoppel, the promisee's reliance must have been reasonable.
Issue. Does the reliance necessary to demonstrate a cause of action for promissory estoppel need to be reasonable?
Held. Yes. Three elements must be proven to successfully plead a cause of action for promissory estoppel: "(1) Was the promise one which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee? (2) Did the promise induce such action or forbearance? (3) Can injustice be avoided only by enforcement of the promise?"
• The court affirms the district court's treatment of all three elements. As to the first, the court affirmed that "Wolf, promised Werner that he would be an off-load parts supplier for Xerox" and that "Wolf's promises were more than mere representations regarding what Xerox might do in the future." Additionally that the Defendant should have "reasonably expected" Mr. Wolf's actions to induce the Defendant's actions. Further, that after Mr. Wolf's supervisor made his comments, Mr. Werner could no longer have reasonably relied on the Defendant's promises.
• As to the second, the court found that the phrases "justifiable" reliance and "in the exercise of ordinary care" are synonymous with one another, and that to recover under promissory estoppel the promisee's reliance must have been reasonable. Applying this to the facts here, the court found that Mr. Werner's conduct was reasonable until July 1979, when Mr. Wolf's supervisor made his comment that the Plaintiffs would never produce parts at the leased facility. After the supervisor made his comments, however, the reliance became unreasonable.
• As to the third, the court recognized that the district court "held that injustice could only be avoided [ ] by enforcement of Wolf's promise." The court could not find that the district court abused its discretion by finding "Werner "deviated from his usual manner of doing business, … leased a large facility [, went] into business with the Verheims (sic) and hired an employee, Robert Parr, to work for the newly created corporation."
• The court also refused to overturn the lower courts award of reliance damages
Discussion. This case demonstrates that recovery under promissory estoppel is limited to reliance that is reasonable.