Contracts and Sales Multistate Bar Practice Exam

Under what circumstances does promissory estoppel apply?

1. When both parties have signed a contract

2. If the promisor reasonably expects reliance and the promisee relies to their detriment

3. When a promise is made verbally

4. If the intended benefit is not material

The correct answer is: If the promisor reasonably expects reliance and the promisee relies to their detriment

Promissory estoppel applies in situations where a party makes a promise that leads another party to take action or refrain from taking action, resulting in detriment to the promisee. Specifically, it is essential that the promisor reasonably expects that the promise will induce reliance on the part of the promisee, and that the promisee actually relies on that promise to their detriment. This principle serves to prevent the promisor from being unjustly enriched at the expense of the promisee. In this context, the concept of reasonable expectation is crucial; it establishes that the promisor should foresee that the promise would lead the promisee to act on it. The reliance must also be detrimental, meaning that the promisee suffers a loss or incurs some form of harm based on their reliance on the promise. When these conditions are met, promissory estoppel allows the promisee to enforce the promise even in the absence of a formal contract. The other options do not capture the essence of promissory estoppel. For instance, simply having a signed contract or a verbal promise does not automatically invoke this doctrine. Additionally, the materiality of the intended benefit is not a determining factor in establishing promissory estoppel; rather, the focus is on the