A property owner verbally promises a contractor, "If you install a state-of-the-art security system in my warehouse, I will reimburse whatever costs you incur." Relying on the promise, the contractor purchases equipment and begins the installation, spending $25,000. Two weeks later, the owner orders the contractor to stop work and refuses to pay, asserting that "we never signed anything."
If the contractor sues the owner to recover the $25,000 already spent, which doctrinal theory is most likely to allow the contractor to recover despite the absence of a traditional bargain?
The promise is unenforceable under the Statute of Frauds because the agreement was not in writing.
Promissory estoppel, because the contractor reasonably relied on the owner's promise and enforcement is necessary to avoid injustice.
Restitution (quasi-contract), because the owner has been unjustly enriched by the contractor's partial performance.
The contractor cannot recover because the promise lacked consideration and is therefore unenforceable.
Under Restatement (Second) of Contracts § 90, a promise is binding when the promisor should reasonably expect to induce action or forbearance, the promisee does in fact rely, and enforcement is necessary to avoid injustice. The owner's promise to reimburse costs induced the contractor to spend $25,000; refusing to enforce the promise would leave the contractor uncompensated for foreseeable reliance.
Restitution (quasi-contract) is less certain here because the owner has received little or no benefit; recovery would be limited to any enrichment actually conferred. The lack-of-consideration argument fails because promissory estoppel supplies a substitute for consideration. The Statute of Frauds does not bar recovery: this is a services contract that can be performed within a year and therefore need not be in writing. Consequently, promissory estoppel is the doctrine most likely to support the contractor's claim.
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What is promissory estoppel, and how does it work?