What Is the Difference between a Breach of Contract Claim and One for Promissory Estoppel

When someone enters into a contract, they expect the other party to fulfill their end of the bargain. However, there are times when the other party fails to meet their obligations, resulting in a need for legal action. In these scenarios, two possible claims may arise: breach of contract and promissory estoppel. Despite potentially overlapping elements, each is distinct and must be understood to determine the best course of action in a legal dispute.

A breach of contract occurs when one party fails to fulfill an obligation specified in the contract. The non-breaching party can file a claim against the breaching party in court, seeking compensation for damages resulting from the breach. The compensation could include financial losses or the cost to fix the situation.

For example, imagine a construction contract between a property owner and a contractor. The contract specifies that the contractor will complete the building within 12 months, but the project remains unfinished for 16 months. In this scenario, the property owner could sue the contractor for breach of contract since they did not complete the project within the agreed-upon timeframe.

Promissory estoppel, on the other hand, arises when one party makes a promise to another with the expectation that they will rely on that promise to their detriment. If the other party does indeed rely on the promise and suffers a loss, the injured party can sue for damages. In contrast to breach of contract, promissory estoppel can apply even if no contract exists, or if the promise is made outside the confines of an existing contract.

For example, imagine a situation where a company promises to hire someone for a particular position. The candidate rejects other job offers and moves to a new city based on this promised position but later finds out that the company has decided not to hire them. In this scenario, the candidate can sue the company for promissory estoppel since they moved and rejected other offers based on the company’s promise.

In summary, while both breach of contract and promissory estoppel involve parties failing to meet their obligations, they differ in how the obligations were formed. A breach of contract is related to a written contract, while promissory estoppel arises from an oral or written promise upon which someone relies to their detriment. So, understanding the differentiation between these two legal claims is essential when deciding which legal action to pursue.