Today we're going to look at a well-known case, Allegheny College versus national Chautauqua County Bank of Jamestown, which was decided by the highest court of the state of New York in 1927. We will use the case to talk more broadly about some issues related to promissory estoppel. The case concerns a promise to make a charitable bequest. Allegheny college in Northwestern Pennsylvania, ran a fundraising drive in 1921 and persuaded Mary Yates Johnston who lived in New York, to promise to make a donation of $5,000 upon her death. She signed a document to that effect and two witnesses signed as well. She donated a thousand dollars in 1923 while she was still alive, and she later retracted her promise. Now, when the case is being argued, Mrs Johnston has passed away and the college was trying to enforce her promise against the bank that was serving as the executor of her estate. In this case, Judge Benjamin Cardozo, later Justice Cardozo had to decide whether Mrs. Johnston's promise was enforceable for lack of consideration. Cardozo spends a significant portion of his decision discussing the doctrine of promissory estoppel which he sees as a new direction in which contract laws involving. Promissory estoppel is "a substitute for consideration or an exception to its ordinary requirements." Ordinarily, as we've discussed in past weeks, a valid contract must include consideration which is bargained for benefit to the promise or a legal detriment to the promisee. Promissory estoppel is quite different. Under this doctrine, a promise is enforceable if the promisee incurs expense to the knowledge of the promisor and in reasonable belief that the promise would be kept. Donative promises to non-profit institutions such as schools and churches often, give rise to this kind of reliance as the donees embark on big construction projects that depend on the promised money. Notice, that the focus in these cases is on the promisee's reliance interest. They have adjusted their behavior in response to a promise and therefore are harmed when some promises are broken. They might be left with half a building because the funding for the rest did not come through. Cardozo notes that judges in New York have adopted the doctrine of promissory estoppel as the equivalent of consideration in connection with our law of charitable subscription. In doing so, the judges have been influenced by conceptions of public policy. They believe that charitable organizations do important and beneficial work that would not be possible without an ability to rely on promised donations. Organizations need to be able to plan for the future. Today promissory estoppel in New York is no longer restricted only to context such as charitable subscriptions. But it does have some additional elements, not required in section 90 of the restatement of contracts. In New York, the promise must be clear and unambiguous. And the reliance must be foreseeable to the promise soar and reasonable by the promisee and the resulting injury must be unconscionable. It's possible that promissory estoppel would have developed more quickly. But for judge Cardozo's failure to use it in Allegheny College. So why didn't judge Cardozo use the doctrine of promissory estoppel? One possibility is that Section 90 of the first restatement requires a definite and substantial reliance, which is difficult to find in a case like this. We can also ask what sort of damages should be available to Plaintiff in cases based on promissory estoppel. The first restatement and some treatises have treated suits based on promissory estoppel as exactly like other contractual promissory claims, with expectation damages as the default rule. But others have since argued that because the doctrine of promissory estoppel is based on the promises reliance, the appropriate measure of damages is restricted, the promises reliance interest. The second restatement suggests the promissory estoppel follows the same rules for damages as other breach of contract cases. But comment D to the section 90, suggests that damages might quote sometimes to be limited to restitution or damages or specific relief measured by the extent of the promises reliance, rather than by the terms of the promise. One of the main reasons for expectation damages is to ensure that courts fully compensate hidden reliance in bargain for contracts. In non-bargain contracts, courts can just protect reliance unless there is reason to suspect hidden reliance. In which case, they can use the expectation damage measure to give this fuller protection. So in practice, what kind of damages are awarded today in promissory estoppel cases? Legal scholars have read hundreds of promissory estoppel cases trying to discover the answer to this question without coming to a clear consensus. But it's reasonable to conclude that for non-charity promises, the damages may be less generous than what is given under contract law. Cardozo does not end up ruling based on promissory estoppel. Rather, he argues that there was consideration in this case. Mrs Johnson specified that her quote gift should be known as the Mary Yates Johnston Memorial Fund unquote. He argues that by implication, the college undertook when it accepted a portion of the gift that in its circulars of information and another customary ways when making announcements of the scholarship, it would couple with the announcement, the name of the donor. Does this remind you of another Cardozo opinion? Well it should. Cardozo also found an implied return promise to service consideration in wood versus Lucy Lady Duff Gordon. There was the implied promise to use reasonable efforts in an exclusive dealing agreement. Here, it is an implied promise to publicize the donor's name. From these two cases, we can start thinking of Cardozo as the great employer. There seems to be no nude promise that he can't clothe with implied return consideration. Commentators have tended to view Cardozo's characterization of the transaction quite skeptically. And we can see this already in Judge Kellogg's dissent in this case. First of all, Kellogg's thinks that Ms Johnston's use of the term gift, undermines the idea that the donation was intended to be a quid pro quo. Further, her inclusion that the line in her promise to donate was at most an offer the college never accepted it. But he views Mrs Johnston's communication with the college as insufficiently concrete and specific to really count as part of the bargaining that was leading up to a contract. And so, there was not even an offer. Colleges and other non-profits do frequently bargain with donors for naming rights, but it seems highly unlikely that such a bargain took place in Mrs Johnston's case. Bargained for naming rights, looked much more like ordinary contracts and would better fit the mold into which Cardozo tries to shove this case. So which of the following is not an element of promissory estoppel? The promissory should foresee that the promisee would rely, the promisee C does in fact rely on the promise, the promisor and promisee a bargain for the promise, the promisee was reasonable and relying on the promise. Well the answer is C. Promissory estoppel applies in exactly those cases where there is no bargain for exchange between the two parties. The other items are key things that courts look for in evaluating suits based on promissory estoppel. So we have seen that promissory estoppel allows courts to enforce promises, even in the absence of consideration. Instead, courts look at the promisee's reasonable and genuine reliance on the promise, and the promisor's knowledge of or ability to foresee that the promisor would rely. We've also seen that courts may use either the expectation measure or the reliance measure in assessing damages in these cases, though we've also seen that there's been some shift over time toward limiting damages to reliance.
