Promissory Estoppel in Texas

Texas and the Use of Promissory Estoppel

Part of contract law, the doctrine of promissory estoppel enables a person or an entity to recover damages which result from relying on a promise that was made and later broken. Promissory estoppel is normally a defensive theory, but its use became a central focus in the case of Frost Crushed Stone Company, Inc., v. Odell Geer Construction Co., Inc., when it was used as a cause of action for a promisee.

For a party to claim promissory estoppel, several elements must be in place: a promisor, a promisee, and some injury or damage that the promisee has suffered as a result of relying on that broken promise. See English v. Fischer, 660 S.W.2d 521, 524 (Tex.1983); Bailey, 972 S.W.2d at 193. First and foremost, promissory estoppel requires “detrimental reliance which is reasonable and justified.” See  Gilmartin v. KVTV–Channel 13, 985 S.W.2d 553, 558 (Tex.App.-San Antonio 1998, no pet.) (citing Collins v. Allied Pharmacy Mgt., Inc., 871 S.W.2d 929, 937 (Tex.App.-Houston [14th Dist.] 1994, no writ).

The case began in late 1995 when Mr. Geer submitted a bid to Mr. Ellis, a general contractor, to provide and transport rock for a highway project. Geer spoke with someone from Frost Crushed Stone Company by phone, who said that he could supply the rock for the project to Geer. Based on that conversation, Geer offered a contract to Texas Trucking Company (TTC) in which he agreed to transport the rock, contingent upon receiving a contract from Ellis. According to Geer, Frost’s promise to supply the rock is what led him to offer the contract to TTC, which Mr. Ellis accepted. Frost followed up with a written price quote, and TTC signed a contract with Geer in November of 1995, agreeing to haul the rock supplied by Frost. Months later, Frost Crushed Stone Company informed Mr. Geer that, despite its earlier promise, it was not able to provide the rock. The trial court initially sided with Mr. Geer, and Frost appealed the verdict.

According to Frost, Mr. Geer did not rely on promises about delivery of the rock, especially since Frost provided a written quote after Geer had signed a contract with TTC. Geer, on the other hand, claims that the contract was signed because of Frost’s verbal promise. The court ruled, however, that the written quote confirmed Frost’s verbal promise to Geer because it offered “more than a scintilla of evidence” that Geer took Frost at his word to the detriment of Geer. As a result, the Texas Supreme Court found the evidence of Geer’s detrimental reliance to be “factually sufficient” and overruled Frost’s claims on that point. See Lance v. USAA Ins. Co., 934 S.W.2d 427, 429 (Tex.App.-Waco 1996, no writ). While Frost also asserted that Geer’s claims were unenforceable since no written contract existed to specify price, quantity, and delivery of the rocks, the court further held that even though no written contract was signed, the written price quote provided evidence of Frost’s verbal promise.

Frost also objected to the fact that Geer was awarded damages for lost profits or benefit of the bargain losses. While promissory estoppel does not allow damages for anticipated profits, it does allow damages for the amount of money required to return Geer to the financial position he would have been had he not detrimentally relied on Frost’s promise. The court determined that factually sufficient evidence supported the damages of approximately $40,000 to restore Geer to his original position. See Fretz Const. Co. v. Southern Nat. Bank, 626 S.W.2d 478, 483 (Tex.1981); Holt, 987 S.W.2d at 142.

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