Detrimental reliance is a legal claim that an individual makes in court when they seek damages from another individual or entity for failing to fulfill a promise. An individual would claim detrimental reliance in a situation in which they believed they had entered into a contract, but for some reason, there was no contract. Nonetheless, the individual claiming detrimental reliance relied on the promise of the other individual and suffered a loss because of it.
A lawyer consultation in Florida with a Florida lawyer would help a person understand detrimental reliance and how it differs from breach of contract in Florida law.
A claim of detrimental reliance is a claim made by a person when they cannot succeed with a claim for breach of contract because they did not have a contract. Generally, when two individuals or entities, e.g., businesses, intend to make a contract, one party offers to supply the other with something of value. The other party accepts and promises to provide something of value in return.
For example, one business may promise to provide the other with a specified quantity of some product and the other promises to pay a certain amount of money in return. This is how a valid contract is formed.
One essential feature of a binding contract is the fact that a court will enforce a contract if one party fails to perform as promised. If, however, for some reason a court were to find that a contract was not made by the parties, the court might still find that one party relied on the promise of the other and suffered some detriment, i.e., an economic loss, as a result.
If the court finds that the person’s reliance was reasonable, they would award them damages on the basis of the legal doctrine of detrimental reliance. The doctrine of detrimental reliance is also sometimes referred to as “promissory estoppel.”
What Are Some Examples of Detrimental Reliance Claims?
One notable situation in which promissory estoppel can be used in Florida but not in most other states involves insurance coverage. In most states, courts follow the law that the doctrine of detrimental reliance cannot be used to establish insurance coverage.
The Florida Supreme Court has ruled differently. In a case in which an insured discussed their insurance coverage with the insurer and their insurance broker, the insured claimed that they were led to believe that they had a certain type of coverage.
On the basis of this understanding, the insured person refrained from purchasing the type of coverage from any insurance company. However, when they made a claim for coverage and it was denied, the insured sued the insurance company and the broker for detrimental reliance.
The jury found for the defendant insurance company, but the Florida Supreme Court held that detrimental reliance, referred to in this case as “promissory estoppel” or “equitable estoppel,” should apply, because to deny it would essentially result in an injustice to the insured.
What Are Some Other Considerations?
The Statute of Frauds is a law which requires certain contracts to be in writing. For example, contracts regarding transfers of interests in real property must be in writing to be enforced. If the Statute of Frauds in Florida requires that a certain contract be written, an individual may not claim detrimental reliance in the case of an oral contract that should have been in writing.
As for the measure of damages that might be awarded in a case of detrimental reliance, a court tries to put the plaintiff in the economic position they would have been in had they not relied on the defendant’s promise.
Can Reliance on a Promise Become a Contract?
In Florida, detrimental reliance is usually different than a breach of contract claim in that consideration, a necessary element for finding that the parties made a contract, is absent. The plaintiff’s detrimental reliance on the defendant’s promise is a substitute for the consideration that must be present if a contract is to be formed. The reliance on a promise is the key that creates the conditions necessary to recover damages.
What Do I Need To Prove for a Promise To Become a Contract in Florida?
Formation of a contract begins with an offer in which one party offers a promise to do something of value to the other party. There are various legal requirements if an offer is to be valid; for example, it must be clear, unambiguous and show an intent to be bound.
The individual or entity that receives the offer must then clearly indicate their acceptance of the offer. The agreement between the parties must involve an exchange of consideration, which is simply something of value. A simple promise by each party, e.g., one to deliver goods and the other to pay a certain amount for them, is enough.
Both of the parties must have the legal capacity to make a contract. The party to a contract must be an adult and must understand the nature and consequences of the transaction to have capacity. An individual who signs a contract for a business must have the authority, actual or apparent, to represent the business in concluding a contract.
When Is a Promise Not a Contract?
In Florida, a person who wants to succeed with a claim of detrimental reliance must prove three specific elements:
- The person sued, the “defendant” in legal terminology, promised the plaintiff, the person who brings the lawsuit, some kind of performance.
- The defendant should have expected the plaintiff to rely on this promise and act or not do an act based on the promise.
- The plaintiff did rely on the promise of the defendant and either did or did not do something because they relied on it.
- As a result of the reliance on the defendant’s promise, the plaintiff suffered an economic loss.
On the basis of these facts, a court would enforce the defendant’s promise in order to avoid causing injustice to the plaintiff.
When Is It Reasonable To Rely on a Promise?
It is reasonable to rely on a promise when it is concrete and specific with regard to its terms and the timing of the promised performance. In cases in Florida in which detrimental reliance was denied by a court, the promise was viewed by the court as illusory or ambiguous.
Generally, courts do not view reliance as reasonable if it was based on an oral representation that directly contradicts the terms of a written agreement. However, what is viewed as reasonable will depend on the specific facts of a given situation.
What Constitutes Reasonable Reliance in Florida?
Under Florida law, success with a claim of detrimental reliance requires a clear showing of a definite promise, as well as reliance by the plaintiff that was reasonable given the circumstances.
In addition, the plaintiff must show that they experienced a significant change in their economic position because they relied on the promise. The plaintiff must persuade the court that they have suffered an injustice that can only be addressed by enforcing the promise.
Do I Need a Lawyer?
If you have been promised a certain performance by another person or business and they have failed to deliver on it, you want to talk to a Florida contract lawyer. Your lawyer will be able to do the technical legal analysis that you need to determine whether or not you have a contract. If not, your lawyer can determine if you might successfully claim detrimental reliance.
The law of detrimental reliance is technical, and you do not want to guess about what your rights are. You want a Florida contract lawyer to help you figure out what your next steps should be.
