2.5 Contracts Without Consideration

• Library: Contract Law in Virginia (Virginia CLE) (2019 Ed.)

2.5 CONTRACTS WITHOUT CONSIDERATION

2.501 In General. Many states recognize the formation of contracts even when consideration, one of the basic elements of formation, is lacking. Courts in a majority of the states follow the doctrines of equitable estoppel or promissory estoppel, which negate the requirement for consideration when certain factors exist. Virginia recognizes equitable estoppel and applies it more liberally than in the past; however, Virginia does not recognize promissory estoppel as a legal cause of action. ⁸⁵

2.502 Equitable Estoppel. There is no major recognizable difference between the general principles of equitable estoppel and promissory estoppel. Both doctrines serve as a substitute for consideration, allowing a contract to be enforced where no contract would otherwise exist. Equitable estoppel is the "defensive doctrine preventing one party from taking unfair advantage of another when, through false language or conduct, the person to be estopped has induced another person to act in a certain way, with the result that the other person has been injured in some way." ⁸⁶ This doctrine has been recognized in Virginia and has evolved over the years from requiring a demonstration of actual fraud or deceit to a more relaxed interpretation. ⁸⁷ In Tuomala v. Regent University, ⁸⁸ the court highlighted what is necessary to have an equitable estoppel claim. The court held that "to establish a claim of equitable estoppel, without proving fraud, the complainant must show that he reasonably relied on the representations and conduct of the defendant, such that he changed his position to his detriment." ⁸⁹ Another Virginia court furthered this premise by stating that "[a] person is estopped from denying the consequences of his conduct where that conduct has been such as to induce another to change his position in good faith or such that a reasonable man would rely upon the representation made." ⁹⁰

Example. Consider the following employment issue: Barrister Barney relocates to a new city and interviews

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with several law firms. He narrows his choices down to two firms. One firm, Liar and Howe, tells Barney that with his prior experience, Barney would be up for partner in three years. Another firm, Venerable and Reputable, offering a much higher salary, gives Barney a seven-year estimate for making partner. Upon learning of the offer of a more competitive salary, Liar and Howe tells Barney that if he comes to work for them, they will unconditionally make him a partner after only two years. Relying on the promise of a shorter partnership track, Barney takes the job with Liar and Howe at a much lower salary. After two and a half years, Barney has not been promoted to partner and there has been no mention of his advancement. Barney may have a claim based on equitable estoppel, if he can prove that he reasonably relied in...