Pop's Cones, Inc. v. Resorts International Hotel, Inc.
307 N.J.Super. 461, 704 A.2d 1321 (1998)
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Rule of Law:
A claim for promissory estoppel may be justified to recover reliance damages based on pre-contractual assurances, even if the promise is not perfectly clear and definite, when a promisor should reasonably expect their assurances to induce detrimental action and injustice can only be avoided by compensating the promisee for their losses.
Facts:
- Pop's Cones, Inc. ('Pop’s'), a TCBY franchisee, operated a store in Margate, New Jersey, with a lease requiring a renewal decision by October 1, 1994.
- In mid-1994, Brenda Taube of Pop's began discussions with Marlon Phoenix of Resorts International, Inc. ('Resorts') about relocating Pop's to a boardwalk location owned by Resorts.
- Resorts expressed strong interest, stating management was 'very anxious' for Pop's to become a tenant and allowed Pop's to operate a temporary cart to test the location.
- In late September 1994, Taube informed Phoenix of the impending October 1st deadline to renew her Margate lease.
- Phoenix responded that a deal was '95% there,' assured Taube that his superior's signature was a formality, and explicitly advised her to give notice that Pop's would not be renewing its Margate lease and to 'pack up the Margate store and plan on moving.'
- Relying on Phoenix's assurances, Taube let the Margate lease expire at the end of September 1994 and moved Pop's equipment into storage.
- Negotiations continued and Resorts sent a draft lease in December with a non-binding disclaimer, but its representatives continued to assure Taube that they wanted Pop's as a tenant for the upcoming season.
- On January 30, 1995, Resorts formally withdrew its offer to lease the space to Pop's.
Procedural Posture:
- Pop’s Cones, Inc. filed a complaint for damages against Resorts International, Inc. in the New Jersey Law Division (trial court), alleging promissory estoppel.
- After discovery, Resorts filed a motion for summary judgment.
- The trial court judge granted summary judgment in favor of Resorts, dismissing Pop's complaint on the grounds that there was no clear and definite promise to form the basis of the claim.
- Pop's Cones, Inc., as appellant, appealed the trial court's grant of summary judgment to the Superior Court of New Jersey, Appellate Division.
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Issue:
Does a defendant's series of assurances during lease negotiations, which foreseeably induce a plaintiff to take detrimental action like terminating its existing lease, give rise to a valid claim for promissory estoppel even if the assurances do not constitute a clear and definite offer for a new lease?
Opinions:
Majority - Kleiner, J.A.D.
Yes, a claim for promissory estoppel can arise from assurances made during negotiations that induce detrimental reliance, even if they do not form a clear and definite offer. The court held that the traditional, strict requirement of a 'clear and definite promise' is relaxed where a plaintiff seeks reliance damages rather than enforcement of the underlying bargain. The court adopted the flexible approach of the Restatement (Second) of Contracts § 90, which focuses on whether a promisor should reasonably expect its promise to induce action and whether injustice can only be avoided by enforcement. Here, Pop's was not seeking to enforce the un-negotiated lease (expectation damages), but to recover the losses incurred from giving up its prior lease in reliance on Resorts' specific instructions. Phoenix's assurances to 'pack up' and that the deal was '95% there' were calculated to induce Pop's to forgo its lease renewal, and it was foreseeable that Pop's would be harmed if Resorts backed out. Therefore, whether Pop's reliance was reasonable and whether injustice could be avoided only by awarding damages were questions for a jury, making summary judgment improper.
Analysis:
This decision significantly softens the 'clear and definite promise' requirement for promissory estoppel claims in New Jersey, particularly when a plaintiff seeks reliance damages rather than expectation damages. It aligns the state's doctrine with the more equitable, modern approach of the Restatement (Second) of Contracts § 90. The case establishes that assurances made during negotiations can be legally actionable if they induce foreseeable, detrimental reliance, even if the terms of the ultimate deal remain unsettled. This holding provides a potential remedy for parties who are harmed by relying on good-faith assurances in negotiations that collapse, shifting the legal focus from the enforceability of the final contract to the fairness of the negotiation process itself.
