Wheeler v. White

Supreme Court of Texas
398 S.W.2d 93 (1965)

ELI5:

Rule of Law:

When a promise, which the promisor should reasonably expect to induce definite and substantial action by the promisee, does induce such action, the promise is binding under the doctrine of promissory estoppel if injustice can be avoided only by its enforcement, allowing for the recovery of reliance damages.

Facts:

Ellis D. Wheeler owned a tract of land and desired to construct a shopping center on it.
Wheeler entered into a written agreement with S. E. White, whereby White would secure a $70,000 loan for Wheeler or provide the funds himself to finance the construction.
The agreement specified the loan amount, term, and maximum interest rate, but failed to detail the amount of monthly installments or how interest would be computed.
After the agreement was signed, White assured Wheeler the money would be available and urged him to proceed with demolishing the existing buildings on the property to prepare for construction.
The existing buildings had a reasonable value of $58,500 and generated rental income.
In reliance on White's promises and assurances, Wheeler demolished the buildings on the property.
After Wheeler had razed the buildings, White informed him that he would not be providing or securing the loan.
Wheeler made reasonable but unsuccessful efforts to obtain the loan himself.

Procedural Posture:

Ellis D. Wheeler sued S. E. White in a Texas trial court for breach of contract and, alternatively, promissory estoppel.
White filed special exceptions, arguing the contract was unenforceable due to indefiniteness and the estoppel claim was insufficient.
The trial court sustained White's special exceptions.
Wheeler declined to amend his petition, and the trial court entered a judgment dismissing the case.
Wheeler, as appellant, appealed to the Court of Civil Appeals (an intermediate appellate court).
The Court of Civil Appeals affirmed the trial court's judgment in favor of White.
Wheeler, as petitioner, sought review from the Supreme Court of Texas (the state's highest court).

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Issue:

Does the doctrine of promissory estoppel allow a party to recover reliance damages for actions taken in response to a promise, even when the underlying agreement is too indefinite to be enforced as a contract?

Opinions:

Majority - Justice Smith

Yes, the doctrine of promissory estoppel can be invoked to secure a remedy that compensates a party for foreseeable, definite, and substantial reliance on a promise, even if the underlying agreement is not a legally sufficient contract. While the written agreement lacked essential terms to be enforceable as a contract, Wheeler's alternative claim of promissory estoppel states a valid cause of action. The court adopts the principle of the Restatement of Contracts, § 90, which makes a promise binding if it induces detrimental reliance and injustice can only be avoided by enforcement. The function of this doctrine is defensive; it estops the promisor from denying the enforceability of the promise. However, the remedy is limited to reliance damages—measured by the detriment sustained—to place the injured party in the position they would have been in had they not acted on the promise, rather than awarding expectation damages like lost profits.

Concurring - Justice Greenhill

While agreeing with the judgment to remand the case, the decision should rest on a sounder ground. The contract, although potentially too indefinite to be specifically enforced, may be sufficiently definite to support an action for damages. Precedent cases denying damages for unenforceable contracts often did so because they violated the Statute of Frauds, which is not an issue here. Therefore, the contract itself could be the basis for a damages claim without needing to rely on the doctrine of promissory estoppel.

Analysis:

This case solidifies the application of promissory estoppel under Restatement § 90 as an affirmative cause of action in Texas, not merely a defense. It establishes that a party can recover for detrimental reliance even when a contract fails due to indefiniteness. The decision critically distinguishes the available remedy, limiting recovery to reliance damages (out-of-pocket losses) and explicitly precluding expectation damages (lost profits). This creates a middle ground, providing a remedy for injustice without giving the promisee the full benefit of a bargain that was never properly formed.

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