Expanding the legal analysis beyond contract law limitations.
The following article was written by Callagy Law’s Legal Team, and will focus on many common questions and concerns surrounding new developments, legal matters, and other procedures within the business and commercial litigation. Our mission is to answer any questions and give knowledge to many different aspects of these matters.
When most lawyers are given a factual situation that includes a promise, their mind will undoubtedly begin to analyze it as a potential contract. Promises, in the legal world, are tricky things. Most first year law students spend the better part of a semester distinguishing when a promise is an enforceable contract vs. mere banter. As any of those first year law students will (hopefully) be able to tell you by the end of that semester, is that if the promise lacks “consideration” – or something of value (either a promise, an act or an object) that a promisor receives from a promisee in return for his promise – it is generally unenforceable as a contract. While this is a vast oversimplification of centuries of contract law, it is safe to say that issues involving a promise are almost always analyzed under theories of contract.
This tendency to analyze promises under a contract theory leads to several limitations. First, unless the court finds sufficient consideration, any claims arising from the promise will fail. Second, the damages one may recover under a contract theory are usually limited.
In certain situations however, a promise, and the subsequent failure to deliver on that promise, is still actionable. Instead of a contract, though, the promise is actually considered under a “tort” theory, specifically, a claim for fraud. For example, in Arizona, to prevail on a constructive fraud claim, a plaintiff must prove: (1) Defendants had a fiduciary or confidential relationship with Plaintiffs that gave rise to a legal or equitable duty; (2) Defendants breached that duty; (3) the breach tends to deceive others, violates public or private confidences, or injures public interests; and (4) the breach induced detrimental and justifiable reliance.” Dawson v. Withycombe, Provided that the Plaintiff can prove the first three elements, a promise to perform, which is not ultimately fulfilled, can be used to satisfy the fourth element.
It is the general law that to constitute a fraudulent misrepresentation, the representation must be relative to a present or preexisting fact and cannot be based on unfulfilled promises or statements as to future events. Law v. Sidney. However, a promise made without a present intention to perform the promise, is considered to be a matter of fact which exists in the present. Starkovich v. Noye and Ahmed v. Collins. Many states in addition to Arizona provide for recovery under a similar set of facts and circumstances.
As such, a promise which does not meet the formalistic requirements of a contract cause of action can still be used as the basis of a cause of action under a constructive fraud theory. The limitations on damages which are present in a contract cause of action are also replaced by those applicable to a tort theory – which may include punitive damages.
We hope you found the information provided in this article helpful to your everyday life and business. Please free to reach out to Sean Callagy or the Callagy Law team at any time for questions you may have concerning personal and business matters. Callagy Law’s headquarters is located conveniently in Paramus, NJ. Beyond the scope of information, Sean Callagy has developed multiple areas of business legal practice and business coaching, if you need help with anything, please reach out to us by calling 201-261-1700 or by emailing us here. Feel free to connect with us on Facebook, Twitter or LinkedIn! Additionally you can subscribe to our daily videos on YouTube by clicking here.
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Promises and Failure to Perform | Callagy Law
