A software developer verbally promised a start-up company free use of her custom accounting software for the first six months to assist with their launch. Relying on this promise, the start-up hired an accounting team and invested in training them on the software. Two weeks after the training, the developer decided not to provide the software, stating that no binding agreement existed because the start-up had not provided consideration. The start-up claims it incurred significant costs based on the developer's promise. Can the developer's promise be enforced despite the absence of a bargained-for exchange?
No, the promise is not enforceable because it was not in writing and therefore does not meet statutory requirements.
Yes, the promise is enforceable because the start-up relied on it to their detriment.
Yes, the promise is enforceable because the software developer received a tangible benefit, thereby creating a restitution interest.
No, the promise is not enforceable because there was no consideration exchanged between the developer and the start-up.
The reason the start-up company may enforce the promise is the doctrine of promissory estoppel, which applies when one party makes a promise that induces another party to reasonably rely on that promise to their detriment. This reliance creates an obligation enforceable in the absence of consideration. Here, the start-up reasonably relied on the software developer's promise and incurred costs by training its staff based on that reliance. This makes the promise enforceable under promissory estoppel.
Answer options that state the promise is unenforceable fail to account for this reliance, even though there was no formal agreement or exchanged consideration. The assertion that restitution would apply here is incorrect because the start-up did not confer a tangible benefit on the developer that would give rise to a restitution claim.
Ask Bash
Bash is our AI bot, trained to help you pass your exam. AI Generated Content may display inaccurate information, always double-check anything important.
What is promissory estoppel?
Open an interactive chat with Bash
What constitutes consideration in a contract?
Open an interactive chat with Bash
Can oral agreements be enforceable without written documentation?