“Detrimental reliance” refers to a situation where one party relies on the promises or representations of another party to their detriment. It often arises in the context of contracts and can be a basis for legal remedies.
If one party makes a promise or representation to another, and the second party relies on that promise to their detriment (suffers a loss or harm), the first party may be held legally responsible for the consequences. This is sometimes referred to as “promissory estoppel” or “detrimental reliance theory.”
For example, Party A promises to sell a car to Party B, and Party B relies on this promise by selling their existing car and making other arrangements based on the expectation of acquiring the new vehicle. If Party A backs out of the deal, Party B may have a legal claim respecting detrimental reliance, arguing that they suffered harm due to relying on the promise.
Detrimental reliance is often used as a legal theory when there is no formal contract between the parties or when the agreement is deemed unenforceable for some reason. Courts may enforce the promise to prevent injustice or unfairness when one party has relied on the other’s assurances to their detriment.
Detrimental reliance issues may arise in employment law cases. For instance, a court may enforce an employer’s promise to pay an employee a bonus even if a contract is not proven under the theory of detrimental reliance.
A court will reserve the theory of detrimental reliance only for those cases that present the possibility of an injustice being done. In some states, courts recognize a claim of detrimental reliance, and in other states, courts do not.
In Canadian law, the concept of detrimental reliance is recognized, and it aligns with the broader principles of promissory estoppel. Canadian courts may apply the doctrine of detrimental reliance to prevent injustice when one party has relied on the promises or representations of another to their detriment.
U.S. courts also recognize and apply the principle estoppel, including the concept of detrimental reliance, to prevent injustice and ensure fairness in contractual relations. It is often invoked in situations where there is no formal written contract or where a contract may be unenforceable for various reasons.
In the UK, the doctrine of promissory estoppel has been recognized and applied in various cases, including those involving contractual relationships. It allows a party to enforce a promise even if there is no formal contract or if implementing the promise is necessary to prevent an injustice.
