Promissory Estoppel vs Contract Law essay

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Contract Law Case Study

Contact Law Case Study

The author of this report is to review a legal case study. The purpose is to determine whether the promises and words of Iva Mullet made to Barry Mundey constitute a legal contract and thus makes Iva to follow through on her promises of a bonus and a new contract or if the statements made were non-binding. The short answer to the question is that nothing Iva did makes her promises binding, but it is only because she was not specific and did not give a concrete offer to Barry. However, the author of this report will dig deeper and flesh out exactly why there is no contract and what could or would change that situation. However, while a contract did nto technically exist, the principle of promissory estoppel may be Iva Mullet's undoing because even though she did not quantify specifically what she was offering, she did make a promise of sorts to Mundey and he turned down another offer in reaction to that and it was eventually to his detriment when Iva reneged on what she had previously offered, vague as it was.

Issue One -- Elements of a Contract


The first issue at hand is whether the discussions between Iva Mullet and Barry Mundey, either in writing in or in print, meet all three standards necessary for a contract. Of course, if any of the three standards is missing or otherwise not met, then no contract would exist and this generally means that Iva Mullet owes Barry Mundey nothing and Barry will have to continue to fend for himself in his lower role. Based on the information provided and the actions and events that are notably missing or do not pass the muster of meeting a contract.


There are three things that clearly must be in place for a contract to be in force and this is true of verbal agreements and written agreements. Clearly, there was nothing in writing between Iva Mullet and Barry Mundey, but this does not by itself mean that no contract in place because the three conditions being met verbally with at least one witness or some other corroboration (e.g. video tape, etc.) proving the discussion happened would be enough. Those three conditions are offer and acceptance, legal intention and consideration (Nolo, 2014).


One can start with the condition that was clearly met, and that was consideration. Iva Mullet clearly stated to Barry Mundey that he wanted his services for the foreseeable future and that there was a bonus and a contract in it for him if he stayed and she did not shy away from that even in light of the fact that another firm wanted his services. The remarks about Barry's affinity for gambling were really not relevant, although it perhaps incentivized Barry to stay. However, that was Barry's choice and had no legal or other bearing on whether or not Barry should accept.

However, it is clear that neither of the other two parts of a contract were in place. Even with the promises and statements of Iva Mullet, it is clear that she never surpassed the bar necessary to be held and controlled by a legally binding agreement. She only made general statements about the fact that she intended to pay him a bonus and intended to make it worth his while to stay. However, it is Barry Mundey that erred in the respect that he did not have an iron-clad and specific offer or promise from Iva Mullet about what the amount of the bonus would be, when that bonus would be paid (or even IF it would be paid) and the extension of the contract. It is perhaps unethical for Iva Mullet to go back on her word later but since no contract, verbal or written, was ever executed before she changed her mind so she cannot be held to an agreement that never fully materialized. There was a broad framework of an agreement, but no complete agreement ever materialized.

The third condition of a valid contract, and one of the two that was not met in this case, was the consideration. The reasons for this burden not being met very much parallel and match those of the intention to be legally bound. Iva Mullet never offered specifics about a bonus, when it would be paid or what the terms of any contract would be. One could argue that she did make a general promise but she could get cute and offer him a one day contract and a one-dollar bonus. This would technically allow her to keep her word while not committing to anything she did not want to involve the firm in. The other dimension to this is that Barry Mundey could and should have extracted a promise in writing. If Iva Mullet was unwilling or unable to put it to paper what she was promising and when it would be delivered, then Barry could have made his "gamble" and followed the glow worms venture rather than stick with an "offer" that really guaranteed him nothing.


In short, the main things that make it clear that no contract existed between Barry Mundey and Iva Mullet is that nothing was put to paper and the precise frameworks regarding the new contract and/or the bonus were never clearly defined. As such, the consideration was never defined and neither party met the burden of being willing to be legally bound by a contract. Iva did not offer such a framework and Barry never demanded it. As such, no agreement or contract exists and Iva technically owes Barry nothing. There was never technically an offer in place, let alone an acceptance or retracting of such an offer. Iva did technical retract her general agreement, but the lack of specificity or legal binding of any agreement shoots down Barry's case.

Issue Two -- Promissory Estoppel


The other issue at hand is whether Iva Mullet is bound to owe Barry Mundey something in light of the principle of promissory estoppel. While Barry was not all that wise in not getting an iron-clad offer before turning down the glow worms project, it is clear that Iva Mullet made a promise, albeit a vague one, and she did so knowing full well that Barry Mundey was considering another offer. In light of what she did say, and promise, to Barry, he ended up turning down the glow worms offer based on the fact that he expected to be getting a bonus and a new contract from Iva. However, Iva eventually reneged on her promise and never extended the bonus.


Under Australian law, the lack of consideration vis-a-vis a contract is not enough to negate possible liability on the part of the person makes an incomplete offer as pitted against someone who was promised something. The four main things that can override a clearly defined amount of consideration are promises, dishonest behavior on the part of the person who made the offer, a special relationship between the offering party and the person receiving the offer and an irreversible outcome as experienced by the person who received the promise but was in some way jilted. However, any ruling against a promising party even in absence of what normally comprises a legally binding contract, the judge involved is not bound to favor either party as it is a matter of discretion (Lawnix, 2014).


Even though a promissory estoppel case is much more promising for Barry Mundey, it is by no means a home run…not even close. Iva Mullet's undoing would not be dishonest behavior or a special relationship because Iva's shift in position was based on business conditions and need and not because she was lying to Barry nor was there anything "special" about their relationship, although Iva's knowledge about Barry's gambling would seem interesting to some as this is not something that Barry would probably advertise to people he did not know closely. Even so, unless they were in a romantic relationship (and even that might not matter, based on case law), the "special relationship" clause really does not matter here either.

What is going to matter is whether the courts go by the promise Iva Mundey made or whether there was indeed irreversible damage involved. Indeed, Iva did make a promise to Barry and he reacted to that to his own detriment. However, to say that this detriment was "irreversible" is a bit of a stretch. Indeed, it would seem that the industry as a whole took a dive and this would explain why Barry ended up getting an unrelated job at an aquarium. It would seem that not only did Barry miss out with his existing employer but he also did not his fallback with the glow worms place. This is by no means Iva's fault. However, one could argue that if Barry did do the glow worms project and did get a contract and/or bonus for…[continue]

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