Promissory estoppel and contract formation in the Mullet v. Mundey case

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

Issue

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.

Rules

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).

Conclude

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

Issue

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.

Rules

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).

Apply

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 his work with that task and it was written in stone when the aforementioned tanking of the industry happened, then Barry would still get his money, in all likelihood.

However, something that will be Barry's undoing on the detriment he would or would not have received would be based on two things. First, there was no guarantee, since it never technically happened or got completed, that he wouldn't have got rolled the by glow worms people as well and Iva had no bearing on that. Second, and more important, is that a true and specific offer was never codified or laid out. As mentioned before, since Iva was never specific, she could just low-ball Barry and dare him to reject or accept the offer. Since she never put a figure behind it, she's not under any burden to offer any specific amount. The court may reject her low-balling him too much, but she could probably offer him a nominal amount with an appropriate amount of work to be done for said amount and probably come out unscathed. Barry's lack of due diligence and the fact that the offer was retracted for reasons that did not have specifically to do with Barry is probably reason enough for a judge to find that Barry has no case. If Iva truly deceived Barry and offered the job to someone else or just lied to him knowing full well that no contract would be offered, than things would be different. Barry can always find another job but the industry he worked in tanked, so that is why he had to find a job elsewhere.

Conclude

As stated before, this situation did not lead to a complete and valid contract but the promissory estoppel thing is a possibility. However, since there was never specific consideration given and since Iva Mullet was not clearly deceiving Barry and her shift in the offer was based on business conditions and because Barry's detriment was based on economic cycles that will probably subside eventually, the odds that Barry would win a promissory estoppel case on this matter are not impossible but extremely unlikely as Barry could (and should) had demanded a specific offer before saying no to the glow works project. Better yet, he should have demanded it in writing and executed the agreement but he ended up doing none of those things and he basically acted unwisely overall.

Conclusion

Iva Mullet needs to be very careful about making promises such as she did in light of the job offer that Barry got and turned down based on what Iva said in response to Barry wondering about changing jobs. She would definitely not lose a straight contract case but she could possibly lose a promissory estoppel case and she could absolutely get herself in a pickle later on if she keeps making promises that she cannot later keep, regardless of whether it is due to legitimate business need or something else. Even if she is not intentionally deceptive, she could bind herself and/or her company to things that she will later regret.