The Washington court in Weitman v. Grange Ins. Ass\u27n., enforced a gratuitious promise by a promisor-insurer that it would notify the promisee-insured of any lapse or termination in his insurance coverage

Jarvi, Kenneth O.

English

UW Law Digital Commons (University of Washington)

Washington Law Review Volume 38 Number 2 Washington Case Law—1962 7-1-1963 Contracts—Promissory Estoppel—Forbearance Kenneth O. Jarvi Follow this and additional works at: https://digitalcommons.law.uw.edu/wlr  Part of the Contracts Commons Recommended Citation Kenneth O. Jarvi, Washington Case Law, Contracts—Promissory Estoppel—Forbearance, 38 Wash. L. Rev. 289 (1963). Available at: https://digitalcommons.law.uw.edu/wlr/vol38/iss2/5 This Washington Case Law is brought to you for free and open access by the Law Reviews and Journals at UW Law Digital Commons. It has been accepted for inclusion in Washington Law Review by an authorized editor of UW Law Digital Commons. For more information, please contact cnyberg@uw.edu. WASHINGTON CASE LAWJudge Hunter stresses the purpose of the constitutional provisions-to protect against benefit to private parties at public expense. Ifthis be correct, private bodies might receive gifts or privileges whenthe result would be to contribute primarily to the public welfare. Hesuggests this on the theory that the benefits derived by the public area sufficient consideration for the "gift" or grant.23In any case, the fact that utilities have been granted free use of thehighways suggests that some gratuitous benefits-whether they beprivileges, immunities, gifts, or loaned credit-have been justifiedwhen a public purpose is served. It is, of course, difficult to draw theline between public purpose and private advantage, especially whenthey are so often intermixed. The present decision, however, provideslittle help in defining that line.WAYNE BOOTH, JR.CONTRACTSPromissory Estoppel-Forbearance. The Washington court inWeitman v. Grange Ins. Ass'n.,1 enforced a gratuitious promise by apromisor-insurer that it would notify the promisee-insured of any lapseor termination in his insurance coverage.The promisee had the policy in his possession and thus knew the dateupon which the policy was to terminate. The date of terminationpassed, but because of the insurer's promise the insured-promisee failedto procure insurance which was available from another source. Thecourt held that the insured had not only relied in fact upon his insurer'spromise, but also that he had been legally entitled to do so. Con-sequently the insurer was obligated to pay for fire loss occuring afterthe policy's termination date. The court stressed the fact that thepromisor had on two prior occasions notified the promisee that hisinsurance coverage was suspended. It had little difficulty in determin-ing that on the date of policy termination the promisee could againrely on the promised notice.The Weitman decision suggests that the Washington court may have23 State Highway Comm'n v. Pacific Northwest Bell Tel. Co., 59 Wn2d 216, 227,367 P.2d 605, 612 (1961) (dissenting opinion) ; State ex rel. Tattersal v. Yelle, 52Wn.2d 856, 329 P2d 841 (1958).159 Wn.2d 748, 370 P2d 587 (1962).19631WASHINGTON LAW REVIEWclarified its thinking about one detail of enforcing gratuitous promises.That is, that forbearance is a sufficient change of position2 by thepromisee to hold the promisor to his promise. The Washington courthas frequently recognized' the promissory estoppel doctrine of RE-STATEMENT, CONTRACTS § 90 (1932):A promise which the promisor should reasonably expect to induceaction or forbearance of a definite and substantial character on the partof the promisee and which does induce such action or forbearance isbinding if injustice can be avoided only by enforcement of the promise.However, in Hazlett v. First Federal Say. & Loan Ass'n4 (an earliercase with facts similar to Weitman, but which was not discussed orcited in Weitman) the court considered arguments based upon theRestatement theory and found them inapplicable. It said that promis-sory estoppel is available only if the promisee can show sufficientforbearance,5 a showing not made in the case at bar.Hazlett involved an oral promise to obtain insurance. The plaintiff-mortgagor had applied to defendant mortgagee for a loan, for which theproperty in question was to be security. The mortgage provided thatthe mortgagor was to keep the property insured and that the mortgageewas not responsible for failure to have insurance placed upon thepremises. When the subject of insurance arose during negotiations, themortgagee indicated he would "take care" of it along with other detailsnecessary to complete the transaction. The mortgagee failed to procureany insurance, but the mortgagor believed the mortgagee's statement tobe a promise and, relying upon it, failed to take any action himself.Subsequently, a fire destroyed the property. When the mortgagorbrought an action to recover for breach of contract, the WashingtonSupreme Court found for the defendant. After stating that the parolevidence rule prevented admission of the oral promise as evidenceto interpret the mortgage agreement, the court went on to say thateven if the oral promise had been independent and subsequent, it was2That forbearance can be a change of position seems paradoxical. However,"change of position" is more illustrative than "reliance" that the promisee has failedto take action to protect his rights.3 Recognized but not applied in Spooner v. Reserve Life Ins. Co., 47 Wn.2d 454,287 P.2d 735 (1955) ; Hill v. Corbett, 33 Wn.2d 219, 204 P.2d 845 (1949) ; State v.Northwest Magnesite Co., 28 Wn.2d 1, 182 P.2d 643 (1947). Recognized and appliedin Luther v. National Bank of Commerce, 2 Wn.2d 470, 98 P.2d 667 (1940).4 14 Wn.2d 124, 127 P.2d 273 (1942).5 To the court in Hazlett sufficient forbearance meant only "active" forbearance.Since forbearance means failure to act, it seems meaningless to say that forbearancecan be either "passive" or "active."[VOL.. 386]WASHINGTON CASE LAW.gratuitous and unenforceable.' The court noted that gratuitouspromises were enforceable if the promisor had begun to perform orif he was in fact a broker or insurance agent. Since neither exception7applied, the promise in Hazlett was not enforced.The impact of Hazlett on the Washington law of gratuitous promiseswas two-fold. First, by blind adherence to stare decisis in relying onHudson v. Ellsworth8 it gave new vitality in this jurisdiction to the thenobsolete9 gratuitous agency and bailment theories.0 Its second effectwas two-fold. First, by blind adherence to stare decisis in relying onarising from the court's choice of language." This second effect ofHazlett arose because of the court's eagerness to adhere to its pastposition, even though the promisee had in this case argued promissoryestoppel to the court. To sustain its gratuitous agency premise thecourt was forced to refute the promissory estoppel argument. Thiswas done in a summary fashion after a review of the Restatement6 The court relied upon Hudson v. Ellsworth, 56 Wash. 243, 105 Pac. 463 (1909), adecision during a period of contract law when the courts enforced gratuitous promisesonly if a bailment or agency relationship could be found, and only if the promisor onlyhad begun performance of his promise. Finally legal scholars, recognizing in actualitythe courts were giving effect to a justified change of position by the promisee relyingupon the promise, formulated the Restatement doctrine. See 4 ALI PROCEEDINGS 107(1926). For a discussion of the historical evolution of the promissory estoppel principleSee Boyer, Promissory Estoppel: Principal from Precedents 50 MicH. L. REv. 639,873 (1952) ; Shattuck, Gratuitous Promises-A New Writ? MIcH. L. Rxv. 908(1937).7(Each of these exceptions presents a situation which makes it easily ascertainableto the court that the promisor by initiating his act is inviting reliance by thepromisee. Before the Restatement rule was drafted, the courts required extensiveactivity by the promisor before the promisee would be justified in relying upon thepromise to the extent of obtaining enforcement. See Shattuck, Gratuitous Proinises-A New Writ? 35 MIcrE. L. Rxv. 908 (1937).8 56 Wash. 243, 105 Pac. 463 (1909).0 An obsolescence that in some jurisdictions has not been realized because the purposeof Restatement § 90 has not been comprehended. Recent decisions based upon thattheory are: Lester v. Marshall, 143 Colo. 189, 352 P.2d 866 (1959); Brunelle v.Nashua Building & Loan Ass'n, 95 N.H. 391, 64 A.2d 315 (1949) ; Spiegel v. Metro-politan Life Ins. Co., 6 N.Y.2d 91, 160 N.E2d 40 (1959) ; Dallas Title & GuarantyCo. v. Jarrell, 320 S.W.2d 696 (Tex. Civ. App. 1959).10 These theories refuse to hold the gratuitous agent or bailee liable on the basisof an executory promise. The situation changes, however, if the promisor has begunto carry out his promise. The relationship which is then established requires the gra-tuitous agent or bailee to act with "due care." No change in effect on the promiseeoccurs. In each situation (whether executory or executed) the promisee relies uponthe promised performance and is injured because of his reliance. In one instance thepromisor takes no action (he may, for example, fail to procure insurance) but he isnot liable because he has not undertaken to do anything. However, should the promisorbegin performance under the gratuitous agency theory, as obtaining insufficientcoverage or an invalid policy, then the promisor has failed to use "due care" and willbe liable. In each case the injury and reliance are identical; the only difference isthat the court can say in the latter case that the promisor should be able to expectthe promisee's reliance. See, Boyer, Promissory Estoppel, Principal from Precedents50 MIcEr. L. Rxv. 639, 873 (1952); Shattuck, Gratuitous Promises-a New Writ?35 MICr. L. Rxv. 908 (1937)."1 See text accompanying note 4 supra.1963].-WASHINGTON LAW REVIEWillustrations. 2 Since the court could not find among them an active"forbearance example, it concluded "Surely, forbearance was notintended to include the mere passive failure of the promisee to procureelsewhere, or by other means, the service or the thing promised."14 Thisfailure to comprehend what is meant by forbearance may be excusednot only by the compelling commands of stare decisis, but also byrealizing that the court was looking at the Restatement at the thresh-old of its development. Had the court endeavored to determine thebasis of the Restatement definition, it would have learned that thepurpose of Section 90, in clarifying 5 an uncertain area of contract law,was to enforce promises such as that made in the Hazlett case." Nowtwenty years later, the Weitman case demonstrates that the court isre-oriented on the forbearance question, as it has accepted withoutquestion what was contemplated as forbearance by the Restatementframers.Decisions from other jurisdictions support the Weitman position. InLusk-Harbison-Jones, Inc. v. Universal Credit Co." the plaintiff re-12 RESTATEMENT, CONTRACTS § 90 (1932), Illustrations:"1. A promises B not to foreclose for a specific time, a mortgage which A holdson B's land. B thereafter makes improvements on the land. A's promise isbinding."2. A promises B to pay him an annuity during B's life. B thereupon resigns aprofitable employment, as A expected that he might. B receives the annuityfor some years, in the meantime becoming disqualified from again obtaininggood employment. A's promise is binding."3. A promises B that if B will go to college and complete his course he will givehim $5000. B goes to college and has nearly completed his course when Anotifies him of an intention to revoke the promise. A's promise is binding."4. A promises B $5000, knowing that B desires that sum for the purchase ofBlackacre. Induced thereby, B secures without any payment an option tobuy Blackacre. A then tells B that he withdraws his promise. A's promiseis not binding."13 See text accompanying note 4 supra.14 14 Wn.2d 124, 131, 127 P.2d 273, 277 (1942).15 Llewellyn, The Rule of Law in Our Case-Law of Contract, 47 YALE L.J. 1243at 1252, n.25 (1938) : "Is § 90 of the Contracts Restatement, or § 45 a 'new' doctrine?The cases say: Both are rather belated explicit doctrine." See 4 ALI PROCEEDINGS106 (1926). There Professor Williston explains that the cases involving reliance ongratuitous promises are a special group and that if the law in this area is to be simpli-fied then section 88 (present section 90) must be included within the ContractsRestatement.16 While the illustrations at note 12 supra do not present a situation where, throughfailure to act, the promisee has manifested a reliance, it does not seem likely thatthe Restatement doctrine was meant to exclude such a form of reliance. Non-existenceof such an example presented the court with an easy basis for distinguishing the Re-statement proposition deciding Haslett on the basis of stare decisis. This observationis based upon ALI PROCEEDINGS 106-109 (1926) where Professor Williston discussescases which he felt came within the Restatement doctrine. Among these was "a recentNew York case" which allowed recovery from promisee's reliance on a promise toprocure insurance. Forbearance from procuring insurance was sufficient reliance toallow recovery. The case alluded to must be Siegel v. Spear & Co., 234 N.Y. 479,138 N.E. 414 (1923)."7 164 Miss. 693, 145 So. 623 (1933).[VOL. 38WASHINGTON CASE LAWlied upon a confidential pamphlet distributed to it by Universal CreditCo. This pamphlet stated that when dealers repossessed cars fromdelinquent purchasers "insurance protection for dealers interest willcontinue in force until such account is liquidated, after which thedealer should provide such insurance as he may require." The plain-tiff, a dealer, refrained from procuring insurance. After the repos-sessed automobiles were damaged, suit was initiated and the Mississippicourt, without discussion and relying solely on the Restatement theory,held that the forbearance in reliance on the circular's representationwas sufficient.In W. B. Saunders Co. v. Galbraith,"s a widow promised to pay herdeceased spouse's debt to the plaintiff, who refrained from filing aclaim against deceased's estate. Thereafter, the widow gave a noteand mortgage to secure the debt. When the plaintiff sued to foreclose,the defense was want of consideration. The Ohio court refused toentertain the defense, saying that the promise reasonably induced theplaintiff to forbear asserting its claim against the estate at a time whenit would have been effective. 9 While the number of appellate decisionson the forbearance element is small the decisions evidence a proclivityto follow the expressed intention of the American Law Institute.20KENNETH 0. JARVI1840 Ohio App. 155, 178 N.E. 34 (1931).loIn contrast to the Washington court in Hazlett, the Ohio court accepted theRestatement approach enthusiastically, saying; "we are content, however, to take therestatement as the law of this state without exploring its soundness, and hold thatof its own vigor it is adequate authority." Id. at 156, 178 N.E. at 35-36 (1931).See McCowen v. McCord, 49 Ga. App. 358, 175 S.E. 593 (1934) for a similar resulton nearly identical facts, and Schafer v. Fraser, 207 Or. 446, 290 P.2d 190 (1955)where the court concludes that reliance upon an attorney's promise to prorate thecost of a law suit among several litigations was sufficient reason for promisee's for-bearance from seeking alternative relief.20 Within the past fifteen years, California has developed a substantial body of'lawon this point of the Restatement doctrine.In Van Hook v. Southern California Waiters Alliance, Local 17, 158 Cal. App.2d556, 323 P2d 212 (1958), a union officer had been promised by the local that hewould get retirement benefits if he remained with the local. He refused an outsideposition. This forbearance was sufficient; the court enforced the contract when theunion failed to provide the retirement benefits. For other promises involving retire-ment benefits which were enforced under section 90 involving identical forbearancesee West v. Hunt Foods, 101 Cal.App.2d 597, 225 P.2d 978 (1950) and Hunter v.Sparling, 87 Cal.App.2d 711, 197 P.2d 807 (1948). The Federal court has also en-forced this type of promise, Gill v. U.S. Rubber Co., 195 F.Supp. 837 (N.D. Ind. 1961).Graddon v. Knight, 138 Cal.App.2d 577, 292 P.2d 632 (1956) involved an impliedpromise by the bank to the borrower that the bank would insure the residence uponwhich the loan was sought. Relying upon this promise the borrower failed to procureinsurance. The court held the promise enforceable under section 90.In Wade v. Markwell & Co., 118 Cal.App.2d 410, 258 P2d 497 (1953) a pledgorrefrained from redeeming a valuable coat, relying upon the pledgee's promise to holdthe coat for another week. When the coat was sold within the week the pledgorwas allowed to recover under the Restatement.Edmonds v. Los Angeles County, 40 Cal.2d 642, 255 P.2d 772 (1953) involved a1963]

Contracts—Promissory Estoppel—Forbearance

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Contracts—Promissory Estoppel—Forbearance

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