1. State the four elements of a promissory estoppel claim.2.

1. State the four elements of a promissory estoppel claim.

2. What is the significance of the fourth element of promissory estoppel, “avoidance of injustice”?

3. How did the court deal with Chrysler’s assertion that existing written contracts between the parties preclude the application of promissory estoppel?


Portman Lamborghini, Ltd. (Portman), was owned by Chaplake Holdings, Ltd., a United Kingdom company, which was owned by David Jolliffe and David Lakeman as equal shareholders. Between 1984 and 1987, Portman sold approximately 30 new Lamborghinis each year through its exclusive concession contract with the car maker. It was then the largest Lamborghini dealer in the world, since Lamborghini’s production was just 250 cars per year. These cars sold at a retail price between $200,000 and $300,000. In 1987, Chrysler Corporation bought Lamborghini, and its chairman, Lee Iacocca, presented a plan to escalate production to 5,000 units within five years. The plan included the introduction of a new model, the P140, with a retail price of $70,000. Between 1987 and 1991, all of the Chrysler/ Lamborghini top executives with whom Jolliffe and Lakeman and their top advisors came in contact provided the same message to them—Chrysler was committed to the Expansion Plan, and in order for Portman to retain its exclusive U.K. market, it must expand its operational capacity from 35 cars in 1987 to 400 cars by 1992. Accordingly, Portman acquired additional financing, staff, and facilities and built a new distribution center. An economic downturn in the United States and major development and production problems at Lamborghini led Chrysler to reduce its expansion investment by twothirds. Factory production delays eroded Portman’s profitability and success, and it entered into receivership in April 1992. Suit was brought on behalf of the Portman and Chaplake entities on a promissory estoppel theory against Chrysler, a Delaware corporation. The Jury awarded 569,321 to Portman for costs incurred in implementing the Expansion plan and awarded 462,686 to Chaplake for its investment in the plan. Chrysler appealed.

JUDICIAL OPINION

WALSH, J.… Under the doctrine of promissory estoppel a plaintiff must demonstrate by clear and convincing evidence that:

(i) a promise was made;

(ii) it was the reasonable expectation of the promisor to induce action or forbearance on the part of the promisee;

(iii) the promisee reasonably relied on the promise and took action to his detriment; and

(iv) such promise is binding because injustice can be avoided only by enforcement of the promise. There were a series of promises made by Chrysler and its various representatives to Portman, Chaplake and their representatives. First, the comments of then-chairman Iacocca upon the acquisition of Lamborghini made clear Chrysler’s plans to expand production over a period of five to six years. More importantly, between 1987 and 1991 [Chrysler/Lamborghini executives] Novaro, Richards, Molaschi and Levy made similar statements promising that the Lamborghini line would expand ten-fold, and that Portman would retain its exclusivity deal only if it expanded its operational capacity. By making these promises, Chrysler should have expected that Portman and Chaplake would be induced to expand its operations in accordance with the promised expansion of the Lamborghini line of automobiles.

Portman and Chaplake reasonably relied upon the promises made by Chrysler, and took action to their detriment. Over a period of several years, Portman and Chaplake were regularly updated regarding the progress of the Expansion Plan. Portman would not have implemented the Portman Plan in the absence of these promises. The reasonableness of Portman and Chaplake’s reliance is bolstered by the fact that the promises emanated from many of the most senior officers involved with the Expansion Plan. Lakeman and Jolliffe were sophisticated businessmen in their own right, and in crafting the Portman Plan they employed the services of highly sophisticated advisors. Nevertheless, the record establishes that all of the Chrysler/ Lamborghini executives with whom Lakeman, Jolliffe, and their advisors came in contact provided the same message: Chrysler is committed to the Expansion Plan, and in order for Portman to retain its exclusivity in the U.K. market, it must expand its operational capacity accordingly. Therefore, it was not unreasonable for Lakeman and Jolliffe to rely upon the promises made by these executives. ……………………………

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