When parties to a contract make promises to perform their obligations, and one party reasonably relies on the other party’s promise—but the party making the promise fails to perform, causing harm or loss to the party who relied on the promise—the party who relied on the promise to perform is said to have relied to its detriment.
This legal concept is called detrimental reliance. Detrimental reliance may serve as a substitute for consideration, and make an otherwise unenforceable contract enforceable.
Thus, detrimental reliance is a legal concept based on fairness (known as equity or equitable), and is equivalent to contractual promissory estoppel (due to the other party’s reliance, the party who did not keep its promise is prohibited from challenging the enforceability of its promise).
Detrimental reliance is not a separate tort cause of action.
In Texas, the legal concept of detrimental reliance is recognized and is often referred to as promissory estoppel. Under Texas law, if a party makes a promise that leads another party to rely on it to their detriment, the promisor may be prevented from arguing that the promise was unenforceable. This doctrine is used to enforce agreements that may lack consideration, which is typically required to form a binding contract. Detrimental reliance is based on principles of fairness and aims to prevent injustice that would result if the promisor were allowed to renege on their promise. It is important to note that detrimental reliance is not an independent cause of action in tort; rather, it is a principle applied in contract disputes to enforce promises that have been relied upon. Texas courts will consider factors such as the reasonableness of the reliance and the foreseeability of the harm caused by the promise when applying this doctrine.
