Pop’s Cones, Inc. v. Resorts International Hotel, Inc.

307 N.J. Super. 461, 704 A.2d 1321 (App. Div. 1998)
  • Opinion Date: January 23, 1998

LEASES; PROMISSORY ESTOPPEL—By instructing a prospective tenant not to renew its existing lease and by indicating that it was “95%” toward having a final lease, a landlord may be liable to the prospective tenant under the doctrine of promissory estoppel.

A franchisee of a frozen yogurt store had numerous discussions with a hotel and casino operator about relocating the store to space available in the hotel. The franchisee was concerned about rental rates and the viability of the new location. In order to allay these concerns, a hotel executive vowed that the financial issues could be easily resolved, and offered to permit the franchisee to operate a vending cart in the hotel free of charge for a summer to test the traffic flow. At the end of that summer, the franchisee inquired about the status of a lease proposal given to the hotel and informed the hotel that it needed an answer so that it could give notice to its current landlord as to whether it would exercise a renewal option. The franchisee was told that a more senior hotel executive had to approve the deal, but that approval was highly likely and that the franchisee should not extend its current lease. In reliance on that advice, the franchisee did not renew its lease and, instead, placed all of its equipment in temporary storage, commenced site preparations, and hired an attorney. After four months of preliminary negotiation, accompanied by continuing assurances that everything would work out and the store was wanted in the hotel, the franchisee received a letter from the hotel, withdrawing its offer to lease space. The franchisee tried to find new space to lease since its original space had been re-let, but was unable to reopen for another 18 months. It then sought damages against the hotel, alleging it detrimentally relied on assurances that it would be able to lease space in the hotel. The lower court granted summary judgment against the franchisee, finding no clear and definite promise had been made that could reasonably be relied on and no specificity regarding lease terms.

The Appellate Division thought the motion judge had viewed the franchisee’s complaint as seeking enforcement of a lease not yet fully negotiated. However, in the Appellate Division’s view, the franchisee was really asserting a claim of promissory estoppel, not one of breach of contract. The elements of promissory estoppel are: (1) a clear and definite promise; (2) made with the expectation of reliance thereon; (3) where the promisee in fact reasonably relied on the promise; and (4) where detriment of a definite and substantial nature was incurred in reliance on the promise. The Court found that the first requirement has been relaxed somewhat by courts when determining whether a prima facie case exists. The Court further found particular favor with cases that address whether injustice can be avoided only by enforcement of the promise, a more equitable analysis than the rigid “clear and definite promise” standard. It then found that the hotel had instructed the franchisee not to renew its lease and had indicated that the parties were 95% of the way toward having a final agreement. As a result, the franchisee relied to its detriment on the hotel’s assurances. Whether its reliance was reasonable was left as a jury question. In conclusion, the store presented a prima facie case of promissory estoppel sufficient to defeat summary judgment.