Contract From Below: Promissory Estoppel and the Reserved List

by Scott Peitzer // Jul 13, 2018

Every time we see the new spike in the price of dual lands, the subject of the Reserved List pops up on social media. In those conversations, people often assume that Wizards won’t abolish the Reserved List because it exposes them to a lawsuit for promissory estoppel. But what exactly is promissory estoppel? How does it apply to the Reserved List? And would such a lawsuit be successful?

This article series will attempt to explain all of those questions and more, hopefully clearing up a lot of the misconceptions people have about the legal side of the reserved list. But first, allow me to introduce myself. Some of you might know me as the creator of the Booze Cube—a custom set that turns Magic into a drinking game. I’m also an attorney with a keen interest in contract law. I’ve been playing Magic since Revised and own a respectable collection of Reserved List cards. While I enjoy playing most constructed formats, my favorite by far is Legacy (I’m obsessed with 12 Post). And as both an attorney and Legacy player, I’ve spent a lot of time thinking about the Reserved List. Personally, I’d like to see it abolished because Legacy is my favorite format, and I’d like to have people to play it for the next twenty years. For now, however, we will ignore the question of whether Wizards should abolish the list. Instead, we will be focusing on the legal consequences of reprinting cards on the list.

So let’s start with the simplest question: What is promissory estoppel, and why would someone sue Wizards for it?

To understand promissory estoppel, you first need to understand some fundamentals of contract law. A promise, by itself, is not legally enforceable—that is, a court won’t award damages for a broken promise. To be enforceable, you typically need a contract. So then what is a contract? Now, when you think about a contract, you probably picture a formal document you sign or perhaps a EULA where you click an “I Accept” button. But what counts as a “contract” is much broader than that and can be much less formal. Any time you buy something—be it a new car or a bottle of water—that’s a contract. Any time you trade Magic cards, that’s a contract. Any time you play in a GP, that’s a contract. So what, then, is a contract?

A contract is simply a promise (or a set of promises) that the law either recognizes as a duty or provides a remedy for breaching it.[1] To form a contract, you need three core elements: offer, acceptance, and consideration. These elements reflect the fundamental idea that, for a promise to be legally enforceable, it must be the product of mutual assent to the same bargain, and that the bargain is one in which both parties get something out of it.[2] One person “offers” terms, and the other person “accepts” them—this is often called a “meeting of the minds.”[3] The key here is that both parties agree to be legally bound by the same contractual terms.[4]

The element of “consideration” is about reciprocity—the exchange at the core of the parties’ bargain.[5] We see this all the time in Magic. I offer to trade you my Taiga in exchange for your playset of Karn, Scion of Urza, and you accept. We have agreed to the same terms, and the exchange of cards is the consideration to which we’ve agreed — we’ve formed a contract. Consideration can also be an exchange of promises.[6] For example, I promise to lend you my deck for a tournament if you promise to give me 25% of anything that you win with it. Again, the key here is that we’ve bargained for a reciprocal exchange. That bargain can be wildly one-sided—trading a Black Lotus for a draft common—but, as long as there’s something exchanged, it will count as consideration when forming a contract.[7]

The Reserved List is a promise, but it’s not enforceable as a contract because it lacks consideration. Wizards didn’t promise to forego reprinting certain cards in exchange for something. Many people were upset after Chronicles tanked the value of the cards that were reprinted in it. Wizards made the promise gratuitously, hoping that renewed faith in the cards’ collectability would encourage people to continue buying packs. There was no reciprocity, no promise by Magic players to buy packs in return. Without that mutual exchange, there’s no contract. And if the Reserved List isn’t a contract, the law provides no remedy for a breach.

This is where promissory estoppel enters the picture.

Promissory estoppel is an equitable doctrine in which a court enforces a promise as if it was a contract.[8] The word estoppel comes from the French word “estoupe,” which means “shut the mouth.”[9] Essentially, the court is preventing a party from making an argument, asserting a right, or introducing evidence based on that party’s prior conduct.[10] There are many species of estoppel. Collateral estoppel, for example, prevents parties from re-litigating issues that were already decided in a previous case.[11] Judicial estoppel prevents a party from asserting one position in a legal proceeding and then asserting an inconsistent position later.[12] With promissory estoppel, the promissor is estopped from defending themselves that there was no contract because the promise lacked consideration.[13] This allows the promisee to seek quasi-contractual damages for relying on the broken promise.[14]

The precise definition of promissory estoppel varies from state to state, but its elements are basically the same. In order to establish promissory estoppel, you need to prove several things:

The existence of a promise; The promise is one that the promisor should reasonably expect to induce the promisee to rely on it to their detriment; The promise actually did cause the promisee to justifiably change their position in reliance on it; and Injustice can be avoided only by enforcement of the promise.[15]

There’s a lot to unpack in each of these elements, which I plan to do in future articles. For now, however, let’s look at the broad picture.

The essence of promissory estoppel is based on the idea of “reliance,” which is a term of art in contract law. Reliance is the change of position induced by a promise—that is, expenses or losses that the promisee would not have incurred but for the broken promise.[16] To get a sense of what this means, consider what a Tournament Organizer ("TO") might need to invest before a large limited tournament. They need enough packs for the players to open and as prize support, so they order extra cases. They need to print deck registration forms and have plenty of paper on hand to print match slips. And so on. Now imagine what would happen if the venue they booked for the tournament suddenly pulled out at the last minute. The TO just spent thousands of dollars to prepare for the tournament, relying on its contract with the venue that there would be a space to hold it. The TO could then sue the venue for breach of contract, seeking this amount as reliance damages. We can contrast this with the TO’s expectation damages, which would be the profits they reasonably expected if the venue hadn’t breached.

In a promissory estoppel claim, what you need to prove is very similar — the difference being that the promise isn’t part of a contract. Imagine that, when the TO spoke to the venue six months before the tournament, they were told that they don’t book rooms that far in advance. The venue also told the TO not to worry and to go ahead planning the tournament because they’d have a room available closer to the time. Relying on this promise, the TO spends thousands of dollars in preparation. When the TO speaks to the venue again, however, they are informed that they are all booked up and don’t have any rooms to rent. In this case, there was no contract formed, just a promise to have a room available for a contract at a later date. The venue, however, should have reasonably foreseen that its suggestion to go ahead and prepare for the tournament would induce the TO to justifiably rely on the promise that they’d have a room to rent. The TO can sue the venue for the amount that they spent relying on that promise, estopping the venue from arguing that they didn’t have a contract.

For a claim based on the Reserved List, your theory of the case would be that you spent an exorbitant amount of money to acquire cards, relying on Wizards’s promise never to reprint them to protect the value of your investment. You would also need to prove that Wizards should have reasonably expected you to rely on the Reserved List in this way, and that you were justified in doing so. This theory has significant flaws, which I will delve into in future articles.

The measure of damages here would be the price you paid minus the fair market value after they reprinted those cards. It’s very important to note that you can’t recover expectation damages. Because it’s reliance based, promissory estoppel won’t allow you to recover the profit that you would have made from selling a card at pre-reprint prices. Let’s say that you bought a Revised Underground Sea at $300, listed it at $800, and it tumbles down to $100 after a reprint. You could try to get the extra $200 that you paid in reliance on the Reserved List, but you can’t get the $500 profit that you would have made if Wizards hadn’t reprinted it.

The injustice element is where we see the biggest difference between breach of contract and promissory estoppel. As I mentioned before, promissory estoppel is an “equitable” claim, as opposed to a “legal” claim like breach of contract. Claims at equity invoke an entirely different set of the court’s powers than claims at law. We will dive into what this would mean for a lawsuit against Wizards later, but for now, the most important thing to understand is that equitable relief “is not a matter of absolute right to either party; it is a matter resting in the discretion of the court, to be exercised upon a consideration of all the circumstances of each particular case.”[17] In other words, even if you prove all of the elements of promissory estoppel against Wizards, the court still has tremendous discretion as to whether to give you any money. In the end, it comes down to policy decision about whether the Reserved List is the kind of promise that the courts should be willing to enforce.

Well, that’s it for today. I hope this helped give you a basic understanding of what promissory estoppel actually is. Join me next time, when I will dive deep into the reliance element and why someone suing Wizards would have a very difficult time proving it. If you want to contact me, I’m on Twitter at @theboozecube. See you next time!