OPINION
We granted allocatur to determine whether an agreement to build a new school, entered into by a school board at the expiration of its term, is binding on the successor school board. For the reasons that follow, we affirm in part and reverse in part.
*382 On May 15, 1991, Lobolito, Inc., (Lobolito) and the school board of the North Poeono School District (School District) entered into a written agreement, entitled “Joint Development Agreement.” Under this initial agreement, Lobolito proposed to construct, own and operate a sewage treatment plant (STP). The STP would provide sewage disposal services to a new elementary school that the School District proposed to construct on eighteen acres of its own property located in Clifton Township. The STP would also provide sewagе disposal services to a residential subdivision, which Lobolito would construct on 220 acres of its own property located in Lehigh Township. Pursuant to the Joint Development Agreement, over the next several years, Lobolito and the School District proceeded to obtain and share the costs of the necessary planning and permit approvals for the proposed STP.
In November of 1994, a new majority of the school board was elected. On December 7, 1994, while still awaiting the approval of needed permits, Lobolito and the old school board entered into a second written agreement, entitled “Memorandum of Agreement” — the agreement at issue in the present appeal. Based on the record before this Court, it appears that the newly elected board members were not yet in place at the time of the second agreement.
This second agreement changed the proposed location of the STP, altered the financing arrangements of the Joint Development Agreement and revised the terms of the STP’s service obligations to the new elementary school. It also terminated the Joint Development Agreement. 1 In the Memorandum of Agreement, the School District promised to “proceed with the *383 School District Project, subject to all regulations and laws by which it is governed.” Memorandum of Agreement ¶ 7. Under this agreement, Lobolito and the School District would no longer share costs associated with attaining the remaining approvals and permits. Rather, the parties agreed that “all costs incurred in the connection with obtaining permits and approvals for the proposed sewage treatment plant shall be paid by Lobolito ... and shall be recovered by rates and charges as set forth in the Service Agreements.... ” Memorandum of Agreement ¶ 8. Lobolito claims to have incurred substantial costs after the execution of the Memorandum of Agreement in attempting to acquire the necessary approvals and permits.
Approximately one year after the exeсution of the Memorandum of Agreement and the school board election, the School District adopted a resolution promulgated by the successor school board which provided that the elementary school would not be built and that, even if it were built, it would not utilize the proposed STP for sanitary sewage disposal services. Believing that the resolution breached its agreement with the School District, Lоbolito filed a cause of action seeking to recover its costs and lost profits.
The School District responded by filing preliminary objections in the nature of a demurrer, claiming,
inter alia,
that Lobolito’s Complaint failed to state an actionable claim because the School District’s new school board, which Lobolito alleges to have breached the agreement, cannot be bound by a contrаct executed by the predecessor school board. The trial court granted the School District’s preliminary objections and dismissed the case with prejudice. On appeal, the Commonwealth Court affirmed, finding that the succeeding school board could not be bound by a contract executed by the predecessor board which encompassed a governmental as opposed to a proprietary function.
Lobolito v. North Pocono Sch. Dist.,
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This Court has long viewed agreements involving governmental bodies in a different light than agreements made exclusively between private parties. Since the mid-nineteenth century, we have distinguished between agreements encompassing governmental functions of governing bodies from agreements encompassing proprietary or business functions.
See Western Saving Fund Soc’y of Philadelphia v. City of Philadelphia,
With respect to those agreements involving municipal or legislative bodies that encompass governmental functions, we have repeatedly held that governing bodies cannot bind them successors.
See, e.g., Mitchell v. Chester Housing Auth.,
In the performance of sovereign or governmental, as distinguished from business or proprietary, functions, no legislative body, or municipal board having legislative authority, can take action which will bind its successors. It cannot enter into a contract which will extend beyond the term for which the members of the body were elected.
Commonwealth ex rel. Fortney,
In Mitchell, we described the public policy behind this rule of law in the following terms:
The obvious purpose of the rule is to permit a newly appointed governmental body to function freely on behalf of the public and in response to the governmental power or body politic by which it was appointed or elected, unhampered by the policies of the predecessors who have since been replaced by the appointing or elеcting power. To permit the outgoing body to ‘hamstring’ its successors by imposing upon them a policyimplementing [sic] and to some extent, policymaking [sic] machinery, which is not attuned to the new body or its policies, would be to most effectively circumvent the rule.
Mitchell,
Our Court has noted only one exception to the general rule against binding governmental successors. In
MacCalman v.
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County of Bucks,
if the [contract] is ‘deemed to constitute a contractual impairment or limitation upon future county commissioners in a legislative or governmental function, then we ... believe that considerations of urgency and necessity, especially when coupled with the stipulated public interest and absence of bad faith or ulterior motivation, should permit the commitment to be sustained as an exception to the general rule.’
MacCalman,
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The most contemporary illustrations of the governmental-proprietary distinction come from the Commonwealth Court. That court has recently explained, for example, that a multiyear custody and securities lending agreement between the Commonwealth’s treasurer and a bank encompasses a governmental function (safekeeping the Commonwealth’s assets) and thus was unenforceable against the succeeding Commonwealth treasurer.
State Street Bank & Trust Co. v. Commonwealth Treasury Dep’t,
Applying these principles to the case at bar, we must determine whether the Memorandum of Agreement encompassed a proprietary or governmental function. We first note, as the Commonwealth Court observed below, that the Memorandum of Agreement cannot reasonably be construed only as an agreement to provide sewage treatment services, which is arguably a proprietary function.
See Lobolito v. North Pocono Sch. Dist.,
Having found the crux of the Memorandum of Agreement to be the construction of a new school, we turn to the question of
*388
whether such a purpose constitutes a governmental function. We find that it does. The creation and operation of public schools have traditionally been governmental functions in Pennsylvania. Our Commonwealth’s Constitution expressly charges the General Assembly with the duty to “provide for the maintenance and support of a thorough and efficient system of public education....” Pa. Const. Art. III, § 14. Moreover, our courts have noted that the right to education is a statutory entitlement in Pennsylvania and that the government has a duty to provide for and enable public education.
See Lisa H. v. State Bd. of Educ.,
There can be no doubt that the government needs to create schools in order to satisfy its duty to provide education for the Commonwealth’s youth. Indeed, the Public School Code gives local school boards the exclusive authority to decide whether and where to establish new schools. The Code provides that “[t]he board of school directors of each district shall provide the necessary grounds and suitable school buildings to aсcommodate all of the children between the ages of six and twenty-one years, in said district, who attend school.” Section 701 of the Public School Code of 1949, Act of March 10, 1949, P.L. 30, as amended, 24 P.S. § 7-701. The decision to build a school, therefore, is a traditional governmental function and, under the Public School Code, a function that comes under the exclusive province of local school boards. Id.
Given that the authority to build sсhools rests with local boards and that decisions concerning the creation and operation of schools is a basic governmental function, we find that the successor school board was not obligated to honor the agreement entered into by the predecessor school board and Lobolito.
7
To require such a contract to be enforced would be to inappropriately compel the successor board to either follow the governmental policies of its predecessor or be faced with
*389
substantial liability, including the possibility of consequential damages, for merely seeking to implement its own policies. We are particularly concerned about allowing such a result in cases such as this one, where the old board entered into a new agreement after an еlection but before the newly-elected board members took office.
See Mitchell v. Chester Hous. Auth.,
In finding that the successor school board was entitled to disavow the Memorandum of Agreement, we affirm the granting of the preliminary objections with regard to those counts in which Lobolito avers breach of contract and seeks lost prоfits. Such a finding, however, does not preclude Lobolito from recovering its out-of-pocket costs under an equitable theory of relief. Because this case was dismissed in its entirety at the preliminary objection stage, the appropriate inquiry is whether Lobolito’s Complaint “sets forth a cause of action which, if proved, would entitle the party to the relief sought.”
Sinn v. Burd,
In the present case, the underlying facts set forth in the Complaint provide for the possible recovery of damages based upon promissory estoppel.
9
In its Complaint, Lobolito averred that it “proceeded with the permitting and approvals for the proposed STP in reliance upon the School District’s
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obligation to use the same.” Complaint ¶ 42. It also averred that through this action it sought to recover certain damages, including “сosts and expenses [incurred] ... for the purpose of obtaining planning approvals for the proposed STP.” Complaint ¶ 43(a). In essence, Lobolito averred that, given its dealings with the School District since the 1991 Joint Development Agreement, it relied on the board’s promises and, to its detriment, expended substantial money after the execution of the Memorandum of Agreement in proceeding with the STP project. Since these allegations outline a theory of recovery in promissory estoppel the Complaint should survive the preliminary objection stage.
See Sinn,
While we hold that promissory estoppel may provide a theory of recovery for Lobolito under these facts, we do not hold that at this early stage of the litigation that Lobolito is entitled to recover damages. 10 The determination to award relief involves questions of fact concerning the reasonableness of Lobolito’s reliance as well as the establishment оf actual losses, questions which must be answered by the trier of fact. We therefore affirm the decision of the Commonwealth Court to .the extent it determined that the contract at issue encompassed a governmental as opposed to a proprietary function. We nevertheless reverse the Commonwealth Court’s decision affirming the trial court’s dismissal of Lobolito’s Complaint *391 and remand for further proceedings consistent with this opinion.
Notes
. The Commonwealth Court found that the Memorandum of Agreement terminated and replaced the Joint Development Agreement. See Lobolito v. North Pocono Sch. Dist., 722 A.2d 249, 252 n. 4 (Pa. Commw.Ct.1998). While Lobolito challenges this finding, we agree with the Commonwealth Court that since the Memorandum of Agreement expressly stated that upon its delivery "the School District and Lobolito shall terminate the Joint Development Agreement,” the latter аgreement terminated and replaced the former. See id.; Memorandum of Agreement ¶ 8. For purposes of this appeal, therefore, the Memorandum of Agreement is the only agreement at issue — that is, the only agreement under which Lobolito may be entitled to relief.
. We note that in the law of pleading it is axiomatic that preliminary objections in the nature of a demurrer admit as true all well and clearly pleaded material, factual averments and all inferences fairly deducible
*384
therefrom.
Sinn v. Burd,
. The historical basis for this distinction stems from the nineteenth-century view that local governmental bodies or municipal corporations were both private corporations that engaged in proprietaiy actions and public entities thаt performed governmental functions. In those days, it was commonplace for municipalities to be involved in proprietaiy enterprises such as constructing wharves, building jetties, operating markets and entering into all types of joint ventures with the private sector. Agreements entered into by the municipalities that encompassed these business functions, therefore, were naturally viewed as distinct from those аgreements that encompassed the municipalities’ police powers or other interests and functions of general public importance. See Janice G. Griffith, Local Government Contracts: Escaping the Governmental/Proprietary Maze, 75 Iowa L. Rev. 277, 280-300 (1990) (discussing historical development of governmental-proprietary distinction made by early state courts).
.
See also In re Jones,
. The rule against binding governmental successors is recognized in most other jurisdictions as well. See Eugene McQuillin, The Law of Municipal Corporations, § 29.101 (3d ed.1990) (discussing unenforceability of municipal contracts that bind successors and citing cases from many states); see also Griffith, supra note 3, at 305-28 (discussing approaches of stаtes in applying governmental-proprietary test); Restatement (Second) of Contracts § 8 cmt. c (1981) (discussing English *386 common law basis for unenforceability of certain government contracts).
. Lobolito correctly observes that a short line of our cases which involve government contracts do not discuss the governmental-proprietary distinction and make seemingly unequivocal pronouncements that all gоvernment contracts can bind successors.
See Altman
v.
School Dist. of City of Uniontown,
. We note that if the successor school board wanted to continue with the school project, it could have continued with the contract simply by ratifying it. There can be no doubt here, however, that the successor board’s December 1995 rеsolution clearly expressed its desire to abandon the school project and thus avoid the contract with Lobolito.
. Our scope of review of this matter is plenary since the trial court dismissed Lobolito's Complaint for failure to state a cause of action upon which relief may be granted.
See Renziehausen v. Township of Robinson,
. Promissory estoppel provides an avenue of recovery where "La] promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.”
Thatcher's Drug Store v. Consolidated Supermarkets,
. We note that in pursuing damages under promissоry estoppel, Lobolito shall be limited to recovering the amount of money it expended in reliance on the school board’s promise.
See Banas v. Matthews Int’l Corp.,