Formation V: Consideration (Part 2)

Question 1

Goals

Answer 1

Part Payment of a Debt
· Promissory Estoppel

Last week - Pre-existing duty → good consideration?
Variation of contract → CA in NZ, UK, and USA differ
Alongside this structure → in the variation of contract → when one party promises something more to the other
Does forgiveness in part payment of debt → requires consideration
And we can say → there is a practical benefit there (Roffey)
But the Court says NO
Rules on variation in part payment of Debt is different
After this → promissory estoppel
Enforce promises that are given in the absence of consideration
Goes against regular rules of contract law → Carlil → naked promise “nothing without consideration” but may be enforceable → promissory estoppel.

Question 2

PART PAYMENT OF DEBT:

Answer 2

First case → Foulkes v Beer
Lord Blackburn
Subsequent treatment of this case in English Courts

Question 3

Foakes v Beer (1884) 9 App Cas 605 (HL)

Answer 3

FACTS:
Two parties
Appellate Doctor Foalkes and Beer
Prior proceedings to these proceedings where Mr Foakes had to pay Ms Beer a sum of money
Does not matter that it comes from a lawsuit → there is a debt owed to Miss Beer
Miss Beer makes an agreement to pay it in instalments → you can pay by instalments
He finished paying the instalments
ISSUE → he owes interest → when we don’t pay on time, our debt accrues interest → for example: having money on the bank accrues interest.
When you don’t pay on time you have to pay the interest as well
MS Beer comes after the payment of instalments → and says the full payment of debt will include payment of interest
Mr Foalkes says → No we had a contract → you promised to not ask for more money after i pay the instalments
But MIss Beer states → maybe i made this promise but there was no consideration given in return for it.
WAS THERE CONSIDERATION?

· The rule in Pinnel’s case (Pinnel’s Case (1601) 5 Co Rep 117a, 77 ER 237 (Comm Pleas)): “that payment of a lesser sum on the day in satisfaction of a greater cannot be any satisfaction for the whole, because it appears to the judges that by no possibility a lesser sum can be a satisfaction to the plaintiff for a greater sum; but the gift of a horse, hawk, or robe, &c., in satisfaction is good, for it shall be intended that a horse, hawk, or robe, &c., might be more beneficial to the plaintiff than the money, in respect of some circumstance, or otherwise the plaintiff would not have accepted of it in satisfaction.”

HOL cites 400 year old case
Pinnel’s case:
Sir Edward Cooke
If you pay part of your debt it cannot be satisfaction of the whole debt → because why would you take less when you are owed more?
Horse, robe, hawk → does not matter about the quality of the consideration → we know that Courts do not look at the adequacy of consideration
If something is given in return → that is fine
WONT LOOK INTO THE ADEQUACY
If payment is made earlier or in a different place
Or changes in the circumstances of the payment → that could also be good consideration
But PART PAYMENT IS NOT SUFFICIENT CONSIDERATION
Variation of the original obligation → is not valid → no valid agreement

· Blackburn L, at 622: “What principally weighs with me in thinking that Lord Coke made a mistake of fact is my conviction that all men of business, whether merchants or tradesmen, do every day recognise and act on the ground that prompt payment of a part of their demand may be more beneficial to them than it would be to insist on their rights and enforce payment of the whole. Even where the debtor is perfectly solvent, and sure to pay at last, this often is so. Where the credit of the debtor is doubtful it must be more so. I had persuaded myself that there was no such long-continued action on this dictum as to render it improper in this House to reconsider the question. I had written my reasons for so thinking ; but as they were not satisfactory to the other noble and learned Lords who heard the case, I do not now repeat them nor persist in them.
I assent to the judgment proposed, though it is not that which I had originally thought proper.”

BLACKBURN → thinks something is wrong in Pinnel’s case – something wrong ⇒ Made a mistake of fact
What did he say:
Must be getting something out of it → because they do it over time → there must be some PRACTICAL BENEFIT → 100 years before Rofey
According to Blackburn → should we recognise part-payment as consideration → YES
When I am being paid promptly I am ensuring my self against the risk that you go bankrupt
Even when there is no need to fear insolvency
It is still good to have money in your hand rather than just a promise of money
But the other lords disagreed
OTHER JUDGES DISAGREED

The rule in Pinnel’s case has been good law
Lord Blackburn → must be getting something from it → (not his language) → have to get some practical BENEFIT
BLACKBURN’S RESERVATIONS IN FOAKES V BEER
Part payment → when I am being paid promptly (full amount) → ensuring myself that you won’t go bankrupt → even when debtor is perfectly solvent → Still it is good to have immediate funds rather than a promise of money.
HOWEVER BLACKBURN WAS OVERTURNED (HE WAS IN THE MINORITY).
Blackburn → in Pinnel’s case has been good law for a long time → he wanted to overturn but other judges disagreed.
PINNEL’S CASE IS STILL GOOD LAW DUE TO THIS → OTHER JUDGES AGREED WITH IT.

Rule of Foakes and Pinnels → has been read narrowly TO EXCLUDE:
Part Payment of Debt → something is added → hawk,robe, tv set, bicycles → change in terms of payment → can be good consideration → part payment of debt is accepted
If there is a SUM IN DISPUTE → for ex: owe me $1000, you say no I owe you $600 → and agree on $800 → valid agreement → Agree on Compromise then compromise is valid → Cooke v Wright → Blackburn → commissioners say you owe us money and they say I don’t owe you anything → and reach a compromise → agreement on compromise is valid contract →
CASES OF INSOLVENCY (Composition of creditors) → Person who is in debt cannot pay debt → all the creditors, all people to whom the debtor owes money can come together and make an agreement between them → and the person in debt as to how much he will pay all of them as part payment of the debt
All of these situations → ARE EXCLUDED FROM FOAKES V BEER → payment of a lower sum in satisfaction for the entirety of the debt.

Question 4

In Re Selectmove Ltd [1995] 1 WLR 474 (CA)

Answer 4

Foakes v Beer is good law in many cases →
FACTS IN SELECTMOVE:
When dealing with Vessels and ships → we say in the matter of that ship (here it is a company)
Company which doesn’t have enough to cover its debt → and the case of insolvency
So in this case: in the matter of Selectmove.
The company owed a lot of tax → had a debt to the internal revenue
Cant pay it because they don’t have money → insolvent
Agreement to pay partly over time
AN AGREEMENT TO PAY ARREARS IN INSTALMENTS (ULTIMATELY ALSO ENCOUNTERS DIFFICULTIES)
WAS THE AGREEMENT BINDING ON THE IR?
Struggle to pull of this agreement
Tax authorities ask for payment of debt on time
They say → No we had an agreement for an alternative payment arrangement

CA:
Faced with two important decisions: Foakes v Beer, Pinnel’s case and Rofey brothers
Case of part payment of debt → They owed money → got some reprieve from internal revenue → pay a lesser sum → part of what they would ordinarily
Did that change → was this agreement binding on internal revenue
Rule comes to: Foakes v Beer, Pinnels case → forgiveness of part of the debt is it binding? Rule is the same → NO part payment is not satisfaction for entirety of debt
But another decision from English CA came → Williams v Rofey Brothers
Old rule → but new logic
Practical benefit → if parties choose to vary their contract in this way → Stilk does not apply →
PETER GIBSON:
· Peter Gibson LJ
o At 481: “I see the force of the argument, but the difficulty that I feel with it is that, if the principle of Williams v. Roffey Bros. & Nicholls (Contractors) Ltd. [1991] 1 Q.B. 1 is to be extended to an obligation to make payment, it would in effect leave the principle in Foakes v. Beer, 9 App.Cas. 605 without any application.”
PETER:
See the force of the argument → difficulty → if principles of Rofey is to be extended to part payment of debt
It would leave the principle without any application
Cannot do this → because Foakes v Beer is good law
Even after Rofey
Why was it good enough to get rid of Stilk but not Foakes
Stilk v Myrick no longer controlled this cases → Barganawarath
CA: there is a doctrine of precedent, CA can overturn → and doesn’t mind cases from lower instances → It can overturn cases at CA if it wants
Foakes v Beer → is decided in the HOL → CA cannot overturn HOL decision

o “Foakes v. Beer was not even referred to in Williams v. Roffey Bros. & Nicholls (Contractors) Ltd. [1991] 1 Q.B. 1, and it is in my judgment impossible, consistently with the doctrine of precedent, for this court to extend the principle of Williams’s case to any circumstances governed by the principle of Foakes v. Beer, 9 App.Cas. 605. If that extension is to be made, it must be by the House of Lords or, perhaps even more appropriately, by Parliament after consideration by the Law Commission.”

To extend Rofey bros → you have to be in the HOL
Even the HOL should not overturn a case that has been standing for over 100 years → Parliament should come and sort it
IF THE LAW IS TO CHANGE, IT SHOULD PROBABLY BE BY LEGISLATION
As it is a rigid law

There is a set of circumstances that look like the variation cases → and the rule is different
Unprincipled → this is what makes it hard
Practical benefit is not good enough

Question 5

MWB Business Exchange Ltd v Rock Advertising Ltd [2016] EWCA Civ 553, [2016] 3 WLR 1519

Answer 5

CA CASE:
Facts:
Rock Advertising had a license agreement to manage a process managed by MWB
Original license agreement stated → all variations must be agreed and signed in writing
Rock Advertising fell behind on payment → and verbally agreed to reschedule the payment schedule
And payed $3500 on the same day
MWB → then exercised their rights in original agreement and excluded rock advertising from the premises
MWB → wants them out
ROCk → we had a contract
You promised we could stay and have this change
MWB → we made the promise → BUT THERE WAS NO CONSIDERATION
Lord Justice Kitchin:
In 1937 → Law Revision Committee expressed opinion that Lord Blackburn’s view → was right → recommended that legislation should be passed to give effect to it
Law Revision Committee → Let’s have parliament overturn Foakes v Beer
This recommendation was not implemented
And Foakes was implemented subsequently in many cases → for example: Selectmove

· Kitchin LJ:
o [48] “There was, so it seems to me, a commercial advantage to both MWB and Rock in reaching an agreement if that could be achieved. MWB would receive an immediate payment of £3,500, it would be likely to recover more from Rock than it would by enforcing the terms of the original agreement and it would also retain Rock as a licensee. Rock would remain in occupation of the property, continue its business without interruption and have an opportunity to overcome its cash flow difficulties. Accordingly this is not a case in which the only benefits conferred on MWB by the oral variation agreement were benefits of a kind contemplated by Lord Blackburn in Foakes v Beer … and by this court in In re Selectmove … MWB derived a practical benefit which went beyond the advantage of receiving a prompt payment of a part of the arrears and a promise that it would be paid the balance of the arrears and any deferred licence fees over the course of the forthcoming months. This is therefore a case where, as in the Roffey Bros & Nicholls case [1991] 1 QB 1, Rock’s immediate payment of £3,500 and its agreement to perform its obligations under the revised payment schedule conferred a practical benefit on MWB which amounted to good consideration, so rendering the oral variation agreement enforceable.”

There was a commercial advantage
Could have recovered more
CA:
Kitchin:
Both parties here → gained a practical benefit from this variation
Very similar → can distinguish to Foakes v Beer
Here → the forgiveness of part-payment of debt is in the service of continuing the contractual relationship
MWB → derived practical benefit → beyond receiving prompt payment → in continuing relationship
Case where → Rocks immediate payment → conferred a practical benefit
Rendering the old variation agreement enforceable.
If Rofey was the same circumstance → and that is here → we cannot apply otherwise.
PRACTICAL BENEFIT
BEYOND PROMPT PAYMENT
ROFFEY BROS APPLIES

MWB → GOES TO SC
· In the Supreme Court:
o Sumption L: [18] “That makes it unnecessary to deal with consideration. It is also, I think, undesirable to do so. The issue is a difficult one. The only consideration which MWB can be said to have been given for accepting a less advantageous schedule of payments was (i) the prospect that the payments were more likely to be made if they were loaded onto the back end of the contract term, and (ii) the fact that MWB would be less likely to have the premises left vacant on its hands while it sought a new licensee. These were both expectations of practical value, but neither was a contractual entitlement. In Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 the Court of Appeal held that an expectation of commercial advantage was good consideration. The problem about this was that practical expectation of benefit was the very thing which the House of Lords held not to be adequate consideration in Foakes v Beer (1884) 9 App Cas 605: see, in particular, p 622, per Lord Blackburn. There are arguable points of distinction, although the arguments are somewhat forced. A differently constituted Court of Appeal made these points in In re Selectmove Ltd [1995] 1 WLR 474, and declined to follow Williams v Roffey. The reality is that any decision on this point is likely to involve a re-examination of the decision in Foakes v Beer. It is probably ripe for re-examination. But if it is to be overruled or its effect substantially modified, it should be before an enlarged panel of the court and in a case where the decision would be more than obiter dictum.

MWB → appealed to SC → decided on different matter (not covered)
FACTS:
Oral variation to the contract. → original contract said → all variation must be in writing
That is the basis on which the SC decided this case → contract wasn’t valid in the right way
One of the judges of the SC → LORD SUMPTION:
SUMPTION:
The problem is:
Practical expectation of benefit → There are arguable points of distinction → reality is any decision will look for reexamining Foakes → Case should be more than obiter → and more rigid
SC: IN OBITER: NOT SO FAST

Rule in Pinnels, and Foakes → are still GOOD LAW:
READ narrowly → in ways specified
And also read narrowly by legislation

PROPERTY LAW ACT 2007:
Part of writing requirements:
If a waiver (forgiveness, discharge) of a debt → is promised in writing and explicitly → acknowledgement in writing by a creditor in satisfaction of the whole debt operates as a discharge of the debt
APPLIES REGARDLESS OF ANY OTHER LAW
If you give this acknowledgement in writing it is enough
FOAKES IS STILL GOOD LAW EVEN THOUGH IT IS NARROWED.

CONSIDERATION IS REQUIRED IN FORMATION → must have consideration in order to form a contract
BUT → there is a special rule for variation → ROFEY BROS, ANTON TRAWLINGS,
Special rule for variation involving part payment of a debt → Need something substantive → a practical benefit WILL NOT DO.
Sumption → Rofey Bros does not control part payment of debt → Foakes controls part payment of debt → it is an exception
Sumption → CA trying to overturn Foakes v Beer, Sumption said no. (Kitchen’s attempt to overturn Foakes not successful)

Question 6

Promissory estoppel

Answer 6

shield not a sword → Combe v Combe → cannot go to a Court and look to enforce promise
Context
· A rule read narrowly to the exclusion of:
o Additional elements
o A disputed sum
o A composition with creditors

Doctrine → that is not in contract law → comes from the worlds of equity
Remedy in equity → generally
First → principles of equitable estoppel → traditionally in the law of equity
Jordan v Money
Then a series of decisions → first in England and Wales
First in the HC, then the CA
Lord Denning → High Tree House (important case)
High Tree House → looks at 50 years of law, shows mastery of the cases, and through them reinterprets the law to find a new principle
Walton Stores → AUS
And NZ law → Wilson Parking

Introduction to estoppel
· “The broad rationale of estoppel, and this is not a test in itself, is to prevent a party from going back on his word (whether express or implied) when it would be unconscionable to do so.” (National Westminster Finance NZ Ltd v National Bank of NZ [1996] 1 NZLR 548 per Tipping J at 549, quoted in Wilson Parking v Fanshawe 136, at 585).
· Propriety Estoppel
· Equitable estoppel

The idea of Estoppel → is from French ‘to stop’ → prevented from arguing something in Court (saying something)
Rationale → prevent party from going back on his word when it is unconscionable to do so
Equity → things that are unconscionable
When i say something and go back on my word → then try to argue what I denied outside the Court inside the Court → may be prevented if it is unconscionable to allow it.

PROPRIETARY ESTOPPEL:

Applies to property
If a person puts another person in possession of a piece of land
For ex: Go to friend and give land, say you can build a house. Friend with my knowledge, expands a sum of money in building house on my property → donor (me), Donee → is entitled to call on the Donor to make good on the promise
If i tell someone → build on this land → and it will be yours
And then I say → the house is mine → cannot do that
Things that Courts will not do to help someone from misusing a right
Enforce this and that → Courts: will not help you, because it is inequitable to use rights in this way
This is what is happening here

Or for ex: If a stranger, begins to build on my land, supposing it is on my land (for example boundary not clear), and i perceiving the mistake, let him build on my land → Court will not allow me to assert my title
Cannot see someone build on my land and say → WHAT YOU BUILT IS MINE → NO.
Cannot come to a court and argue contrary to my word → either explicit or implicit → by standing by and letting someone build on my property → I AM ESTOPPED FROM DOING THAT.

Question 7

Jorden v Money (1854) 5 HL Cas 185

Answer 7

Facts
Mid 19th century case
Tells a story
People meet each other in India
A story of 19th century British Empire
Speculation in Spain
Parties:
Money borrowed from Jordan’s brother → Original debt owed to Charles Marnell → debt is secured by bond → Charles → dies → and his sister Mrs Marnell (Jordan) inherits the debt.
Debt can be inherited → Mrs Jordan →
Mr Money → comes to her and they meet → and he tells her and her father → I WILL NOT ACT ON THE DEBT
Why doesn’t she act on the debt
Mrs Jorden says on multiple occasions that she will never act on the bond
Mr Money and Charles Marnell → There was a kid called money, his father Mr Money Sr had a business partner → Mr Marnell and the dad of the debtor were friends and business partners
After Charles Marnell dies → sister needs help → the old business partner of her late brother helps her → Mr Money helps her with her affairs
Promises both the father and the son → I will not act on the debt.
And then Mr Money → needs to be sure she will not act on the debt
Mr Money goes to a Court with a petition to have a declaratory judgement → The Court says he has no debt owed to Ms Jordan

· Is there a contract?
· Can there be an injunction?
· Cranworth L (Lord Chancellor) at 880: “if a person makes any false representation to another, and that other acts upon that false representation, the person who has made it shall not afterwards be allowed to set up that what he said was false, and to assert the real truth in place of the falsehood which has so misled the other.”
Lord Cranworth → HOL
If i made a misrepresentation → cannot later assert in Court contrary to my misleading statement
But the doctrine of estoppel does not apply
· 882: “I think that that doctrine does not apply to a case where the representation is not a representation of a fact, but a statement of something which the party intends or does not intend to do. In the former case it is a contract, in the latter it is not;”

Court says → statements of misrepresentation of facts → give rise to estoppel → but we cannot give the same status to promises → intention into the future → because that is not equity that is contract law

Cranworth:
What is here contended for that ms Jordan, stated that she abandoned the debt → that she should never enforce the debt → all that she could mean that she positively promised that she would never enforce it
Only way a promise can be binding in law → is if it is part of a contract.
Jordan v Money → is law before Lord Denning.

After equitable doctrine → there is a promissory estoppel

Question 8

Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130

Answer 8

PROMISSORY ESTOPPEL INTRODUCED
Judgement by Justice Denning → Queens Bench

· Facts
Dispute:
There is a renter and they have a lease for 99 years at 2500 pounds per annum → 1937 → The war is coming so a bad time to make an agreement → lease of block of flats
In 1940 → England is in War → CLP sends a letter ot High tree House and asks to half its rent → reducing rent to 1250 pounds per annum without mentioning an end date
High tree house says yes
1945 → war is over and the flats are fully let, but HTH refuses to return to the original rent → but wants to continue to pay half the original rent
COP → comes to the court
COP → I want the full 2500 per annum in rent → certainly for second half of 1945 → because the war ends in 8th of May
CLP claims the difference in rent for the two last quarters of 1945 (buy also, potentially, for the entire period). (see p.131)
CLP → at least for second half → but maybe for the entire period
HTH → NO → we have a contract → in which you halved the price
CLP → SAID NO WE HAVE NO CONSIDERATION given for my promise to have the rent
How would this case be decided under Jordan v Money → if you said to CLP, you cant act contrary to your word → you can say you promised, you cannot act contrary to your promise → you have made a representation different from it outside of Court → HOL would say it is a bad claim against CLP → because it is not a statement of fact it is a promise → Equitable estoppel does not apply to promises it applies to statements of fact
COURT DENNING:
· Denning J
o 134: “There has been a series of decisions over the last fifty years which, although they are said to be cases of estoppel are not really such. They are cases in which a promise was made which was intended to create legal relations and which, to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made, and which was in fact so acted on. In such cases the courts have said that the promise must be honoured. … In each case the court held the promise to be binding on the party making it, even though under the old common law it might be difficult to find any consideration for it. The courts have not gone so far as to give a cause of action in damages for the breach of such a promise, but they have refused to allow the party making it to act inconsistently with it. It is in that sense, and that sense only, that such a promise gives rise to an estoppel.”
Series of decisions in the past 50 years → not cases of estoppel → promise was made with intention to create legal relations, and which to the knowledge of person making the promise, going to be acted on by the person to whom it was made, and which was in fact so acted on.
1. PROMISE WITH INTENTION TO CREATE LEGAL RELATIONS
2. REASONABLY RELIED ON
Many cases where Courts do recognise estoppel when it comes to promises
When there is a promise that is made with intention to create legal relations and it was intended to be relied on and in fact relied on
In these cases the promise must be honoured
In each case → the Court held the promise to be binding on the party making it → even though under the old common law it would be difficult to find any consideration for it
The Courts have not gone so far as to give a cause of action or damages for breach of such promise → but they have refused to allow the party making it to act inconsistently with it.

Can you come to a Court and say i want to enforce a promise that was given without consideration → NO → not even under HTH
Cannot use it as a cause of action
But if plaintiff comes enforcing a contract → a right
That he promised not to act on
A right that he promised not to enforce
Then the Courts will not lend their hand to that cause of action
Only in this sense will promise give rise to estoppel
Equity can be understood → as what Courts don’t lend their hand to → cant ask courts to part of your inequity → enforce a property right that is inequitable to enforce
This is what Lord Denning says → cant come to a Court after saying a promise that you intended the other party to rely on → cant come to Court and enforce that → Court will not help you act contrary to your promise
THAT IS DIFFERENT FROM → coming to a Court asking to enforce a promise that was given without consideration

3. WITHOUT CONSIDERATION
   CAN SERVE AS SHIELD, BUT NOT A SWORD

When there is a promise made with an intention to create legal relations → and reasonable reliance on that promise → even when there is no consideration given for that promise → the party who promised might be estopped from making a claim contrary to the promise
this doctrine CAN ONLY BE USED AS A SHIELD → Cannot be used as a cause of action
Cannot say → ENFORCE THAT CONTRACT → enforce that promise

THE PROMISE IN THIS CASE → Reduction of the rent by half (50%)
The court says → you cannot come and ask for a Court to enforce the full sum
After you made a promise that you intended to be binding that the other party relied on to half the rent
But → when i come to interpret the terms of the promise → i interpret the terms only as long as the war lasts
Obviously was not meant to last after the war ends
So awarded the plaintiff → the full sums owed after the end of the war → BUT NOT BEFORE THAT.

Question 9

Combe v Combe [1951] 2 KB 215 (CA)

Answer 9

The CA
Lord Denning → explains the limits of promissory estoppel in Englad in those days
· Facts
Combe and Combe → husband and wife that got divorced
When they separate → the husband says → i promise to pay you 100 pounds per annum after we divorce
Husband Promises wife a yearly allowance of 100l after their divorce
So Wife relies on the promise
Wife does not sue for maintenance
Based on the promise wife does not apply for maintenance in the Divorce Court
She could have gone to a Court and say I want my rights to be maintained etc.
Husband already promised to support her.
IS THE WIFE’S FORBEARANCE GOOD CONSIDERATION?
Husband made a promise → wife did something → is that good consideration?
It was not given in return for the promise
Husband did not say i will pay you 100 pounds if you don’t go to the divorce Court, nor did she say i won’t go to the Divorce Court if you pay me 100 pounds
He said → I promise → and she relied on his word and calculated her actions accordingly → that is not consideration.
If you tell me → I promise to give you my laptop tomorrow → and based on that → I go and put something nice on your doorstep → THAT IS NOT GOOD CONSIDERATION → that is NOT PART OF THE AGREEMENT
· Was there consideration here?
· 221: “The principle, as I understand it, is that, where one party has, by his words or conduct, made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at his word and acted on it, the one who gave the promise or assurance cannot afterwards be allowed to revert to the previous legal relations as if no such promise or assurance had been made by him, but he must accept their legal relations subject to the qualification which he himself has so introduced, even though it is not supported in point of law by any consideration but only by his word.”
DENNING: → the principle of HTH is that where one party has by his words or conduct, made to the other a promise or assurance which was intended to affect legal relations and acted on accordingly → the one who have promise cannot be allowed to revert to previous as no such assurance had been made.

· 221: “Seeing that the principle never stands alone as giving a cause of action in itself, it can never do away with the necessity of consideration when that is an essential part of the cause of action. The doctrine of consideration is too firmly fixed to be overthrown by a side-wind.”

As much as I am inclined to favour the principle → it should not be stretched to far
Miss Combe → is trying to use Promissory Estoppel as a sword → cause of action
Coming to husband and saying you owe me →
Only prevents party from insisting upon his strict legal rights → when ti would be unjust to allow him to enforce them → having regard to the dealing which have taken place between the parties

Consideration is essential part of cause of action
Cannot enforce actions without consideration → DOCTRINE OF CONSIDERATION IS TOO FIRMLY FIXED TO BE OVERTHROWN BY A SIDE-WIND.
Cannot form a contract without consideration → cannot enforce a promise for which consideration was not given.

CONSIDERATION STILL NEEDED FOR A CAUSE OF ACTION → if you want a sword you need consideration → Promissory estoppel acts as a shield only → if you want a sword you must have consideration.

Until the next decision of Maher.

Question 10

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

Answer 10

Facts
· Timeline
· Mason CJ and Wilson J
o 406: The doctrine: An emphasis on unconscionable behaviour.
o 407-408: Applied to the case, giving rise to cause of action.
· Brennan J
o 425: “there is a logical difficulty in limiting the principle so that it applies only to promises to suspend or extinguish existing rights. If a promise by A not to enforce an existing right against B is to confer an equitable right on B to compel fulfilment of the promise, why should B be denied the same protection in similar circumstances if the promise is intended to create in B a new legal right against A?”
o 426: on the doctrine’s relation to proprietary estoppel.
o 425, 427: The doctrine’s relation to the requirement of consideration.

WALTON STORES (AUS CASE) V MAHER (1988):
FACTS:
Lease of land between landowner, and Waltons Stores
Parties negotiating over a long while → and by the second of november → clear terms are negotiated → they don’t have a contract
Authority → Concorde v Anthony → case where both parties had offer and acceptance and no signature → in circumstances where signature is accepted → they don’t move beyond stage because no signature as it is said in contract
Solicitors state → the terns are agreed and everything is fine
Maher → executes the lease → signs it and gives it to the other party
And starts demolishing the building on his property
Walton Stores → did not sign the contract → and not sure they want a contract → but they are demolishing building on their land
And asks lawyers → are we contractually bound → Lawyers say no
Walton stores → tell their lawyers → go slow
Know that Maher thinks they have a contract. → and they tell their lawyers to go slow
In early January they say they are not interested → then Maher brings a claim.

MASON CJ and WILSON CJ:
Use as a shield not a sword
And state → we are not in contract law → This is a doctrine of equity
If you want to enforce a promise you go to contract law
We are in equitable estoppel not in business of executing promises → just reducing injustice
Different style of NZ and AUS estoppel
Rather than talking about promises → shifts to unpromisability of exchanges
Not every promise given with intention
Has to be other element of unconscionability
In these circumstances → Maher was clearly in distress
Signed the contract → delivered it to other party →
Communicated all the time → we need to know
In that background → appellants in action → encouraged inducement → to act on the assumption that they have made.
Decent thing to do to tell them to continue →
To express the language → the appellant is estopped from retreating from implied promise of retreating contract.
An implied representation → just like in proprietary estoppel they cannot benefit
Justice Brennan →
AN EMPHASIS ON UNCONSCIONABLE BEHAVIOUR (e.g. ENCOURAGEMENT)
USED AS A CAUSE OF ACTION
ON PRINCIPLED GROUNDS FROM THE PERSPECTIVE OF EQUITY
Then Court states → we are not enforcing a promise → there are differences between equity and Estoppel
A contractual obligation is created by agreement by parties.
Don’t have to have an agreement.
The measure for compensation → It protects the expectation of the innocent party
To bring back to place they would have been before
Equity → varies depending on what is necessary
Purpose of equity is to remove the inequity
DOES NOT OUTFLANK THE DOCTRINE OF CONSIDERATION IN ITS RATIONALE AND ITS EFFECT

Promising something and going back on your word is not enough for promissory estoppel
Encouragement, inducement, etc. is needed
Not just about reducing the equity
MAHER → what is he asking the Court to do? → to create out of thin air → a contract → there was no intention to be bound
No consideration in the full sense
Did not sign → No clear evidence of consideration
MAHER knew that the other party did not sign → they nagged them and they didn’t say yes
Signed the contract → and went to demolish the building → To force Walton Stores hand into this contract.
This law → undoes the law of formation → when there is unconscionable behaviour and allow us to enforce promises no matter what judges say
Enforce promises when there is unconscionable behaviour → then we go and find unconscionable behaviour.
So now everything is muddled.
Unconscionability → rule of fact, and there are rules, but in the end it is fuzzy.

Question 11

Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567

Answer 11

Facts
· The letter: “we confirm that if Mr Haghi or a related party were to repurchase the property at 136-142 Fanshawe Street, Wilson Parking would waive our Right of First refusal to purchase the property, subject to the clause remaining in effect for any further sales of the property.”
FACTS:
Multiple parties, but in fact there are three
Mr Haghi → owns a piece of property, and wants to develop it but has no money
Bank says no
Instead he goes to finance company
And says you will lend me money for the finance company
You get interest for lending money
Interest is the money that creditors get for the value of lending money
Says that you will get paid for this
And the other party says → you may not be able to pay
Here is a collateral → Haghi → I will give you the land, “sell it” → selling land formally → but essence of contract is not selling → transferring value in land to finance company → and finance company promises to sell it to him for the sum loan and the interest to him
Commercially it is not a sale of land →
Use the fund to develop the property → then go on.
PROBLEM: third party: Wilson Parking
Tenant of property → has right of first refusal for any sale of property → they first have to offer it to this person, and if Wilson can buy it then he can
First right of refusal → Wilson parking
He goes to Wilson → and says do you promise to not exercise right of first refusal
Wilson → says he wont use it now, → and wont when ASL sells it back to you
WIlson → lets first sale go. But in the second sale → ends up purchasing the developed property → for an increased value
Getting property at finance level
· Randerson J
o [114] “The three main elements relevant to relief stem from the ingredients necessary to establish equitable estoppel in the first place. These are the quality and nature of the assurances which give rise to the claimant’s expectation; the extent and nature of the claimant’s detrimental reliance on the assurances; and the need for the claimant to show that it would be unconscionable for the promisor to depart from the assurances given.”
RANDERSON:
Everything we learnt from Walton Stores → applies to NZ
1) An expectation created or encouraged
2) Reasonable reliance
3) Unconscionability
Para 44 → Test → listed above
Court in NZ → adopts and approves Walton Stores
Unconscionability does the work → in realm of equity not contract law
Court accepts the change → can use promissory estoppel → not just as a shield

CAN BE USED AS A SHIELD OR A SWORD
Not enforcing promise just removing the equity

RANDERSON ( on the measure of remedy):
What is plaintiff entitled to → we dont know we are in equity → expectation interest maybe → or reliance interest.

RANDERSON ( applying the law to the case):
Clearly unconscionable → positive encouragement standing by for 9 months
Fanshawe acted to its determinant in reliance on the promise
Wilsons actions were opportunistic

WILSON PARTY HELD TO THEIR PROMISE → said they would not exercise their right → no consideration → and still an enforceable promise.

§ See also [44].
o [80] Following the Australian Waltons Stores v Maher
o Choosing between reliance and expectation as benchmark for remedy