Part-payment of a debt and Promissory Estoppel Flashcards
Estoppel overview
Example 1
A lies to sheriff B and says his property belongs to C. B has come to seize C’s property. A then tries to sue B for taking and selling his goods without consent or legal authority
Outcome: A is stopped, as against B, from denying the truth of a particular state of affairs. So, here, A cannot now deny that the goods did not belong to A. As a result, A cannot make a conversion claim against B: see eg Horn v Cole; Pickard v Sears
Reason: A made a representation to B as to a “certain state of things”; B acted in reliance on that representation; B would now suffer a detriment if A were allowed to deny the truth of the representation
Pickard v Sears
P was the the mortgagee of property which remained in the actual possession of the mortgagor. A writ of fieri facias was executed and the sheriff took the property mortgaged to P. P spoke to the sheriff about the sale of the property but never mentioned his own mortgage. The property was sold to S. P then claimed the property or payment of his debt from S. S refused. It was held that P was estopped from pleading his own mortgage having failed to mention it to the sheriff before the sale:
‘But the rule of law is clear, that where one by his words or conduct wilfully causes another to believe the existence of a certain state of things, and induces him to act on that belief, so as to alter his own previous position, the former is concluded from averring against the latter a different state of things as existing at the time.’ (Lord Denman CJ).
The Diversity of Estoppel
Example 2
B has long-term truck repair contract with A Ltd. One truck crashes shortly after being repaired by B. A believes repairs were negligent, thus in BoC. A sues B and a court finds that B was not negligent in carrying out the repairs. When payment is later due under the long-term contract for all B’s repairs over the year, A deducts a sum on the basis of her belief that the crashed truck had been carelessly repaired by B.
The outcome: A is stopped, as against B, from denying the truth of a particular state of affairs.
The reason: The court’s earlier decision that binds A and B: see eg Thoday v Thoday [1964] P 181 per Diplock LJ at 197-198, describing the principles of “issue estoppel”.
A Problem with Promises Example 3 (Jorden v Money): B owes A £1200. A tells B that she is happy to forgive the debt and does not intend to ask B to pay. A’s assurance was an important part of the plans made by B, and X’s family, so as to allow B to marry X. B did marry X. Can A then enforce B’s duty to pay the money owed?
Jorden v Money (1854) 5 HL Cas 185 eg per Lord Cranworth LC at 214-5: “I think that the doctrine [in eg Pickards v Sears] 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 case of what is something future, there is no reason for the application of the rule, because the parties only have to say ‘Enter into a contract’ and then all difficulty is removed.”
Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752 (HL) per Lord Scott at [14]:
“An ‘estoppel’ bars the object of it [A] from asserting some fact or facts, or, sometimes, something that is a mixture of fact and law, that stands in the way of some right claimed by the person entitled to the benefit of the estoppel [B]”; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 (High Court of Australia) per Gaudron J at 459: [the restriction of estoppel by representation to matters of existing fact is] “not merely a matter of authority, but also a matter of logic – at least in so far as the representation gives rise to an assumption as to a future event. Because common law or evidential estoppel operates by precluding the assertion of facts inconsistent with an assumed fact, the assumption must necessarily be as to an existing fact and not as to a future event.”
PROMISSORY ESTOPPEL
Lord Hailsham in Woodhouse AC Israel Cocoa Ltd v Nigerian Produce Marketing Co Ltd [1972] AC 741 (HL) at 757:
“the whole sequence of cases based on promissory estoppel since the war…raise problems of coherent exposition which have never been systematically explored.”
Principle 1: Hughes v Metropolitan Rwy Co (1877) Example 4 (Hughes): A is B’s landlord. Terms of lease give B six months to complete certain repairs. If B does not complete the repairs, A can terminate B’s lease. A and B enter into negotiations as to B’s possible surrender of the lease to A. A agrees to B’s deferring the repairs. Can A then terminate the lease when the initial six month period ends?
Lord Cairns LC at 448: “it is the first principle upon which all Courts of Equity proceed, that if parties who have entered into definite and distinct terms involving certain legal results – certain penalties or legal forfeiture – afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings between the parties.”
- leading B to believe that
Lord Blackburn at 452 (citing Mellish LJ in the Court of Appeal: (1876) 1 CPD 120 at 135): “even if [A] himself did not intend to abandon the notice, yet if his conduct was such as to put [B] off their guard, and to lead them to believe that the six months’ notice would not be insisted on, there is a ground for giving relief in Equity.”
See too eg Hickman v Haynes (1875) LR 10 CP 598: A and B enter into a contract for the sale of goods. A is entitled to reject the goods if they are delivered after 30 June. A agrees to B delivering after that date. In reliance on that promise, B fails to deliver by 30 June. The common law doctrine of waiver, or forbearance, means that A has no immediate power to terminate the contract, but may do so if B does not deliver within a reasonable time (see too Tool Metal v Tungsten Electric [1955] 1 WLR 761 (HL)).
Hickman v Haynes (1875)
A and B enter into a contract for the sale of goods. A is entitled to reject the goods if they are delivered after 30 June. A agrees to B delivering after that date. In reliance on that promise, B fails to deliver by 30 June. The common law doctrine of waiver, or forbearance, means that A has no immediate power to terminate the contract, but may do so if B does not deliver within a reasonable time (see too Tool Metal v Tungsten Electric [1955] 1 WLR 761 (HL)).
Bottiglieri di Navigazione SpA v Cosco Qingdao Ocean Shipping Co (The Bunga Saga Lima) [2005] 2 Lloyds Rep 1:
B, the ship owner, had a contractual duty under a charter to provide a ship clean enough to carry grain at its first loading by A, the charterer. B did not perform that duty, but A did not protest and used the ship to carry iron ore. A’s second shipment was of rapeseed and that shipment was delayed to allow the ship to be cleaned to the standard required to transport such goods. A claimed that the ship should be off-hire whilst it was cleaned. The contract did give A the power to place the ship off-hire if B breached its duty to ensure the ship was “grain clean” for its first loading by A. It was held that, as A did not protest about the condition of the ship at first loading, and indeed used it to carry goods, A had elected not to exercise its power to insist on an off-hire period. Further, as A’s conduct in accepting the vessel was regarded as amounting to an unequivocal representation that there was no need for B to comply with that duty, A was also precluded from claiming damages.
Principle 2: Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130
Example 5 (High Trees): A is B’s landlord. B’s lease is of a block of flats and is for 99 years from 1937. The rent is £2500 per year. Owing to the war, B has trouble renting out the flats. In January 1940, A agrees to reduce B’s rent to £1,250. B pays, and A accepts, that rent until the end of the first half of 1945. As all the flats were let by the start of 1945, A asks B for the full rent for the second half of 1945 onwards.
Denning J at 134-136: Promissory estoppel not really estoppel. A promise is made, legal relations intended, promisor knew promisse would act on it and promisee did so. Court holds these promises binding despite lack of consideration in common law. No cause of action in damages, but promisor may not act inconsistently with his promise. In that sense only the promise gives rise to estoppel. Cases like Hughes are sufficient basis to show you can’t go back on such a promise. Denning says validity of such promises should now be recognised. The logical consequence, no doubt, is that a promise to accept a smaller sum in discharge of a larger sum, if acted upon, is binding notwithstanding the absence of consideration. Rather than estoppel prefers to apply the principle that a promise intended to be binding, intended to be acted on and in fact acted on, is binding in so far as its terms properly apply. i.e. These are legally binding promises, not estoppel, and should be recognised as such
Lord Denning MR in D&C Builders v Rees [1966] 2 QB 617 (CA) at 625:
“Where there has been a true accord, under which the creditor voluntarily agrees to accept a lesser sum in satisfaction, and the debtor acts upon that accord by paying the lesser sum and the creditor accepts it, then it is inequitable for the creditor afterwards to insist on the balance.”
Lord Denning MR in WJ Alan & Co v el Nasr (Export) [1972] 2 QB 189 (CA) at 212-213, discussing waiver:
Detriment: In High trees and D&C v Rees the party who acts on the belief does not suffer any detriment. The promise is not a detriment, but a benefit to him. Nevertheless, he has conducted his affairs on the basis that he has that benefit and it would not be equitable now to deprive him of it. Don’t necessarily have to suffer detriment, only have to conduct affairs on the basis of your benefit which you are now deprived of
5 principles of promissory estoppel
1) Clear and unequivocal promise intended to be legally binding (Hughes v Metropolitan Railway co)
2) Inequitable to go back on the promise (D & C Builders v Rees)
3) Must not be used as a sword (Combe v Combe)
4) Promisee suffers detriment or conducts their affair on the basis of the benefit which they would now be deprived (WJ Alan & Co v el Nasr)
5) Suspension: promise must not be a permanent change in contractual duties but a temporary one (Higgh trees)
