Promisory Estoppel Flashcards
What is Estoppel?
Mechanism for enforcing consistency - enforcing obligation to statements made for inducing another to believe/act upon it, even though there is no contractual obligation. Would be unjust or inequitable to do so!
Two leading cases of estoppel
Hughes v Metropolitan Railway Company (1877) 2 App Cas 439
Central London Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130
Hughes v Metropolitan Railway Company (1877)
House of Lords held that MRC was entitled to be relieved against forfeiture of the lease, as H’s notice to repair property within six months was temporarily suspended for the duration of negotiations between parties.
Ruled based upon voluntary consent of each party to negotiate, and what was equitably inferred on part of MRC to suppose that the timeframe was suspended
Central London Property Trust Ltd v High Trees House Ltd [1947]
Denning held that the plaintiff was entitled to recover full rent from the period after the war had ended, and the property was fully let.
- Denning did not call this an estoppel case, and in fact differentiated it from the estoppel case Jorden v Money (1854), which held that estoppel must relate to statements of fact, and not statement of intention/promise.
- Denning drew on Hughes v Metropolitan Railway, classifying it as ‘promises intends to be legally binding’, and that in Jorden, the promisor did not intend to be legally bound
- Also came to be in direct conflict w FvB, where his holding recognises “a promise to accept a smaller sum in discharge of a larger sum… notwithstanding the absence of consideration”. Denning said he supposed that FvB did not consider HvMRC.
3a. This can be differentiated because FvB was concerned with legal rights that are permanently extinguished, Hughes concerned with temporary suspensions
3b. Hughes is a situation where one party tells the other not to perform a contractual obligation owed, and so he cannot treat non-performance as a breach, having consented it.
3c. Foakes is a situation where the party is able to change his mind regarding consenting to nonperformance and require performance of the obligation insofar as it is still possible. - CLP had temporarily suspended rights for the full rent during the war-time period.
Ingredients of Promissory Estoppel
The promise that gives rise to the estoppel must be a
(i) Clear and Unequivocal Promise, being one intending to affect legal relations between parties, demonstrating the promisor is giving up strict legal rights against the promisee;
an equity will be raised in favour of the other party, subject to qualifications that
(ii) the promisee has altered his position;
(iii) it is inequitable for the promisor to go back on his promise
(iv) that estoppel is generally suspensory, and promisor can resile from his promise with reasonable notice for the promisee to resume his position
(v) the promise only becomes final and irrevocable if the promisee cannot resume position
(vi) estoppel cannot be a sword, only a shield
Clear and Unequivocal promise and case
The promise giving rise to the estoppel, for the promisee to rely on, must be clear and unequivocal, with the intention to affect legal relations and clearly demonstrating that the promisor is giving some legal rights agains the promisee;
Established in Woodhouse AC Israel Cocoa SA v Nigerian Produce Marketing Co Ltd [1972] AC 741, 757, where the statement forming the basis of promissory estoppel can not be ambiguous - this is to protect promisors, where they will only lose their legal rights upon clearly having given them up
Promisee altered position (to his detriment) because of the promise
Promisee altered his position in reliance on the promise made (to his detriment).
E.g. Hughes v Metropolitan Railway Co - tenants “lost time” for negotiations
High Trees - no obvious detriment but altered position such that it is inequitable to allow promisor to go back on his promise
Rule set out in The Post Chaser [1982] 1 All ER 19 “the representee must have conducted his affairs in such a way that it would be inequitable for the representor to enforce his rights, or to do so without reasonable notice”
- In this case, the defendant (promisee) could resume original position and there was no inequity in resiling from the promise, so the court allowed the promisor/plaintiff to enforce its original right.
Also in Collier v P&MJ Wright. Arden LJ found elements of reliance to support promissory estoppel, but diluted the requirements by finding that C partly paid debt in reliance, therefore inequitable for W to resile promise, but it wasn’t fully tried in court, and Longmore LJ said the courts should be slow to find a promise forgoing its rights; D&C Builders v Ree was a weak precedent that Arden LJ used.
Inequitable to go back on promise
Usually satisfied by the promisee’s change in position, but not always. Will consider the time element, circumstances and events during and subsequent to the promise being made.
- The Post Chaser - held that it was not inequitable for the plaintiff to go back on his promise since the defendant had not altered position, time frame was only 2 days.
- D&C Builders v Rees - No inequity in resiling because R had threatened D to extract a promise to accept less
- Williams v Stern (1879) - Creditor resiled promise to debtor to give him extra time to pay, but chose to exercise his right to seize his assets after hearing that the debtor’s landlord was going to do so. Courts held that it was not inequitable!
Suspensory, unless promisee cannot resume original position
Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955] 1 WLR 761. Courts held that TMM were entitled to reinstate licensing fees as long as reasonable notice was given. These licensing fees were suspended during the war, and was intended for a new contract to be drafted when the war ended.
Ajayi v RT Briscoe (Nigeria) Ltd (1964)
Lord Hodson said that estoppel has suspensory nature, but can be final and irrevocable, and therefore extinctive if original position cannot be resumed.
THEREFORE, when a promisor SUSPENDS his rights, he may in fact effect:
(i) a total extinction of original right - Hughes v MRC - MRC gives up right to timely repairs. Or in instances where the promisee cannot resume position
(ii) partial extinction of original right - High Trees - where lessors could revert to full rent, but lost the right to the full rent during the period of the war
(iii) nothing for the promise - The Post Chaser. Promise was resiled, and nothing was lost, promisee can resume normal position
Promissory Estoppel is a shield but not a sword. What does this mean?
Cannot create a cause of action, and often operates as a defence to a claim, such as in Hughes v MRC where Hughes used promissory estoppel to defend against MRC claims for eviction.
Also only applies where there is a pre-existing contractual or legal relationship between parties, and operates defensively to prevent the promisor from enforcing original rights he has relinquished. Cannot operate offensively to give the promisee more than his original rights, or a new cause of action w/o preexisting legal relationship
In order words, what can promissory estoppel enforce/cannot enforce? 3 categories
- Can enforce promises of “same for less”
- Cannot enforce promises of “more for the same”
- Cannot create new legal rights independent of the existing relationship.
Rationale being to avoid undermining consideration as the primary test of contractual liability.
Enforcing promises of “same for less”
Generally, when there are promises to accept less, they are enforceable by consideration with LEGAL benefit, not practical benefit.
E.g. FvB - B’s promise to accept part payment was not enforced. This would have changed if fresh consideration was provided by Foakes.
However, a promise to accept less may be enforceable via promissory estoppel AS A DEFENCE against promisor’s action to enforce original rights i.e. Hughes v MRC and High Trees.
TO DISTINGUISH HOW PROMISSORY ESTOPPEL AND CONSIDERATION(LEGAL BENEFIT):
- Consideration for the promise PERMANENTLY EXTINGUISHES promisor’s original rights
- Promissory estoppel extinguishes the original rights TO THE EXTENT NECESSARY to protect promisee’s reliance and when it would be inequitable for the promisor to resile his promise.
Also supported by Arden LJ in Collier v Wright
Promises to give more
Generally speaking, promises to give more cannot be enforced with promissory estoppel. However, they may be enforced by consideration of both practical/legal benefit.
Williams v Roffey Bros.
However, the judge in Williams welcomed an estoppel argument to suggest that it would be unjust for defendants to resile their promise; since the doctrine of practical benefit already covers that, there has been no need to develop promissory estoppel accordingly.
So there is no good argument for why promissory estoppel cannot enforce promises to give more, and there is no good justification to distinguish promises to give more, and promises to accept less. In fact, promissory estoppel is a more flexible doctrine that could enforce these promises (as opposed to practical benefit), allowing for contract modification, by looking at the reasonableness of modification and promisee-reliance.
Under what of scenario can Estoppel seem like it’s being used as a sword?
Party can use estoppel when they want to enforce a claim based upon a recognized cause of action to defeat the defence of the other party (e.g. D promised P sth that P relied on, D did something against P, resiling on promise. P sues D for cause of action, using estoppel to back it up to defeat any defence of D)
How is waiver or forbearance being subsumed into estoppel
Waiver is giving up some or all contractual rights. Without consideration, it is often referred to as forbearance. Since High Trees, it has been associated with estoppel insofar as they are promises of sorts not to insist on strict legal rights.
