Promissory Estoppel

Question 1

When does PE arise

Answer 1

When a contract is not backed by consideration, PE allows some promises to be upheld.

Question 2

Where did PE emerged

Answer 2

Central London Property v High Trees

Question 3

What are the principles of PE

Answer 3

Pre-existing contractual relationship
Shield but not sword
Clear and unequivocal promise
Reliance
Inequitability

Question 4

Pre-existing contractual relationship

Answer 4

Set out in Combe v Combe. In this case there was no pre-existing contract. In this case a husband and wife were getting divorced. Husband promised to pay wife £100 per annum. He never paid any mone and after 7 years former wife sued on the basis of his promise. Lord Denning commented that consideration remained a cardinal necessity of the formation of a contract, but not of its modification or discharge. Therefore, PE is limited to the modification of existing legal relationships.

Confirmed in Urmish Ltd v Gill.

Question 5

Shield but not sword

Answer 5

Cannot be used to create a cause of action, only as a shield to provide a defence against the enforcement of strict legal rights.

Much more limited than jurisdictions of US or Aus where it can be used to create a cause of action.

This limitation derives from Combe. Clearly linked to the idea that the doctrine can only be used to modify existing relationships, rather than create new ones.

Question 6

Clear unequivocal promise

Answer 6

A must make a clear and unequivocal promise to B that the existing right will not be enforced.

Objective test & can be inferred

China-Pacific SA v Food Corp of India. In this case promissory estoppel was not established as, inter alia, no clear promise was made. Megaw LJ stated: “for a promissory estoppel…it has to be shown that there is something which is a quite unequivocal statement

Question 7

Reliance

Answer 7

Promisee must have relied on the promise whereby it influences their behaviour. The case law has shown that this reliance need not be detrimental.

Tool Metal Manufacturing Co v Tungsten Electric Co the words used, in relation to reliance, were ‘alter his position’

In WJ Alan & Co v El Nasr Lord Denning found the party should have acted on belief induced by the other party, denying the need for detriment.

Confirmed in Collier - detriment is not a requirement

Question 8

Inequitable

Answer 8

It must be inequitable for the promisor to go back on the promise. In D&C Builders v Rees the plaintiffs were owed money by the defendant. The plaintiff’s agreed to take a lesser amount, with the defendant knowingly taking advantage of their financial difficulties. Lord Denning held, due to the defendant deliberately taking advantage of the plaintiff’s financial situation, it was not inequitable to go back on their promise.

In Re Selectmove Ltd the defendants tried to rely on promissory estoppel to enforce a promise made in regard to unpaid tax. As Selectmove had fallen into arrears in the first place, it was deemed entirely equitable to allow Inland Revenue to enforce its strict legal rights.