Promissory estoppel

Question 1

Why was the principle of promissory estoppel (PE) created?

Answer 1

To prevent injustice caused by one party to a contractual agreement and to allow the other party to ‘enforce’ the agreement notwithstanding the absence of consideration.

Question 1

What is promissory estoppel and when does it apply?

Answer 1

‘A principle of justice and equity’ - Lord denning in Moorgate Mercantile Co Ltd v Twitchings [1976]
It applies where one party to a contract promises to forgo their strict legal rights (E.g. to accept less or pay more) - the promisee is then induced by the promise and acts on the promise. If the promiser goes back on their promise and seeks to enforce their strict legal rights, the court will stop them from doing so.

Question 2

What are the conditions required for the application of the doctrine of promissory estoppel?

Answer 2

1. There must be a pre-existing contractual relationship (existence of a contract)
2. The promisor made a clear and unequivocal promise that they would not enforce their strict legal rights (nature of the promise)
3. This promise influenced the promisee’s conduct (often stated as ‘the promisee acted in reliance on the promise’)
4. It would be inequitable for the promisor to resile on the promise (High Trees Principle)
5. It does not create a new right of action. Thus, it can only be used to prevent the promissor asserting their strict legal rights (shield, not sword)
6. It suspends the promisor’s rights but does not extinguish them for the future - (the doctrine is suspensory - not extinctive)

Question 3

Examples of cases which explain PE

Answer 3

1. Combe v Combe [1951] - Man promises to pay wife £100 a month after marriage and wife took the husband’s word for it - verbal contract. When she took him to court, the court held that there was not a valid contract in place. Promissory estoppel cannot be used as a cause of action (cannot be taken to court for it)

Question 4

Summary of PE

Answer 4

• Consideration remains the requirement to enforce contractual promises (both at contract formation and contract alteration)
• Promissory estoppel - developed to address the harshness and injustice of the common law rule on part consideration
• The doctrine (promissory estoppel) can only apply if certain conditions are met (refer to ‘Conditions for the application of the doctrine’
• Promissory estoppel applies to alteration promises but does not apply to promises to form a contract.