P entered negotiations with D about D knocking down a building and building a new one to P’s specifications that P would lease. When 40% of the work was completed Ps decided to break off the agreement. High Court of Australia ruled that although there was no contract (no definite offer and acceptance since it was a case of “I’ll let you know if there are any problems” which is NOT an acceptance- see Re Selectmove doctrine). However, P was estopped from denying being bound and would have to pay damages.
Majority approach: In central London properties Denning J in obiter extended promissory estoppel outside of contractual relationships. It extends to the enforcement of voluntary promises on the basis that a departure from the assumption underlying the transaction must be “unconscionable.” The circumstances of this case (where D knew that P laboured under the impression that the promise would be enforced) made it unconscionable to allow D to rescind on the promise.
Brennan J: In ordinary agreements where both parties recognise they have the freedom to withdraw then it cannot be unconscionable for them to do so. It is only if one party induces the other to believe that they are bound that it is unconscionable for them to then withdraw. A non-contractual promise only creates equitable estoppel where the promisor induces the promisee to induce or expect that their relations have become binding that the promise becomes enforceable. Unlike contractual obligations, equitable estoppel requires NO consideration. It is illogical that equity should be regarded as a “shield, not a sword” since there is no moral reason why a promise not to enforce legal rights should be capable of estoppel, but not a promise to give new legal rights. This is an artificial distinction (though it does preserve the purpose of consideration, and to get rid of it would create problems of exploitative agreements being valid). To establish equitable estoppel there are 6 conditions: (1) P believed a legal relationship existed between P and D; (2) D induced P to adopt the assumption; (3) the plaintiffs act/omit to act based on that assumption; (4) D knew or intended P to do so; (5) P’s act/omission will be a detriment to him if promise not fulfilled; (6) D failed to avoid the detriment occurring to P.