Promissory Estoppel Notes

Promissory Estoppel

• Equitable principle; arguably steps in as relief from the rigours and strictness of the common law.

In a contractual setting, if one party makes a certain type of promise to the other party and they rely on it (usually to their detriment) then the promising party may be estopped from backing out of the agreement. (Strict requirements however), even in the absence of consideration or formality.

Hughes v Metropolitan Railway Co.

• H, the landlord, gave notice to M, the tenant, requiring M to carry out certain repairs within six months. M asked whether H wished to purchase M’s interest in the premises and suggested that repairs be deferred pending negotiations.

• The HOL gave M relief against forfeiture for failing to make repairs within the original timeframe because H’s conduct had induced M to believe that the time period would stop ‘running’ during the negotiations. Thus, the six months only ran from the point that negotiations broke down.

• To allow H to enforce his original rights would be inequitable, although their Lordships found that H had ‘no intention here to take advantage of, to lay a trap for, or to lull into false security those with whom he was dealing’.

Central London Property v High Trees House 1947: READ JUDGEMENT

• C let a block of flats in London to D on a 99-year lease at annual rent of 2500. In 1940, D discovered that the outbreak of war and evacuation of London meant they were unable to let any of the flats so C agreed to reduce the rent to half of this. This promise to accept a reduced rent was unsupported by consideration. At the end of the war, the property marked returned to normal and the flats were fully let. C demanded that D resume payments from the entire rent but D refused.

• Lord Denning held that C were entitled to demand the entire rent even though there was no consideration so would be unenforceable under common law principles. Lord Denning cited Hughes as support for his reasoning. Not restrained by Jordan V. Money as not estoppel in the strict sense, distinction b/w Jordan V. Money as that was in common law, this = in equity. Lecturer: Unconvincing manipulation of the law. Hard to reconcile the two cases.

Jordan V. Money = Statement as to the future does not give rise to estoppel (?) Doctrine of representation as to existing fact= only works (?) WTAF??

Requirements of promissory estoppel

1. Clear and Unambiguous.

There must be a clear and unequivocal promise which indicates the promisor’s intention not to insist on his or her strict legal rights against the promisee – Woodhouse Israel Cocoa v Nigerian Produce marketing Co Ltd. As Hughes demonstrates, the promise need not be express but may be implied from the circumstances. No estoppel arises if the language is qualified or imprecise – IMT Shipping v Chansung Shipping Co (The Zenovia).

Silence or inaction will not normally estop a party from suing on the breach. A party does not lose his or her rights simply because he or she has failed throughout to insist upon strict performance.

• TEST: equivalent test of certainty as is required for contractual obligations: Baird Textiles v Marks & Spencer (no long term agreement, no contract, Mance LJ: this case shows that the “commercial” presumption of enforceability cannot apply unless the court can first identify an “explicit” or “apparent” promise)

  • NB: Since promise relates to EXISTING legal rights, the doctrine of promissory estoppel can only be used for the VARIATION of contracts.

• Woodhouse Israel Cocoa v Nigerian Produce marketing co LTD. – Held that it was not clear the promise to accept sterling meant to refer to the amount owed or to the currency in which payment should be made. Thus, they would not be estopped from going back on their promise.

• IMT shipping v Chansung Shipping co –

2. Representee relies on representation

Must have influenced behaviour/conduct of the other party. – This highlight promissory estoppel’s distinction from common law where a contract is enforceable from whence the contract is formed.

Detrimental reliance ?- Traditionally had to be detrimental reliance as that will usually give rise to a situation where it would be inequitable/unconscionable to go back on your promise. BUT. High Trees = doesn’t have to be detrimental but just change the course of the conduct. It is for the courts to decide whether there is sufficient reliance. (Judicial Discretion).

Lord Denning in Alan v El Nasr said that detriment is not strictly necessary. Reliance is enough.

Collier v P&MJ Wright (Holdings) Ltd, - the CA was only deciding whether there was a triable issue on promissory estoppel. The case never went to full trial and it is likely that it was settled out of court.

• C was jointly liable for a debt to W with two former business partners. W told C to pay his one-third and said he would pursue the other debtors for their share. On the partners’ bankruptcy, W sued C for the whole sum. The CA found a triable issue on PE, but only heavily diluting its requirements. In particular, it held that:

• C’s reliance can be satisfied by making part-payment of his debt.

• That reliance makes it inequitable for W to resile from his promise.

• The effect is to extinguish W’s rights altogether.

• COA applied Pinnel’s case; part payment of a debt = not good consideration therefore Collier= still liable at common law BUT. Collier should be allowed a final hearing to test his argument of promissory estoppel.

• Arden LJ at [42]: - ‘if (1) a debtor offers to pay part only of the amount he owes (2) the creditor voluntarily accepts that offer, and (3) in reliance on the creditor’s acceptance the debtor pays that part of the amount he owes in full, the creditor will, by virtue of the doctrine of promissory estoppel, be bound to accept that sum in full and final satisfaction of the whole debt. For him to resile will of itself be inequitable. In addition, in these circumstances, the promissory estoppel has the effect of extinguishing the...

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