Promissory Estoppel

In the law of contracts, the doctrine that provides that if a party changes his or her position substantially either by acting or forbearing from acting in reliance upon a gratuitous promise, then that party can enforce the promise although the essential elements of a contract are not present. When a person makes a false statement to another and the listener relies on what was told to him/her in good faith and to his/her disadvantage. In order to see that justice is done a court will treat the statement as a promise, and in a trial the judge will prevent the maker of the statement from denying it. Thus, the legal inability of the person who made the false statement to deny it makes it an enforceable promise called "promissory estoppel," or an "equitable estoppel." An example of promissory estoppel is where A promises B that he would not enforce his legal rights and B acted and relied on it without giving any consideration, equity would not allow A to renege on his promise to B. Promissory estoppel requires (1) an unequivocal promise by words or conduct, (2) a change in position of the Promisee as a result of the promise (not necessarily to their detriment), (3) inequity if the Promisor were to go back on the promise. Estoppel is "a shield not a sword" it cannot be used as the basis of an action on its own. It also does not extinguish rights. Promissory estoppel differs from common law estoppel because it has less strict requirements and it may arise from promise of future conduct or intention. Promissory estoppel is traceable to Hughes V. Metropolitan Railway (1877)2 App Case 439. Here the landlord gave his tenant 6 months to repair the property else risk forfeiture. Within the 6 months, negotiation for the sale of the lease was opened between landlord and tenant. The negotiation failed after 6 months and the tenant failed to repair. The landlord sought to enforce penalty. It was held that the landlord had led the tenant by his conduct to believe that the landlord would not enforce forfeiture. High Trees House Ltd leased a block of flats from Central London Property Trust Ltd in 1937, for a rate of 2500 per year. Due to the heavy bombing of London during the war, rates of property occupancy were drastically lower than normal. As a result, the parties made a written agreement in January 1940 that the rent would be reduced by half. The agreement, however, did not stipulate the period for which this reduced rent was to apply. High Trees paid the reduced rate while the flats were not fully occupied, but Law 200 Assignment 2 Page 1

the flats were back at full occupancy by 1945. Central London sued for payment of the full rental costs from this time (the last two quarters of 1945). HELD: In the High Court, Justice Denning held that the full rent was payable from the time that the flats became fully occupied in mid 1945. This shows that this an agreement that was intended to create legal relations will be enforced despite strict consideration not being provided, as here where High Trees had not provided consideration for the reduction in rent. Denning did, however, add that Central London Property Trust would not have been allowed to claim the full rent for the period between 1940 and 1945. This was the introduction of the concept of promissory estoppel; if a party leads another to believe that he will not enforce his strict legal rights, the court will prevent him from enforcing this right at a later stage. A written agreement that rent was to be reduced while flats were in low occupancy during war time lasted only whilst the flats were in low occupancy. In this case Lord Denning introduced the principle of promissory estoppel, whereby a party who leads another to believe that he will not enforce his strict legal rights should not be allowed to enforce this right at a later stage. Promissory estoppel may be defined as follows: Where, by words or conduct, a person makes an unambiguous representation as to his future conduct intending the representation to be relied on and to affect the legal relations between the parties, and the representee alters his position in reliance on it, the representor will be unable to act inconsistently with the representation if by so doing the representee would be prejudiced. This definition can be divided into five elements: 1) The first is that there must be a promise or a representation as to future conduct which is intend to affect the legal relations between the parties and which indicate that the Promisor will not insist on his strict legal rights against the Promisee but at the same time it must be ensured that Promisor does not lose his rights.

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2) The second element is that the promise must have been relied upon by the Promisee. It must be shown that the Promisee committed himself to a coarse of actions that he would never adopt it in usual time. 3) The third element is that it would be unfair if the Promisor go back to that promise. 4) The fourth element is that the effect of promissory estoppel is generally suspensory; It shouldnt hamper Promisors rights. In Hughes V. Metropolitan Railway Co the landlords right to enforce the repairing agreement was not extinguished. It was suspended and could be revived by his giving reasonable notice. But in High Trees the estoppel had permanent effects because tenant didnt expect the landlord would demand the rent waived between 1940 and 1945. 5) The final point is that promissory estoppel works as a shield and but not as a sword.

Consider the case of Collier v P & MJ Wright (Holdings) ltd, [2007] EWCA Civ 1329, [2007] All ER (D) 233 (Dec) Court of Appeal. Three partners were jointly liable for a debt and the creditor, W, accepted an offer from one, C, to pay his one-third share in installments. C claimed that W agreed not to proceed, or was estopped from proceeding against C for the other two-thirds when his partners failed to pay and became bankrupt. Held: There was no binding agreement between C and W as there was no consideration. There was a triable issue as to the existence of a promissory estoppel even though there was no evidence as to Cs detrimental reliance on Ws acceptance of Cs offer to pay his share, as long as there was accord between C and W. This followed Lord Dennings judgment in D&C Builders v Rees [1966] 2 QB 617. The statutory demand against C should, therefore, be set aside.

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Summary of the Case

Mr. Hossain agreed to rent his lorry to Mr. Osman for taka 20,000 only per week for 104 weeks. Mr. Osman had just started out on his own and aiming to use the lorry to transport coal to nearby power station at Siddhirganj.. After paying the agreed sum for 14 weeks Mr. Osman fell ill. Mr. Hossain agreed to accept taka 10,000 per week till Mr. Osman recovered. Mr. Osman paid the reduced sum for the following eight weeks when Mr. Osmans wife Mrs. Salma, won Tk 40, 00,000 from the 22nd lottery of Bangladesh Diabetic Association. Although they had agreed to share any winnings Salma refused to share any of her prizes with her husband, Mr. Osman. Ten weeks after Salmas win, Osman was left Tk 20, 00,000 by his maternal uncle Mr. Jabbar Ali Howlader. Mr. Osman continued to pay the reduced sum till in the 52nd week. Mr. Hossain discovered what had transpired. Two weeks later Mr. Osman made a full recovery. Mr. Hossain claimed the full arrears of Tk 10,000 per week and requested that the lorry be returned to Mr. Hossain immediately. Mr. Osman refused. At that time Mr. Hossain could have rented lorry for Tk 30,000 per week.

Solution of the case

Here Mr. Hossain can file a suit against Mr. Osman.
Its true that Mr. Hossain agreed to accept Tk 10,000 at 90th week during the illness of Mr. Osman. At the time of Mr. Osmans illness which is in 82nd week, his wife got a lottery of Tk 40, 00,000. This thing will not affect the contract because his wife refused to share the prize money with his husband. So Mr. Osman cant force his wife to share the money. But another thing happened during the illness of Mr. Osman at 72th week. Osman got Tk 20, 00,000 by his maternal uncle Mr. Jabbar Ali Howlader. Mr. Osman could give Mr. Hossain the full payment which is TK 20,000 as he got a big amount of money. But Mr. Osman continued to pay the reduced sum till in the 52nd week. Mr. Hossain discovered what had transpired. Two weeks later Mr. Osman made a full recovery. Mr. Hossain claimed the full arrears of Tk 10,000 per week and requested that the lorry be returned to Mr. Hossain immediately. Mr. Osman refused. At that time Mr. Hossain could have rented lorry for Tk 30,000 per week.

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Here Mr. Hossain can claim the money because it violates the principle elements of promissory estoppel by the following ways Here the promisor who is Mr. Hossains right had been violated as Mr. Hossain wanted to help Mr. Osman. But Mr. Osman chated with him. He didnt see Mr. Hossains profitability. It hampered Mr. Hossains right. He could earn Tk 30,000 per week by lending the lorry. Here Mr. Osman used promissory estoppel as a weapon. If Mr. Osman didnt get the money of Tk 20, 00, 00 then there was no problem. Mr. Hossain could not claim the money based on the case of Central London Property Trust Ltd v High Trees House [1946]. On that case Lord Denning introduced the principle of promissory estoppel, whereby a party who leads another to believe that he will not enforce his strict legal rights should not be allowed to enforce this right at a later stage. But here the case is slightly different. Mr. Hossain can claim the money as Mr. Osman was in that position to pay the full rent which was Tk 20,000 per week.

So here Mr. Hossain has the right to claim the money and he can file a suit against Mr. Osman for hiding the news of his getting money.

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