Formation: Promissory Estoppel

Estoppel

Are there any situations where the law comes to the aid of the promisee?

The Judicature Act 1873-5 gave judges in all the divisions of the new court the power to
administer the rules of both the common law and equity. In the event of a conflict between
the two, equity would prevail. This was a logical necessity, as equity was always secondary
to common-law, so if common-law had been given precedence, equity would have
disappeared.
Equity remains in the modern legal system mainly in the form of equitable remedies – e.g.
injunction, specific performance. Common Law can only award ‘damages’ – sums of money
(liquidated [a known amount] or unliquidated [a guess]).

A debt B No consideration according to Williams v Roffey when there is no

practical benefit other than getting some money.

Basic principle:
Applies where a promise is made, intended to create legal relations, which, to the
knowledge of the person making the promise, is going to be acted upon by the person to
whom the promise was made.

To change or vary a contract, there must be consideration, and consideration must move
both ways A  B, B  A
Promissory estoppel instead suspends rights of the promisor under a contract, i.e. the
promisor promises not to ask for enforcement of the rights in the pre-existing legal
relationship.
The promissor is estopped (prevented) from claiming rights under the contract.

 Must have a pre-existing legal relationship for there to be promissory estoppel.

e.g. Thomas is sued by student, must pay £10,000. The legal action creates a legal
relationship.
The promissory estoppel is an agreement to pay in instalments.
Ex: A debt B
B is a business who owes A £1000. A asks for only £600.
B committed the funds elsewhere, e.g. bought machinery with the £400.
 General notion/result of the promise, reliance?
However, A doesn’t request the act to be done specifically, i.e. “I will let you off if you buy
machinery”, so no consideration from A.

D & C Builders v Rees [1966]

Must be inequitable for the promisor to go back on his promise, must be reasonable to go
back on it.
Unless B behaved badly, and induced the promise from A.

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Estoppel is not like a contract and has limitations:

1. Under traditional view, open for promisor to go back on his promise if there is a
reasonable notice of period of time to resume the former position.
This is so even if A makes an irreparable promise like “I will let you off £400 forever”.
However, Collier v P&MJ Wright [2007]

2. Stilk v Myrick facts applied to estoppel: Captain made an unambiguous

representation of promise and the sailors relied on it.
But the limitation is that estoppel cannot be a cause of action, and can only be used
as a defence (shield).
This arises from the case Combe v Combe [1951].
In the debt example above, when A sues B for the £400, estoppel is B’s defence.

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Conditions for promissory estoppel to apply

Hughes v Metropolitan Railway (1877)

1. Pre-existing legal/contractual relationship, e.g. landlord/tenant lease

2. Unequivocal (unambiguous, clear intention) promise, e.g. letter + negotiations
(implicit from behaviour)
3. Reliance/change in position by promisee because of promise.
The promisee must rely on the representation, and do something or stop doing
something, i.e. they are in a worse position if the promisor goes back on his promise.
 Weak condition because it is easy to satisfy, only need a very small change in the
promisee’s position.
Can be any change, doesn’t have to be a detriment.
4. Inequity if promisor goes back on their promise, e.g. Hughes’ promise meant
Metropolitan Railway didn’t do repairs, if H didn’t make the promise then MR would
have plenty of time to make repairs.
  The court has discretion for inequity. Taking advantage of the promisee is
inequitable.

Consequences

The promisor (H) is estopped/precluded/prevented from claiming his relevant rights in the
contract (repairs within 6 months, right to eject afterwards, no other rights of the contract
affect).

Central London Property v High Trees [1947]

There was an unambiguous representation, intention to effect legal relations.
Promissory estoppel was not in the ratio decidendi but in the obiter dicta, creating a
precedent even though it was only applied to a hypothetical situation.
Q: Could CLP claim back rent to January 1940?
N: Promissory estoppel

1. In an exam, first find whether there was a contract.

a. Offer + Acceptance? Yes, see agreement
b. Consideration?
CLP  HTH reducing rent is detriment to CLP + benefit to HTH
HTH  CLP no consideration, must live up to agreement of lease anyway
(Collins v Godefrey, Foakes v Beer)
Williams v Roffey is a practical benefit, e.g. timely completion
 Not a strong argument, practical benefit has strong requirement.
If there was a contract, CLP wouldn’t be able to get back rent or full rent in future.

2. Was the contract varied?

a. Pre-existing legal relation: 1937 lease
b. Unequivocal promise: Jan 1940 agreement
c. Reliance: Didn’t pay full rent (didn’t make effort to get, or put money elsewhere)
d. Inequity if going back on promise: None, in Jun 1945 went back to full occupancy
so why shouldn’t HTH pay full rent? Not inequitable.
If CLP asked for back rent to Jan 1940, inequity would be fulfilled for period before full
occupancy.

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How to avoid promissory estoppel

Must give sufficient advance notice.

The conditions why the promise was made have ended.

How do the requirements of promissory estoppel differ from requirements for a valid
contract?
- Promissory estoppel does not require consideration.
This is why you apply promissory estoppel – in situations with no consideration.
 - Equity/inequity shown in promissory estoppel, characterised by protecting people in
inequitable situations.
In a contract, the contract is valid no matter if it is equitable or not.

Waltons Stores (Interstate Ltd) v Maher (1988)

Australian case
Contract was never formalised, so no valid contract.
The promisee successfully used promissory estoppel to sue the promisor  use it as a cause
of action, i.e. as the basis of his claim.
In Australia, you don’t have to show pre-existing legal relations, can use promissory
estoppel as a cause of action.
 Unpredictable because too much under inequity.

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Susan is a freelance writer with four young children. She has to finish the book she is
writing by 15 September to meet her publishers’ deadline, otherwise she stands the risk
of having to repay part of her advance fee. At the beginning of June, she employs a live-in
“Mothers Help”, Angela, for £2000 per month to look after the children while she gets the
book finished. By the end of June it is clear that Susan is behind schedule, and she asks
Angela if she can cover evenings and Saturdays as well, saying “I will see you are all right if
you do.” Angela agrees.

In the middle of August, Susan says to Angela, “Because it has been difficult with the
children off school I will give you a £750 bonus at the end of this month.”
On the strength of Susan’s promises, Angela puts down the deposit on a new high quality
sound system.

However, at the end of August Susan informs Angela that she has had some unexpected
additional expenses, and can only afford to pay her £1500 for that month. Angela
reluctantly agrees to accept the £1500 as “full and final payment” for August.

Susan manages to finish the book on time, and the publishers are so pleased they gives
her an additional bonus of £4000.

Advise Angela as to whether she has any claim against Susan for the evening and
Saturdays worked, and for the £750 “bonus”, and whether she is bound by her promise
to accept £1500 in ‘full and final settlement’.

“I’ll see that you’re alright” lacks certainty.

Foakes v Beer – part payment of the debt is never satisfaction of the whole.
Re Selectmove says practical benefit is not applicable here, promissory estoppel is, but
unlikely to be successful.
Apply MWB v Rock?
Inequity hard to enforce due to Angela’s conduct. D&C Builders v Rees “he who comes with
equity must come with clean hands.”