Promissory Estoppel
Promissory Estoppel
At common law a contract can only be modified when consideration is provided for the new
contract, or the parties could terminate their original offer and form a new contract with new terms.
The equitable doctrine of promissory estoppel has made new rules regarding modification of
contracts, where is some circumstances binding contracts can be modified without consideration.
Development
The origin of promissory estoppel can be seen in the case-
Hughes v Metropolitan Railway- where under a contract for lease the claimant were to give the
defendants 6 months’ notice to repair the property. The claimant gave a notice in October and the
defendants were to complete repairs by April, however in November the defendants started
negotiation to purchase the property, but negotiation broke off in November and they completed
repairs in June. It was held that during the negotiations the six months didn’t count as the
defendants didn’t intend to take advantage of the claimant and could rely on the promise without
considerationand were entitled to get another 6 months as the time during negotiations didn’t
count.
Promissory estoppel was developed by Lord Dennings in the case of Central London Properties v
High trees House ltd.
High Trees- where during war due to low tenancy rate the landlord agreed to reduce the rent of the
flats. After war the plaintiff sought to get the full rent back after the war had ended. It was held that
hey could get the full rent back as it they only intended to reduce the rent during war. Lord Dennings
held that when a promise is made with the knowledge that will be acted upon the promise is
enforceable even if no consideration was given in return. They couldn’t get the previous rent back as
they were estopped their promise which the defendants relied upon.
The general rule which was established as stated by Lord Dennings is that “a promise intended to be
binding, intended to be acted on, and in fact acted on, is binding so far as its terms properly
apply”.
Requirements and Limitations of establish Promissory Estoppel.
1. Need for a clear and unequivocal promise.
The promise made by one party must be clear and unequivocal. The promise can be
express as seen in high trees and can also rise from conduct.
If the statement made by the party making the promise is ambiguous and can mean
several things then there will be no estoppel unless the other party clarifies the true
meaning with the promising party.
Kim v Chasewood Park.
1
Promissory Estoppel
2. Need for reliance
The promisee had to reply upon the promise for there to be estoppel.
This can be seen in the case of high trees where the main point was that the tenants relied
upon the promise that they could pay half the rent. And it would be unequitable to go back
on the promise when the party has relied upon it.
3. A shield not a sword.
The principle is the promissory estoppel can only be used as a defence and not as a course of
action.
Combe v Combe- where the wife sued her former husband to pay her the allowance he had
promised to pay. It was held that promissory estoppel cannot be used as a course of action but only
as a defence to protect the promisee.
4. Must be unequitable for the promisor to go back on their promise.
There is no strict rule that promissory estoppel must be applied where a promise has been
made and relied upon.
The courts have the discretion choose whether the doctrine should be applied or not based
on what’s equitable.
For example, where the promise was obtained by fraud.
D and C builder v Rees- where builder accepted part payment of debt because they were in financial
problems and promised to forego the remaining debt. It was held that the there was no estoppel
from going back on the promise as the defendant knew the builders really needed the money.
The Post Chaser- where there was no reliance on the promise because it was withdrawn before they
claimants could rely on it.
5. Doctrine is generally suspensory.
At common law where consider is provided for modification then modification will be
permanent. This isn’t the case in promissory estoppel.
The promise made will only last a specific amount of time.
In high tress the promise was only valid during war and didn’t apply when the war ended.
A promise can also be withdrawn by giving reasonable notice.
Tool Metal v Tungsten- where it was held that the claimants were entitled to get licence fees as long
as reasonable notice was given.
Another rule is that the reduced payments that were made during the promise will not be
recoverable. As seen in high trees where they weren’t able to get the reduced rent.
