Elements in a Contract 30

Promissory estoppel (equitable estoppel) is an equitable doctrine and it operates in accordance with equitable principles. According to the doctrine, when one party makes a promise to another party and the second party relies on the promise and acts to his or her detriment than that promise is a valid promise and is a promise that is enforceable at law.

In Hughes v Metropolitan Railway (1877) the tenant under a lease was obligated to keep the property in a good state of repair and the landlord having inspected the premises and found that the tenant hadn’t complied with the obligation gave the tenant 6 months to complete the repairs failing which the tenant would have to vacate.

Subsequently, the tenant and the landlord entered into an agreement for the sale and purchase of the property and the tenant who was under the impression that the property was going to shift hands or that he was going to acquire the property failed to make the stipulated repairs because the repairs were not something he’d make if he owned the property.

Towards the end of the 6-month period the negotiations had broken down and the tenant did not make the necessary repairs and the landlord claimed that the lease had been forfeited because the tenant had not made the said repairs.

It was held that the 6-month period started from the time the negotiations had broken down. Where the landlord had by himself entered into negotiations with the tenant after he’d stipulated that a failure to make the repairs would result in the forfeiture of the lease, that stipulation is deemed to be held in abeyance or is suspended until the negotiations are complete and the tenant can rely on the implied promise that the landlord will not forfeit the lease until the 6-month period is complete or has run its course.

In Central London Property Trust Ltd. v High Trees House Ltd. (1947) the plaintiffs owned a block of flats and rented it out to the defendants in 1939. The defendants in turn sought to rent out each flat to make up the money that they were to pay the plaintiff. Subsequently the Second World War broke out and many of the flats remained unoccupied. The plaintiffs allowed the defendants to pay only half the annual amount that was due to them. In 1945 the flats were fully occupied and the plaintiff claimed the rent for the last 2 quarters. The Court of Appeal found in favor of the plaintiff and allowed them to recover the full rent for the last 2 quarters but qualified it by saying that should the plaintiff have tried to recover the full rent that was due to them between 1940 - 1945 they would not have been successful.

Is this then an exception to the rule in Pinnel’s Case (1602) which says that in instances of debts, part payment will not amount to sufficient consideration? – (equity varies with the length of the Lord Chancellor’s foot)

Pinnel’s Case (1602) was reaffirmed in Foakes v. Beer (1884) where the defendant owed the plaintiff a certain amount of money and made an arrangement with the plaintiff to pay it off in installments but no mention was made of the interest. The defendant eventually paid off the full debt as promised but the plaintiff brought an action for the outstanding interest and the plaintiff was successful.

Promissory estoppel however cannot be used to create a new right and neither can it be used as an offensive tool because the equitable maxim that equity is used only as a shield and not a sword will apply. The party relying on promissory estoppel merely seeks to enforce an existing promise that he or she has acted on.

In Combe v Combe (1951) Mrs. Combe relied on her husband’s promise to make maintenance payments and brought an action against her husband for failing to adhere to the promise relying on the doctrine of promissory estoppel. The court held that there wasn’t a legal promise in place (domestic agreements are generally not considered or regarded to be legally binding agreements) and that promissory estoppel because of its equitable nature cannot be used to bring an action against someone.

Copyright © 2019 by Dyarne Ward and Kathiresan Ramachanderam