Promissory Estoppel: An Essay On Case Law Evaluation.

The doctrine of promissory estoppel prevents (estops) a claimant from going back on a promise and has been described as a ‘shield and not a sword’.

Undertake an evaluation of this statement using related case law.

Significance of Equitable Estoppel

Promissory estoppel can be described as one of the popular types of equitable estoppel. The significance of equitable estoppel has been stressed upon by the court in Crabb v Arun DC (1976). While emphasizing on the importance of equitable estoppel, the court stated that equity comes in to mitigate the rigors of the application of strict law. It also prevents the person from insisting on the strict application of his or her legal rights when under the circumstances, it will be in equitable for such person to do so, keeping in view the dealings that have taken place among the parties. The doctrine of promissory estoppel can be explained with the help of the following example. Therefore, when A has made a promise to B according to which A is not going to enforce his legal right and B has relied and acted upon such promise without supplying any consideration, equity will not allow A to back up from such a promise later on (Hughes v Metropolitan Rly Co (1877).

A significant case related with promissory estoppel is that of Central London Property Trust Ltd. v High Trees House Ltd. (1974). In the same way, the court has also explained the doctrine of promissory estoppel in Total Metal Manufacturing Ltd V. Tungsten Electric Co Ltd. (1955). The principle of promissory estoppel is different from estoppel under the common law due to the reason that in this case, there are less strict requirements present. Therefore promised the estoppel may arise on the basis of the promise regarding future intention or conduct. The application of the doctrine of promissory estoppel can also be seen in the case of Hughes V. Metropolitan Railway (1877). In this case, the tenant was given the time of six months by the landlord to repair the property, otherwise there was risk of forfeiture. During the six months, negotiations started between the landlord and the payment for the sale of the lease. However after six months, the negotiations between the parties failed at at the same time the team and also failed to repair the property. Under these circumstances, the landlord initiated action to enforce forfeiture. However, the decision given by the court was that on account of the conduct of the landlord, the tenant was led to believe that the forfeiture was not going to be enforced by the landlord.

The brief facts of Central London Property Trust Ltd v High Trees House Ltd. (1947) are that a block of flats was led by the plaintiff to the defendant on a lease for 99 years at the rate of £2 500 per year. As a result of the evacuation of people from London during the World War, the defendant could not sublet enough lives so that the rent could be covered. Under these circumstances, the plaintiff agreed that only half of the rent will be charged. However, at the end of the war, the property market stabilized. As a result, the defendant, succeeded in subletting all the flats. Under these circumstances, the plaintiff asked that original rent should be paid by the defendant, however the defendant refused to pay the original rent.

The Doctrine of Promissory Estoppel and Related Case Laws

Under these circumstances, the issue in this case was if the promise made by the landlord can be enforced even if there was no consideration present to support the promise.

In this case the court stated that the statement made by the landlord was the representation regarding the future. It was a promise to suspend the right of the plaintiff to claim for rent during the war. The plaintiff was aware that the promise would be acted upon and the defendant had indeed acted on the promise (D & C Builders v Rees, 1965). It was enforceable, even if there was no consideration but only during the time when the conditions leading to the promise were present (lack of demand for accommodation during the war). As these conditions seized to exist in 1945, the court stated that from this point, the plaintiff was allowed to claim the original rent.

The decision given in this case reveals some of the major elements of promissory estoppel. Therefore it can be stated that the doctrine of promissory estoppel requires that there should be a promise to waive strict legal rights, such promise, should be made intention of creating legal relations and it should be intended to be acted upon by the other party. It is also necessitate that there should be an act done by relying on the promise, although it is not necessary that there should be detrimental reliance on the promise.

Another important element that needs to be noted in this regard that promissory estoppel only operates as a shield and it cannot act as a sword. Hence, the promise was not result in creating a cause of action, but the courts will prevent the party making the promise from acting inconsistently with the promise. In this case, it was stated by Denning J that it can be said that in any case, estoppel would cease to operate when the condition due to which the representation applied had come to an end or it can also be stated that it would only come to end on notice. However in either case, it is merely a way of ascertaining the scope of the representation.

Therefore, Denning J. has discussed the position that if an attempt would have been made by the plaintiff to claim the full rent for the wartime period, according to him the claim would have failed.

Promissory estoppel takes place when a contractual relationship is present between the parties. However, it is not yet settled if promissory estoppel can also be present in case of pre-contractual relationships. But in this regard, in Brinkom Investments Ltd V. Carr (1979), Lord Denning had stated that promissory estoppel can be the result of a promise that has been made by the parties while they are negotiating the contract. Similar views had been expressed by the court in Durham Fancy Goods V. Michael Jackson (1969). In this case, Donaldson J, had stated that contractual relationship is not relevant. If there is a "pre-existing legal relationship, that may result in giving rise to penalties and liabilities under certain circumstances.

Elements and Requirements of Promissory Estoppel

In case of promissory estoppel, the first requirement is that the promisor should give an unambiguous and clear statement that it was not his intention of enforcing his legal rights. Such a promise can be either express or implied. In the same breed is also required that the promisee should have acted on. the promise that was made by the promisor. Generally, promissory estoppel arises when the promisee had relied on such a promise and suffered a detriment. As was the case in Ajayi V. Briscoe (1964), or even the promisee had altered its position by relying on such promise even if he had not suffered any detriment.

In this way, Lord Denning had stated in Alan Co. Ltd V El Nasr & Import Co. (1972) that suffering a detriment, cannot be described as an essential element necessary in case of promissory estoppel. Therefore, in order to have a successful plea of promissory estoppel there should be a change in the circumstances of the promisee.

Another requirement present in case of promissory estoppel is that it would be inequitable if the promisor is allowed to go back from its promise and claim the strict legal rights after the other party had relied on such promise. Promising estoppel also requires that it cannot be enforced against the promisor. As a result, promissory estoppel can only be used as a defense and hence it cannot be used as a sword. The leading case in this regard is that of Combe V. Combe (1951). In this case, the court had stated that promissory estoppel does not result in creating a cause of action. Consequently, the requirement of consideration for the purpose of the formation of contract is still valid. The court stated that the doctrine of promissory estoppel is a rule of evidence. It prevents the promisor from denying the truth of the statement on which the other party had relied upon.

In this case, a promise was made by the defendant has been according to which he was going to give £100 tax-free to his wife even if no consideration was furnished by the wife in return of the promise. When the husband failed to get the money, the wife sued the husband regarding the promise. However, the claim of the wife failed. The court stated that the principle given in High Trees does not extend to cover such cases. The court stated that promissory estoppel is only a defense and it cannot be treated as a cause of action. In this way the court stated that it is a shield and not the sword. This phrase was adopted by Birkett LJ from the counsel of the husband when he said that the principle of promissory estoppel is to be used as a shield and not as a sword.

In this way, it needs to be noted that the principle of promissory estoppel does not result in creating a new cause of action. Promising estoppel only prevents a party from asserting its strict legal rights, under the circumstances when it will be unjust to allow such party to enforce the right, keeping in view the dealings that have taken place between the parties.

After considering the case law on the issue of the need for consideration, it can be stated that in none of the cases, the defendant had sued on the basis of the promise, assertion or assurance as a cause of action in itself. The defendant had been sued on some other cause of action, for example, a breach of contract or possession. In such a case, the promise or the assertion had only played a supplementary role, although there is no doubt that it was also significant. Therefore, even if it is a part of the cause of action, still it cannot be treated as the cause of action in itself. Thus the principle can be described as follows. Where, through its words or conduct, one party has made a promise on an assurance to the other party, which was going to affect the legal relations present between the parties and to be acted accordingly, in such a case, if the other party had accepted it and acted upon it, the party giving the assurance cannot be allowed later on to revert back from the earlier legal relations by assuming that no such promise or assurance has been given, but such party is required to accept the legal relations subject to the qualification that had been introduced by the party itself although it was not supported by any consideration, but only by the word of such party.

In view of the above mentioned the discussion, it can be stated that the doctrine of promissory estoppel has to be only used as a defense and not as a cause of action. Therefore, generally, promissory estoppel is available as a shield, and not as a sword. The defense of promissory estoppel is available only against the promisor for enforcing the promise. For the purpose of using the doctrine of promissory estoppel as a sword, it is necessary to follow the doctrine of consideration.

References

Ajayi V. Briscoe (1964) 1 WLR 1326

Alan Co. Ltd V El Nasr & Import Co. (1972) 2 QB 18

Brinkom Investments Ltd V. Carr (1979) CA

Central London Property Trust Ltd. v High Trees House Ltd. (1974) 1 KB 130

Combe V. Combe (1951) CA

Crabb v Arun DC (1976) 1 CH 179

D & C Builders v Rees (1965) 2 QB 617

Durham Fancy Goods V. Michael Jackson (1969) 2 QB 839

Hughes v Metropolitan Rly Co (1877) 2 App Cas 439

Total Metal Manufacturing Ltd V. Tungsten Electric Co Ltd. (1955) 1 WLR 761