Promissory Estoppel

Mind Map by beth.monks, updated more than 1 year ago
Created by beth.monks about 5 years ago


Mind Map on Promissory Estoppel, created by beth.monks on 01/07/2015.

Resource summary

Promissory Estoppel
1 an equitable doctrine which in some instances can stop a person going back on a promise which is not supported by consideration
1.1 a contracting party who promises not to enforce a contractual right will not be able to enforce that right later if it would be inequitable to do so, and the promise has been relied upon by the other party.
1.1.1 Central London Property Trust v High Trees House [1947] Defendants were a tenant company renting a block of flats from the plaintiff (landlord company). Defendants had a 99 year lease for rent of £2500 per year. At the outbreak of WWII many flats remained empty and tenant company remained unable to pay the full rent. Plaintiffs agreed to half the rent, and the tenant company paid half from 1940 onwards. By the beginning of 1945, the flats were fully let again. The landlord company was in receivership and believed that the company was entitled to arrears of rent for the whole period of the war, but brought a test case claiming full rent for the last two quarters of 1945. Held: the full rent was payable for the two quarters in question, and from then on but not for the whole period of the war.
1.1.2 Denning J said (OBITER DICTUM) that as a result of the equitable doctrine of estoppel,’ a promise to accept a smaller sum in discharge of a larger sum, if acted upon, is binding notwithstanding the absence of consideration.’
1.2 must have an existing legal relationship
2 operates as a defence and not as a cause of action
2.1 cannot be used in legal proceedings brought to force someone to uphold a promise. can only be used to prevent someone going back on their promise
2.2 Combe v Combe [1951] A husband promised to make maintenance payments to his estranged wife but failed to do so. The wife brought an action to enforce the promise invoking promissory estoppel. Held: Her action failed. There was no pre-existing agreement which was later modified by a promise. Promissory estoppel can only be used as 'a shield not a sword' (Birkett LJ)
3 It must be inequitable to allow the promisor to go back on their promise: clean hands
3.1 D & C Builders v Rees (1966) Debtor exploited the strained circumstances of the creditor to extort a promise to accept immediate part payment of the debt in final settlement (the evidence was that the debtors wife was aware of the creditor’s circumstances). The P creditor then claimed the balance, and the question facing the Court of Appeal was whether there was a binding promise to accept less than the debt owed in full satisfaction of the debt. Lord denning MR found for the P: ‘The creditor is only barred from his legal rights when it would be inequitable for him to insist upon them…Where there had been a true accord…then it is inequitable for the creditor afterwards to insist on the balance…in the present case, on the facts as found by the judge, it seems to me that there was no true accord. The debtor’s wife held the creditor to ransom.’
3.1.1 Lord Denning stated obiter that if the party claiming promissory estoppel has acted in such a way that it would be inequitable to allow him or her to take advantage of the doctrine, then the doctrine will not be applied. North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] The defendants agreed to build a ship for the claimants for a certain price specified in US dollars. After entering the contract the US dollar was devalued by 10%. The defendants threatened not to complete unless the claimants paid an additional 10% on the contractually agreed price. The claimants had a valuable charter lined up so agreed to pay the additional sums and did pay them without protest. 8 months after delivery of the ship the claimants brought an action to recover the additional sums paid. Held: The contract was voidable for duress, however, since the claimants had left it so long in bringing their claim they had affirmed the contract and lost their right to rescind.
3.2 Duress against Creditors
3.2.1 Economic Duress
3.3 Re Selectmove Ltd (1995) Selectmove tried to rely on equitable estoppel to prevent the Inland Revenue reneging on an alleged agreement for the payment of unpaid tax by instalments. The Court of Appeal rejected this argument as, even if the agreement had existed, Selectmove had failed to make certain payments required by it. As a result of this failure, it would be perfectly equitable to allow the Inland Revenue to enforce its strict legal rights.
4 must be based on a clear and unambiguous promise
4.1 Woodhouse AC Israel Cocoa SA v. Nigerian Produce Marketing Co [1972] Lord Hailsham said ‘the meaning is to exclude far-fetched or strained, but still possible, interpretations, while still insisting on a sufficient precision and freedom from ambiguity to ensure that the representation will…be reasonably understood in the particular sense required.’
4.2 Baird Textile Holdings Ltd v Marks & Spencer plc [2001] a claim based on estoppel failed because the alleged representation was considered to be no more than a bare assurance and insufficiently certain
5 Promissory estoppel can usually only be used to prevent rights being exercised for a period of time; it cannot destroy them for ever.
5.1 Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955] The respondents were bound to pay royalties to the appellants under an agreement made in 1938 for the import, manufacture, use ,and sale of hard metal alloys. They were also to pay compensation if the material manufactured were to exceed a stated volume. At the outbreak of WWII, the appellants agreed to suspend the right to compensation. In 1945, the appellants claimed to have revoked that suspension and to be entitled once more to receive it. HoL held that sufficient notice was given for termination of the suspension of the right to compensation.
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