Promissory estoppel - Contract Law I PDF

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Promissory estoppel Leading case: 1. Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 A landlord gave 6 month’s notice to a tenant, requiring him to carry out certain repairs. The tenant responded by inquiring whether the landlord wished to purchase his interest in the premises for 3000 pounds. The landlord entered into negotiations for the purchase of the lease but these negotiations broke down, he sought to forfeit the lease because the tenant had not carried out the repairs within 6 months of his original notice Held: The tenant was entitled to equitable relief against forfeiture of the lease on the ground that the running of the 6 month period was suspended during the negotiations to purchase the the lease and did not recommence until the negotiations broke down. 2.Central London Property Trust Ltd v High Trees House Ltd [1947] KB130 In 1937 the claimants let a block of flats in London to D on a 99-year lease at the annual rent of 2500 pounds. In 1940, D discovered that as a result of the outbreak of war and the evacuation of people from London, they were unable to let many of the flats. So the claimant agreed to reduced the rent to 1250 pounds. This promise to accept a reduced rent was unsupported by consideration. At the end of of the war in 1945 the property market had returned to normal and the flats were fully let. The claimant demanded that D resume payment of the entire rent from 1945, but the D refused to pay. Held: Claimants were entitled to demand the entire rent from the date when the flats become fully let early in 1945.

Definition of promissory estoppel can be divided into 5 elements: 1.There must be a promise or representation as to future conduct which is intended to affect the legal relations between the parties and which indicates that the promisor will not insist on his strict legal rights against the promisee. The promise or representation must be clear and unequivocal so that the promisor dose not lose his rights simply because he has failed throughout to insist upon strict performance of the contract buy the promisee. 2.The promise or representation must have been relied upon by the promisee(have to show that the promisee committed himself to a course of action which he would not otherwise have adopted) Also, it is necessary to demonstrate that a detriment has been suffered, the detriment often arises, not when the promise is made and relied upon, but when the promisor seeks to go back on its promise without giving reasonable prior notice of its intention to do so. (PM Project Services Ltd V Dairy Crest Ltd [2016] EWHC 1235 (TCC), [40] ) 3.It must be ‘inequitable’ for the promisor to go back upon his promise.It has to be demonstrated that the promisee has acted in reliance upon the promise

4.The effect of PE is generally suspensory; it does not extinguish the promisor’s right. (In the leading case 1, the lardlord’s right to enforce the repairing convenant was not extinguished. It was suspended and could be resurrected by his giving reasonable notice. But in leading case 2, the estoppel had the potential to have permanent effects because Denning J was of the view that the lessors would not have been entitled to demand the rent waived between 1940 and 1945) *In cases of post-breach representations or where it is not possible or practicable to return the parties to their original position, then PE may have permanent effect (eg Collier v P&M J Wright (Holdings) Ltd [2007] EWCA Civ 1329 ; [2008] 1 WLR 643,[37] and Dugdale and Yates,1976 ; Thompson, 1983) -The precise effect of PE will depend very much upon the facts of the individual case and upon the exercise by the trail judge of his or her discretion -Judge may conclude that it would be inequitable to permit the promisor to go back on its promise at all or the judge may conclude that it would be inequitable to permit the promisor to go back on its promise without giving reasonable notice (MWB Business Exchange Centres Ltd v Rock Advertising Ltd[2016] EWCA Civ 553; [2017] QB 604, [61] 5.PE cannot act as a cause of action *Caution : ~In Foakes v Beer: Debtor had paid the promised part of of the debt and on the reasoning of judge, debtor ought to have been able to rely on PE as a defence to the creditors’s claim on recovering the balance of the debt. --->If this approach is to be allowed in subsequent cases, care will have to be taken to ensure that creditors do not inadvertently lose their rights to recover the full value of debts owed to them. Emphasis is put on the need for ‘a true accord’ and for a ‘voluntary’ acceptance by the creditor. ~The effect of PE will depend upon the facts of the case and it cannot be said that extinction of the right is the inevitable consequence of the successful invocation of estoppel...