Promissory Estoppel

kazzasingh's version from 2017-05-16 09:54

Development of Promissory Estoppel

Question Answer
Jorden v Money (1854)Money owed Marnell 1,200 pounds. Money gave Marnell a bond for this amount. Marnell died and Mrs Jordan inherited the bond. Money was contemplating marriage, but was concerned about his means. Mrs Jordan said that she would never enforce the debt, so he married. Five years later, she sought to enforce the debt, and Money claimed she should be estopped. The HOUSE OF LORDS said that there was no estoppel in this situation. The HOUSE OF LORDS said that estoppel can only work when the statement is about an existing fact, not a promise. Representation as to the future may be embodied as part of the contract OR nothing.
Hughes v. Metropolitan Railway Co. (1877) Thomas Hughes owned property leased to the Railway Company at 216 Euston Road. Under the lease, Hughes was entitled to compel the tenant to repair the building within six months of notice. Notice was given on 22 October 1874 from which the tenants had until 22 April to finish the repairs. On 28 November, the tenant railway company sent a letter proposing that Hughes purchase the tenant's leasehold interest. Negotiations began and continued until 30 December, at which point nothing was settled. Once the six months had elapsed the landlord sued the tenant for breach of contract and tried to evict the company. HELD: with the initiation of the negotiations there was an implied promise by the landlord not to enforce their strict legal rights with respect to the time limit on the repairs, and the tenant acted on this promise to their detriment.
Central London Property Trust v. High Trees House Ltd. [1947]In 1937, High Trees House Ltd leased a block of flats in Clapham, London, for a rate £2500/year from Central London Property Trust Ltd. Due to the conditions during the beginning of World War II occupancy rates were drastically lower than normal. In January 1940, to ameliorate the situation, the parties made an agreement in writing to reduce rent by half. However, neither party stipulated the period for which this reduced rental was to apply. Over the next five years, High Trees paid the reduced rate while the flats began to fill, and by 1945, the flats were back at full occupancy. Central London sued for payment of the full rental costs from June 1945 onwards (i.e. for last two quarters of 1945). HELD: The rent would be returned to the originally agreed price for the future only. CLP could not claim back the arrears accrued during the war years. Promissory estoppel prevented CLP going back on their promise to accept a lower rent despite the fact that the promise was unsupported by consideration.

Criteria for PE (existing contractual relationship)

Question Answer
Durham City Fancy Goods v Michael Jackson (Fancy Goods) Ltd [1968]PE can be applied where there is a relationship based on statutory provision. Contractual relationship is irrelevant provided that there is “a pre-existing legal relationship which could, in certain circumstances, give rise to liabilities and penalties”.

Case about a payment mechanism called the Bill of Exchange.

The dispute was whether payment was made appropriately.

Statutory dispute, not a contractual dispute.

This is because bills of exchange are governed by the Bills of Exchange Act 1882.

Are relationships created by the Bills of Exchange Act enough to found a claim in promissory estoppel?

Judge said that yes it is!

A cheque is a bill of exchange (a way of paying without currency). The dispute was whether the payment was paid contractually. Will the statutory arrangement/the relationship created by the Bills of Exchange Act – between the two parties – be enough to found a promissory estoppel?

Yes! What we need is a pre-existing relationship. This must be one that gives rise to liabilities and penalties.
The Henrik Sif [1982]3 way contract.

One of the parties thought that they were liable under the contract, but they were not!

The court said that even though there was not a full contractual relationship, there is an essence of the contract there.

If they feel that they have been misled, then this is enough to give rise to the conditions you need to allow promissory estoppel to work.

All we need is some form of legal relationship between the parties.

Criteria for PE (Clear and Unequivocal promise)

Question Answer
Woodhouse Israel Cocoa v Nigerian Produce Marketing Co Ltd [1972]A contract for the sale of some coffee beans was agreed to be payable in pound sterling. The sellers mistakenly sent an invoice stating price was payable in Nigerian currency. At the time the value of pound sterling and Nigerian currency was equal. The buyers accepted the delivery and invoice with out objection. Subsequently the value of the pound fell quite dramatically in relation to Nigerian currency. The buyers then sought to revert to pound sterling as stated in the contract. Held: The buyers conduct in accepting the invoice unquestionably amounted to an implied clear and unambiguous promise to accept on those terms.

Criteria for PE (Reliance by Promisee)

Question Answer
The Post Chaser [1982]the contract did not provide an exact time for notice of appropriation to be sent but merely indicated the need for promptness in general terms. It was held that the provision amounted to a condition which if breached allowed the seller to reject the documents and/or the goods. As SC bought the goods afloat “The Good Fortune” on 11th January and gave notice of appropriation on 14th January, it would seem that the notice of appropriation provided by SC was sufficient.
WJ Alan & Co v El Nasr [1972]W.J. Alan agreed to sell 250 tons of coffee beans at 262/= per c/wt to El Nasr payable on credit. At the time of the contract the value of Kenyan shillings and pound sterling were of equal value and the contract stipulated the price payable in Kenyan shillings, however the credit account referred payment in pound sterling. There were a number of other discrepancies between the credit agreement and contract such as date of shipping and the quantity to be shipped. These other discrepancies were rectified in a revised agreement however, the new agreement still referred to payment in pound sterling. W.J. Alan accepted the first instalment of £57,000, however, the value of the pound dropped quite dramatically resulting in a loss of 165,530.45/=. W.J. Alan then sought to revert to Kenyan shillings and demanded the further payment. El Nasr raised promissory estoppel in their defence in that in accepting the instalment in pound sterling and redrafting the credit agreement without changing the currency there was an implied promise that they would not revert to Kenyan shillings. W.J. Alan argued that El Nasr had not acted to their detriment in reliance of this promise as they had gained a benefit. HELD: once an alternative method of payment is accepted (the pounds sterling) it is deemed to have been accepted as a term of the contract and the sellers had waived their right to be paid in shillings. W.J. Alan could not then withdraw this waiver if it was either too late, or if it would be unconscionable in the circumstances. On the subject of detriment, Denning held that there was no support in the case law for that requirement, simply that the other party had relied on the decision and altered their position. Detrimental reliance is not a requirement of promissory estoppel. It only needs to be established that the promisor has changed their position.

Criteria for PE (Inequitable for promisor to resile)

Question Answer
D & C Builders Ltd v Rees [1965]D & C Builders Ltd was a two man building firm run by Mr Donaldson and Mr Casey. They had done work for Mr Rees at 218 Brick Lane, London E1, coming to £732. Mr Rees had only paid £250. £482 was owing. D&C were facing bankruptcy if they were not paid. Mrs Rees phoned up to complain that the work was bad, and refused to pay more than £300. D&C reluctantly accepted and took a receipt marked ‘in completion of account’. After that, they consulted their solicitors and sued for the balance. HELD: The claimants were successful. Mrs Rees could not rely on estoppel as there was no true agreement to accept less and because Mrs Rees had taken advantage of the builder's position and mislead them as to her financial position.

Criteria for PE (Suspensory Effect)

Question Answer
Tool Metal Manufacturing v Tungsten Electric co [1955]Tungsten had been infringing a patent right held by TMM. When TMM heard of this they waived all infringements in return for Tungsten paying 10% Royalty and also 30% 'compensation' if sales exceeded 50KG in any month. These sums were excessive but Tungsten agreed to pay them otherwise they would be faced with a claim for infringing the copyright. Tungsten struggled to make payments. They got into arrears during the war times and an agreement was reached to waive the 'compensation' payments during the war years. HELD: TMM could not enforce the compensation payments during the war years but could enforce them on termination of the war. TMM were estopped from going back on their promise to waive the payments in equity. Generally promissory estoppel will merely suspend legal rights rather than extinguish them. However, where periodic payments are involved and a promise has been made to reduce the payments because of pressing circumstances which are not likely to persist, promissory estoppel can be used to extinguish legal rights.

Criteria for PE (Shield not a sword)

Question Answer Column 3
Combe v Combe [1951]Mr and Mrs Combe were a married couple. Mr Yasser M Combe promised Mrs Radhika M Combe that he would pay her an annual maintenance. Their marriage eventually fell apart and they were divorced. Mr Combe refused to pay any of the maintenance he had promised. Seven years later Ms Combe brought an action against Mr Combe to have the promise enforced. There was no consideration in exchange for the promise and so no contract was formed. Instead, she argued promissory estoppel as she had acted on the promise to her own detriment. At first instance the Court agreed with Mrs Combe and enforced the promise under promissory estoppel. However this decision was then appealed. HELDThere was no pre-existing agreement which was later modified by a promise. The wife sought to use promissory estoppel as sword and not a shield.