#4600 - Part Payment And Promissory Estoppel - GDL Contract Law

General rule: At common law, payment of a lesser sum does not discharge the obligation to pay the full amount

• Foakes v Beer: There is no consideration for a promise to accept less, so it is not binding

• Re Selectmove: company tried to argue Williams v Roffey – but If this applied then Foakes v Beer would always be circumvented, so judge argued that Foakes v Beer was too well established

• Therefore:

  • Promise to pay more –use Williams v Roffey

  • But promise to accept less – then must use Foakes v Beer

Exceptions to the Part Payment Rule

The Common Law

Pinnel’s Case :

1. Different ‘thing’: – ‘a hawk, a horse, or a robe’

   • Confirmed in Sibree v Tripp: tender of a promissory note was a sufficient novelty to constitute consideration for the creditor’s promise to accept a lesser sum

   • D & C Builders v Rees :part payment by cheque (negotiable instrument) was in no way better than paying the full amount in cash – not sufficiently new

2. Different ‘place’: needs to be an advantage of meeting in a different place – the advantage acts as good consideration

3. Different ‘time’ – earlier: money sooner is better than money later

Welby v Drake : payment by a 3^rd party

• D’s son owed the C 18 – D’s father then made agreement to pay it off, but for a lesser amount (9)

  • Where a lesser amount is paid in satisfaction of a debt by a third party to that debt, the creditor cannot sue for the balance

  • Some cases have found fraud – e.g. CA Hirachand Punamchand v Temple – but breach of contract won’t amount to fraud at CL unless promisor knew at the time of promising that he had no intention of keeping to promise

Promissory Estoppel: An equitable exception to the general rule

• E Cooke – ‘Estoppel is a mechanism for enforcing consistency; when I have said or done something that leads you to believe in a particular state of affairs, I may be obliged to stand by what I have said or done, even though I am not contractually bound to do so’: where it would be unjust or inequitable to go back (Denning)

• Hughes v Metropolitan Railway : Notice to repair which allowed landlord to evict tenant if he didn’t complete within 6 months. After the notice was served L and T began negotiations for the purchase of the property but these broke down. L tried to evict T at the end of the 6 months

  • Lord Cairns – by conducting negotiations L gave impression that they wouldn’t stand by their strict legal rights: the clocks should have been suspended during the negotiations, this would have been reasonable

• CLP Trust v High Trees House (1947)

  • Denning wouldn’t allow back payment because of ‘doctrine of promissory estoppel’ : ‘A promise intended to be binding, intended to be acted on and in fact acted on is binding so far as the terms properly apply’

  • Factors:

    1. Clear and unequivocal promise to suspend existing contractual rights

    2. Change of position by promise in reliance on the promise

    3. Reliance need not be detrimental

    4. Inequitable for promisor to go back on the promise

    5. Shield no a sword

1. Clear Unequivocal promise to waive contractual rights

   • Either express or by conduct – can be implied (Hughes v Metropolitan Railway Co.)

     • But must be clear

   • Woodhouse v Nigerian Produce: promise to pay in one currency was not a clear promise: was just a company doing a favour for another

     • Wasn’t such a clear promise that had it been a contract it would have been a contractual promise

   • Businesses make concessions like this all the time – but not intended to be binding

2. Alteration of position in reliance

   • Change of position must be in reliance on the promise

     • Ajayi v Briscoe– Owners had let lorries to the D who had experiences difficulties in having them serviced. Owner consented to withhold instalments as long as they were off the roads. Owners later sued to recover instalments due, and the D pleaded promissory estoppel. The PC held that promissory estoppel did not defeat the owner’s claim as the D had not altered his position in reliance on the promise: lorries would have been off the road anyway

   • Promise need not be the only reason for the promisee’s change in position but it must have influenced the promisee’s conduct in some way

   • Where the promisee has, after the promise, conducted himself in the way intended by the promisor, it will be up to the promisor to establish that the conduct was not induced by the promise (Brikom Investments v Carr)

   • Collier v P & MJ Wright (Holdings) Ltd: party payment of a debt: approach of Arden LJ seems to suggest that as long as the creditor agrees to accept part payment and the debtor makes it – there will be sufficient reliance to invoke promissory estoppel – but this is problematic as it seems to be dispensing with the idea that the promisee must demonstrate genuine reliance (Alexander Trukhtanov)

3. No need for reliance to be detrimental

   • The Post Chaser per Goff LJ: ‘it is not necessary to show detriment; indeed, the representee may have benefitted from the representation, and yet it may be inequitable …. For the representor to enforce his legal rights’

     • However it is much easier to prove promissory estoppel where there is detriment: Goff J said that proof of detriment would be evidential

4. Inequitable to go back on promise

   • The Post Chaser: ‘it does not follow that in every case in which the representee has acted, or failed to act, in reliance on the representation, it will be inequitable for the representor to enforce his rights’

   • D & C Builders v Rees: didn’t go to equity with ‘clean hands’ – it was not inequitable for the builders to go back on their promise as it had been extracted from the creditors by intimidation

5. Shield not a sword:

• Acts as a defence to a claim and cannot be a cause of action in itself

• Combe v Combe:– ‘the principle never stands alone as giving a cause of action in itself’ per Lord Denning

• Baird Textile Holdings Ltd v Marks & Spencer – wouldn’t allow Baird to be a claimant

• Slight uncertainty (commonwealth influence) but unlikely to change: CA in Smithkline Beecham plc v Apotex Europe Ltd confirmed that promissory estoppel cannot create a cause of action

Does promissory estoppel suspend or extinguishes rights?

• Generally suspensory – rights resumed on ‘reasonable notice’

• E A Ajayi v R T Briscoe: question of whether promissory estoppel is revocable – ‘the promisor can resile from his promise on giving reasonable notice, giving the promise a reasonable opportunity of resuming his position.’ - consistent with view that it is generally suspensory

• Alan WJ & Co v El Nasr Export and Import Co: Lord Denning MR: ‘the one who waives his strict rights cannot afterwards insist on them. His strict...