#17249 - Promissory Estoppel - GDL Contract Law

This is equity’s evasion of the rule in Pinnel’s case. This was established by Lord Denning in Central London Property Trust v High Trees House [1947].

Hughes v Metropolitan Railway Co (1877) – Tenant had covenanted to keep the premises in a state of good repair. Landlord gave tenant six months to carry out some repairs. During this time began negotiations re the purchase of the lease, making it clear that repairs deferred during negotiations. Negotiations collapsed and landlord brought possession proceedings.

• Held that period for repairs to take place did not run while negotiations were ongoing.

• Lord Cairns: negotiations leading to one party supposing rights will not be enforced, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties.

Birmingham and District Land v LNWR (1888) – Bowen LJ: person induced by conduct to believe that certain rights will not be enforced, those persons will not be allowed by a court of equity to enforce the rights until such time has elapsed, without at all events placing the parties in the same position as they were before.

Central London Property Trust v High Trees House [1947] – WW2 meant that leaseholder was struggling to fill flats. Landlord agreed to lower the ground rent ‘for the duration of the war.’ In 1945 with all of the flats full the landlord sought to resurrect the original agreement, and sued for the full ground rent since the time that all the flats had been let.

• Denning J held that the rent was recoverable.

• obiter Denning held that if the plaintiffs had sued for all the ground rent held back during the period, they would have been prevented from doing so by the rule in Hughes’s case.

Denning’s Estoppel:

• Estoppel is essentially a rule of evidence which prevents a witness giving evidence which would be relevant if adduced, but which for reasons of fairness ought not to be adduced.

  • In Jordan v Money HoL held that estoppel in common law must be based on a statement of fact not a promise, Denning treads carefully around this.

• As a result of Hughes, a promise, even though unsupported by consideration, can be set up as a defence to an action for breach of contract.

  • Dennign explains that in Foakes v Beer estoppel was overlooked due to the (then recent) fusion of law and equity

• Treitel argues that the House of Lords in Foakes v Beer was not likely to have been unaware of Hughes’ Case, since it had been decided only seven years earlier and involved two of the judges who also sat in Foakes v Beer.

  • Distinguishes Hughes as where rights are merely suspended, whil in Foakes it was maintained that Mrs Beer’s right to payment should be permanently extinguished.

• Professor Smith distinguished Hughes (and of other cases on waiver) as deciding that a claimant cannot sue for a breach of contract which has been induced by his own behaviour.

  • Foakes v Beer, on the other hand, does not involve a breach of contract. The claim is for performance of a duty.

Assessing High Trees:

• 1) It does not make a promise unsupported by consideration binding for all purposes.

  • Such a promise is enforceable only as a defence, and not as a cause of action in its own right (which would still require it to be embodied in a contract and supported by consideration).

• 2) There must be some measure of reliance by the promisee on the promise.

• 3) The promisor may be able to withdraw the promise by giving notice.

• 4) The doctrine of High Trees is expressed to be derived from equity, and this allows it to claim the status of equity’s answer to the common law problem of Foakes v Beer.

The Characteristics of Promissory Estoppel:

• 1) A clear and unequivocal promise

• 2) Reliance on the promise (this need not be detrimental reliance)

• 3) It must be inequitable for the promisor to renege on the promise.

• 4) It is a shield not a sword.

1) A Clear and Unequivocal Promise

• These can be by words or by conduct: Hughes v Metropolitan Railway Co (1877)

• Must be sufficiently clear:

  • Woodhouse Cocoa v Nigerian Produce [1972] – A contract for the sale of coffee beans was agreed to be payable in pound sterling. Sellers mistakenly sent an invoice stating price was payable in Kenyan Shillings (value = GBP). Buyers accepted the delivery and invoice. Subsequently the value of the pound fell quite dramatically in relation to Kenyan shillings. 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.

2) Reliance on the Promise by the Promisee

• Ajayi v Briscoe (Nigeria) [1964] – D hired lorries from the plaintiff, paying in instalments. Lorries need repair. Plaintiff stated that full hire purchase payments did not need to be made while the lorries were out of service, but later claimed full payment.

  • Evidence failed to show that the defendant had made changes to the organisation of his business on the basis of the promise therefore no reliance.

• Alan v El Nasr (1972) – Lord Denning expressly denied that ‘detrimental’ reliance was necessary

  • The Post Chaser [1982] - Goff J confirms no detrimental reliance needed.

• Musumeci v Winadell (1994 Australia) - plaintiffs were tenants of a shop in a shopping centre owned by the defendants. D’s leased another shop in the centre to a similar business, meaning P’s saw loss in turnover. P sought reduction in rent. This was accepted for a while but D’s eventually changed the locks.

  • Held that the promise to reduce the rent had given the defendants the benefit of keeping the shop occupied without having to look for an alternative tenant.

    • It had cost the plaintiffs a detriment in the form of the risk they undertook by continuing to trade against a stronger competitor instead of leaving and cutting their potential losses.

  • But this seems to break the limitation of Williams v Roffey by Re Selectmove (see above).

3) It must be inequitable for the promisor to renege on the promise.

• D & C Builders v Rees [1966] – Builders carried out work on Mrs Rees’ house. They were in financial difficulty and MRs Rees coerced them into accepting 300 in satisfaction of larger debt. Builders sought remaining balance, Mrs Rees claimed Estoppel.

  • Held it was not inequitable for promisor to go back on the promise. Mrs Rees had not come to equity with clean hands.

  • D & C Builders, seen through the eyes of Lord Denning, offers a helpful insight into the way in which the High Trees principle can co-exist (just) with Foakes v Beer.

• Collier v Wright [2007] – Claimant bound to repay debt at rate of 600/month. Paid 200 a month, initially from the partnership’s bank account and later from his own resources. Claimant argued that he had agreed with the defendant to give up his status as a joint debtor and to take on the status of a sole debtor for 200 a month. Court held that the idea that D was estopped from denying this was ‘a genuinely triable issue.’

  • Arden LJ, the effect of...