#19856 - Estoppel - Contract Law

Informal Gift Promises: The Effect of Estoppel

Notes – Nick’s Essay

Promissory estoppel is only one type of estoppel. In general, estoppel is where the law will stop someone from doing something they would otherwise be entitled to do.

Estoppel by Representation

If A and B are litigating a case in court, and A wants to deny x happened, they will be prevented from doing so if (1) A had previously represented to B x happened, (2) A intended B rely on that representation, and (3) B did rely on that representation. It’s a rule on evidence.

It’s not a ground to sue in itself. But, as Brandon LJ said in Amalgamated Investment and Property, B may be able to succeed in a cause of action where he used estoppel by representation where without it he would fail. Here’s two examples of that:

(1)

A owns a large area of land. A tells B a cottage on A’s land now belongs to B. B relies on this. But A has done nothing to transfer the title. A has the locks changed and throws B’s belongings out of the cottage. B wants to sue A for trespass. A wants to argue there is no trespass because he owns the land – the cottage belongs to him. But this isn’t what he told B, so he can’t say it in court (the only tricky bit here is proving A intended B rely on the representation, but assume this is made out). As such, A’s argument is estopped by estoppel so B wins the trespass case.

(2)

B takes a dress to be cleaned in A’s dry cleaners. A has B sign a form, showing the conditions on which A is prepared to clean B’s dress. B queries a term where B is supposed to not sue A if the dress is returned damaged. A says ‘dw about that, it’s mainly for particular dresses, but yours should be fine’. B’s dress is damaged in cleaning. B sues A. A will want to argue B agreed not to sue if the dress came back damaged. B will counter that A said it doesn’t apply for her particular dress. As such, A will be estopped from raising the argument of the terms.

However. there are times where you won’t outright win a case by using estoppel by representation. If A leads B to believe A is leaving B something in his will, and B relies on this, but A left nothing for B, estoppel by representation will prevent A’s representatives from denying that A promised to leave B property in the will. But B will still have to show that promise was legally binding. Other types of estoppel might help with this, but not estoppel by representation.

Promissory Estoppel

This is based on the idea that you can stop someone going back on a promise, not a representation, if they intended the other person relied on it, and the other person did rely on it.

It only applies where A has a right against B, and A promises B not to enforce that right, intending B rely on this, and B does rely on it.

First expressed by Lord Cairns in Hughes v Metropolitan Railway:

If the parties to a contract ‘enter upon a course of negotiation which has the effect of leading one of the parties to suppose the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, 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 between those parties’. In that case, an implied promise not to enforce a right was enough for promissory estoppel to kick in.

Denning J’s judgement in Central London Property Trust v High Trees gave rise to three issues:

1. Reliance

In that case, the CLPT’s promise to accept half rent was binding because High Trees had relied on that promise. But how? What did High Trees do differently indicating they relied on it?

Arden LJ in Collier v Wright suggested paying the half rent itself counts as reliance on the promise not to collect the full rent. This is hard to argue: you have to say ‘Had A not promised not to sue me for the full amount, I wouldn’t have paid A anything’. This would be silly for a court to allow.

Lord Denning MR in D&C Builders v Reevs said where there has been a true accord where the creditor voluntarily accepts a lesser amount, and the debtor acts upon that accord by paying the lesser sum and the creditor accepts it, it is inequitable for the creditor to insist on the full balance. But he is not so bound unless there has been a true accord between them.

2. Suspensory, not extinctive

It is misleading to say High Trees means promissory estoppel only suspends obligations and doesn’t obviate them for two reasons:

• The CLPT’s rights to the full amount of rent during the war were extinguished under PE – they couldn’t ever get that lost rent back

• As per Denning J, they could only increase rent after the war because the agreement to reduce rent was only meant to apply while High Trees found it difficult to find tenants for their flats. It had nothing to do with PE.

There is one sense in which PS can suspend rather than extinguish someone’s rights. In Ajayi v RT Briscoe, the Privy Council ruled if A promises not to enforce his contractual rights against B and B relies on this, A can abandon the promise by giving reasonable notice so that B has an opportunity to secure his position. In other words, if B can, with sufficient notice, undo his act of reliance on A’s promise which A has given notice they intend to rescind, A will actually be prevented from enforcing his contractual rights for as long as is needed to give B a chance to undo the act of reliance. If B cannot undo the act of reliance, A’s promise not to enforce the rights will be binding.

This case makes Arden LJ’s position in Collier v Wright that part payment of a debt can count as sufficient act of reliance on a promise not to sue for the full amount harder to sustain. If undoing the act of reliance allows the promisor to once again enforce her rights, then consider the following. A owed B 100. A agrees to accept 50 from B and will consider the debt fulfilled. B pays 50. A then sues for the rest. If we consider the act of reliance on A’s promise to be B paying 50, then all A has to do to undo this act of reliance is refund the 50. Then a can sue for the original amount. This seems too twisty and complicated. Viscount Simmonds in Tool Metal Manufacturing v Tungsten Electric would have A keep the 50 and be able to sue B for the other 50.

3. A Shield, not a Sword

PS only works to prevent a promisor going back on a promise they would not enforce their rights against the promise. You can’t use it to sue defendants for breaking promises. It only works when that person sues you.

In Combe v Combe, a husband and wife were divorcing and the husband promised to pay the wife 100/year in maintenance. The promise was not made with the purpose of dissuading the wife from seeking maintenance from the Divorce Court. So when she failed to seek one, her failure did not provide consideration for the husband’s promise. When the husband didn’t pay maintenance, the wife sued. Due to a lack of consideration, she was forced to argue PS prevented the husband from breaking his promise. Denning LJ held that PS doesn’t create new causes of action where none existed before. It’s a shield, not a sword. This principle has been pretty consistent.

Proprietary Estoppel

This applies where B has relief on a belief she has, or will have, an interest in land belonging to A.

In the bit on estoppel by representation, B relied on A’s representation that B has an interest in land currently belonging to A. A is estopped in court from saying that B does not have an interest in the land. It wasn’t much of a leap to say B could also bring a claim saying she actually did have the interest in A’s land that A said she had, but then tried to claim otherwise. As estoppel by representation is only concerned with rules of evidence in court, this last bit is under the remit on proprietary estoppel.

Proprietary estoppel can work as a sword and shield. You can bring claims to be granted interests in land, not just defend your interest from claims brought against it. In Ramsden v Dyson, Lord Kingsdown suggested proprietary estoppel might apply to protect someone who’d relief on the belief he would be given an interest in land belonging to D. This was rejected by the majority.

The CA in Crabb v Arun DC held proprietary estoppel could be used to make A keep a promise that A would give B an interest in A’s land and B had relied on that promise. The remedy would be discretionary in each case, as per Scarman LJ. This means sometimes it would involve giving the claimant more or less than they would have got had A honoured their promise.

For example, in Gillet v Holt, D promised C he would get D’s farming business when D died. Because of this, C worked for D for 40 years. D then dismissed C as an employee and rewrote his will. C sued, and D was ordered to hand over the farmhouse and 105 acres of land as well as 100,000, but C didn’t get the whole farming business.

Nick thinks by allowing C to sue on a promise he would receive an interest in land, and leaving it to the court to determine a remedy, the law on proprietary estoppel has lost touch with the idea estoppel is about stopping someone doing something. Proprietary estoppel forces people to do things.

Comparing the Estoppels

Should the law ever have gotten involved with stopping people going back on their promises.

Could the law on promissory estoppel learn from proprietary estoppel and become a sword?

Can it be justified that claimants who’ve relied on a promise to give them interest in land can sue on the promise, while claimants who’ve relied on a promise to give them money can’t? Either...