definition of promissory estoppel
doctrine that prevents a party from acting in a certain way because the first party promised not to, and the second party relied on that promise and acted upon it
“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” Per E Cooke, The Modern Law of Estoppel
when is promissory estoppel relevant?
when the apparent agreement between the parties or a promise made by one of them is ineffective due to the lack of consideration.
Hughes v. Metropolitan Railway Company (1877)
If parties “enter upon a course of negotiations which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who 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”.
Central London Property Trust Ltd v. High Trees House Ltd (1947)
- Denning, obiter: “a promise intended to be binding, intended to be acted on, and in fact acted on, is binding so far as its terms properly apply”
- During the outbreak of war and evacuation of people from London, D could not sublet enough flats to generate the rent payable to P. P agreed to halve the rent. When the property market returned to normal, the flats were full let at the end of the war, P requested for original payment but D refused.
- HELD: P can demand the entire rent from the date of notice in 1945. If P had sought to claim the rent prior to that, he would have been estopped since it was inequitable for D to resume original position then.
Long Foo Yit and anor v. Mobil Oil Singapore Pte Ltd (1997)
- Court held that promissory estoppel can be used where the apparent agreement between the parties is ineffective due to the lack of consideration.
- Requirements for obtaining relief include:
- A legal relationship giving rise to certain rights and duties between the parties.
- Promise/representation by promising party that he won’t enforce against the other his strict legal rights.
- An intention on the part of the promising party that the other will rely on that promise/representation.
- Reliance on the latter party.
- It is inequitable for the promising party to go back on his promise.
Abdul Jalil bin Ahmad bin Talib and ors v. A Formation Construction Pte Ltd (2006)
- Original trustees leased properties to D, and delays in temporary occupation permits led to delays in rent payments. Negotiations resulted in a compromise agreement but no written agreement was done to wave rental arrears. P new trustees claimed for arrears owed.
- HELD: In accepting the compromise offered by the original sole trustee, D gave up any rights it may have had to make a claim for damages for breach on the part of the trustee, and this was held to be valid consideration.
- Even if there were no consideration, P would be stopped of equity from making their claims because D paid all the money required by the sole trustee in the manner and at the times agreed and it would be inequitable to allow P to go back on the offer. Furthermore, D had incurred expenses in completing works on one of the properties.
Tee Soon Kay v. AG (2007)
- Police officers trying to revert back to the Pension scheme after opting for the CPF scheme.
- HELD: Respondents would be allowed to invoke the doctrine of promissory estoppel as a defence but it is unnecessary since the appellants did not claim that the agreement lacks consideration. The court did not rule on whether it is necessarily that promissory estoppel can only be used as a defence and not as a claim.
clear promise - Hughes v. Metropolitan Railway Company (1877)
- P landlord gave notice to D tenant requiring D to carry out repairs within 6 months. D asked if P wanted to purchase D’s interest in the premises and suggested that repairs be deferred pending negotiations. When negotiations broke down, P tried to forfeit the lease stating D’s failure to repair within the original timeframe.
- HELD: D granted relief against forfeiture because P’s conduct provided D with an implied promise/representation to suspend the time dring the course of negotiations. Allowing P to enforce original rights will be inequitable.
reliance: change of position
- Promisee must have relied on the promise/representation. This is conventionally understood to be detrimental reliance because if the promise is revoked, the promisee would be worse off than if it had never been made. Hence it would be inequitable for the promisor to resile from the promise (as per Hughes v. Metropolitan Railway Company).
- But as seen in Central London Property Trust v. High Trees House, reliance need not be detrimental. D’s reliance on P’s promise in that case was not necessarily detrimental since it did not make D any worse-off.
The Post Chaser (1982) (reliance: change of position)
it is not necessary to show detriment. The promisee may have benefitted from the representation and yet it may be inequitable, at least without reasonable notice, for the promisor to enforce his legal rights.
To establish reliance:
Promisee has committed himself to a course of action he would not otherwise have adopted.
Promisee would be prejudiced if the promisor were to resile from the promise.
The nub of this is the promisee’s inability to resume his original position due to the reliance.
inequitable to go back on promise
Inequity is an independent requirement (though often overlapping with Reliance) and other factors are also relevant.
- The time-lag before the promisor asserts his original right and the degree of prejudice caused to the promisee.
- The circumstances surrounding the giving of the promise/representation.
D & C Builders v. Rees (1966) (inequitable to go back on promise)
- D owes P £482 for building works, but knowing that P were in “desperate financial straits”, eventually responded to P’s several requests for payments by offering £300 in full settlement or nothing. P accepted as they had no choice and sued for balance.
- HELD: Court rejected the plea for promissory estoppel because
- it was not inequitable for P to ask D of the £482 since it was the original sum hey owed, and
- D acted badly having known of P’s financial difficulties and used their awkward situation to intimidate them.
the extent of enforcement: suspensory or extinctive?
- Promissory estoppel is suspensory and not extinctive of the promisor’s rights. The promisor may still, on giving reasonable due notice, assert his original rights. An example of the suspensory effect is in Central London Property v. High Trees, although the rent that cannot be claimed back is also evident of the partial extinguishing of the promisor’s rights.
- However, promissory estoppel may extinguish part or all of the promisor’s existing rights if the promisee cannot resume his original position (as per Hughes v. Metropolitan Railway Company). Promissory estoppel can therefore extinguish the promisor’s rights to the extent necessary to avoid prejudice to the promisee.
Emmanuel Ayodeji Ajayi v. Briscoe (1964) (extent of enforcement)
“When one party to a contract, in the absence of fresh consideration, agrees not to enforce his rights, an equity will be raised in favour of the other party. This equity is, however, subject to the qualifications that [1] the other party has altered his position, [2] the promisor can resile from his promise on giving reasonable notice, which need not be formal notice, giving the promisee a reasonable opportunity of resuming his position and [3] the promise only becomes final and irrevocable if the promisee cannot resume his position.”
Birmingham & District Land Co. v. LNWE (1888) (extent of enforcement)
It is not equitable to forfeit the promise to forbear “if the persons who have contractual rights against others induce by their conduct those against whom they have such rights to believe that such rights will either not be enforced or will be kept in suspense or abeyance for some particular time”. The promise can only be revoked only if the parties were in the same position as they were before.
QBE Insurance (International) Ltd v. Winterthur Insurance (Far East) Pte Ltd (2005) (extent of enforcement)
- Employer was covered by the 2 insurance companies. When one of his employees got injured in the course of employment, they claimed from both insurers. D attempted to establish correspondence with P but P remained silent. D then assumed that P had assumed full responsibility for the claim. When P asked D to contribute 50%, D claimed that they had acted on P’s silence to their detriment.
- HELD: P was estopped from claiming the 50% because when there was a duty to speak, silence would amount to a representation. D had then detrimentally relied on this representation by not seeking to resist the claim or repudiate the insurance policy. (Extinguishing of the right to claim!)
Royal Bank of Scotland v. Ludlum (2008) (extent of enforcement)
Once D had altered his position (by borrowing money off friends and family in an attempt to reduce the overdraft) in response to the P’s undertaking that it will not commence enforcement before the end of the three month period, P cannot then revoke its promise and is estopped from claiming.
only operates defensively: “shield not a sword”
- Can enforce promises of the “same for less” type – after agreeing to accept less for the same act, it becomes inequitable for the promisee if the promisor wants to enforce the original rights, hence can apply it.
- Cannot enforce promises of the “more for the same” type.
- Cannot create new legal rights independent of the parties’ pre-existing legal relationship.
Combe v Combe (1951) (shield not sword)
- The husband promises to pay his wife £100 a year on their divorce. The wife sought to enforce the promise on the basis that she gave consideration for it by not applying for maintenance.
- HELD: The wife attempted to use promissory estoppel to enforce her legal rights to claim payments from her husband. This was using estoppel as a sword and her claim failed.
Walton’s Stones v. Maher (1988) (shield not sword)
- D entered into negotiations to lease land to P for a major construction project. P’s solicitors told D’s solicitors that they “believe that the approval will be forthcoming” and that they “will let [them] know tomorrow if any amendments are not agreed to”. Believing that the negotiations will be successful, D started demolishing the buildings on his land. P has second thoughts and after 2 months when D demolished a substantial amount, P informed D of their intention to withdraw from the project.
- HELD: The court found a binding contract because P was estopped from denying the existence of one. The argument that the parties had no pre-existing legal relationship was rejected. Hence the court allowed that promissory estoppel can act as a sword. (CONTROVERSIAL!)
- However, the basis for promissory estoppel is different from that of consideration – enforcement rests on the reliance on the assumption that a contract will be concluded and relied on this to his detriment.
recent developments
- reliance as unjust enrichment (restitution)
- reliance in part payment as consideration
Collier v. P & M J Wright (Holdings) Ltd (2007)
(reliance in part payment as consideration)
- Court applied promissory estoppel to override Foakes v. Beer. P and his 2 former business partners owe D money and each serviced his share individually. When the 2 partners ceased paying, D told P to continue paying his share while D would chase the other 2 debtors. After P finished paying his one-third of the debt, D demanded that P pay the balance.
- HELD: As P provided no consideration for D’s promise, he has to rely on promissory estoppel.
- If [1] the debtor offers to pay part only of the amount he owes, [2] the creditor voluntarily accepts that offer and [3] in reliance on the creditor’s acceptance the debtor pays the part of the amount he owes in full, the creditor will by virtue of the doctrine of promissory estoppel, be bound to accept the part payment as full and final satisfaction of the whole debt. For him to resile will be inequitable to the debtor.
- Thus, in these circumstances, the promissory estoppel has the effect of extinguishing the creditor’s right to the balance of the debt.
Yeoman’s Row Management Ltd v. James Cobbe (2008) (reliance as unjust enrichment (restitution))
“When a property developer had reached an oral agreement “subject to contract” in principle with a property owner to buy its property and expended substantial amount of time and money in obtaining planning permission pursuant to the agreement but the owner subsequently refused to proceed on the agreed terms and entire into a binding contract, the developer is entitled to quantum meruit payment for his services in obtaining the planning permission. The owner was unjustly enriched because it had obtained the value of the developer’s services without having to pay for them.”
types of estoppel
promissory and proprietary (‘reliance based estoppel’, Halsbury Laws 2003)
