Promissory Estoppel as a Sword and Shield - Essay Example

PROMISSORY ESTOPPEL AS A SWORD AND SHIELD Table of contents History of emergence of principles of equity…………………………………… 3 Estoppels………………………………………………………………………… 4 Promissory estoppels…………………………………………………................. 5 Equity…………………………………………………………………………….. 9 Promissory estoppels- sword and shield………………………………………… 11 Conclusion……………………………………………………………………….. 11 References ………………………………………………………………………. 12 Introduction History of emergence of principles of equity Conflict between strict rules and justice as the courts in civil law systems, such as, unequal bargaining power, the change of circumstances after the conclusion of the agreement and the exercise of contractual rights that are contrary to up initio objective of the agreement gave rise to the doctrine of equity like the promissory of estoppel. Although the classical principles of equity with their discretionary remedies and the ability to subvert common law rules, do not apply to contracts1, equitable notions have found their way into contract law in the form of particular doctrines. These doctrines are used to correct harsh consequences deriving from a pure application of the principle of freedom of contract.2 Rather than to rely on the common principle of good faith reasonableness', or 'fair dealing and honesty in fact', more technical doctrines were invented in order to guarantee many predictability. Estoppels Estoppel’s is a term used to envelope or restrict a party from denying to perform his duties in line with the law as established from the evidence derived from the, who he did not perform these duties or promise and which is sufficiently justified by the law officers, or by his own deed, or acts , either express or implied.3" If a court of law came to a conclusion that a person has performed something similar to the estoppels, the person is referred to as "estopped" from coming up with some kind of arguments or claiming certain privileges.4 The defendant or plaintiff is said to have been stopped from making his or her own arguments before the court if that is so established. There are many species of estoppels, some of which are reliance based estoppels with the party having to rely on the actions or utterances of the other respective party which include proprietary estoppels and promissory estoppel (of which promissory estoppels is of interest in this discussion), estoppel by record where orders from other legal cases arrived at are the basis to prevent parties to bring forward the cases to the court. These estoppels needs that the offended party should show together the inducement and detrimental reliance, this means that: There must be evidence to illustrate that the representor really anticipated the victim to take action on the representation or promise, or The victim must convince the court of law that it was sound for him/her to take action concerning the pertinent representation or promise What the victim did must either have been reasonable The victim did what the representor intended The victim might end up suffering a loss or damage if the represent or was given a chance to refuse what was said or done. The loss is determined soon after the relevant party refuses to keep his promise or not perform his duties as agreed upon. Promissory estoppels For promissory estoppels to be viewed as worthy there are elements that should stand out to make it as so which include a promisor and a promise. A promisor is the one who makes a promise reasonably expecting that to induce some action in the promise side. The promise hence expects and waits consideration be tackled by the promisor. Majority of courts will handle cases that relate promissory estoppel with the presence of the above elements but some cases will not however pursue this avenue unless other factors are put into light as to how this doctrine is to be sufficiently applied. As for Australian courts, this has been put into effect as effectively established in the law and hence to be applied by all courts. This doctrine was propelled more and began to be applied to settle disputes among parties.5 A further move was undertaken in the Australian law which is to applied in the instances which lack mutual agreement on the parties in disagreement to whom the cases are related with further consideration as promissory estoppels as being both a shield and sword, a matter which had held grounds ad it being only a shield to resolve conflicts but this issue is still subjected to numerous debates. In another case it was arrived at that if this doctrine is proven to prevail in that circumstance than this favours the plaintiff.6 Plaintiff was expected by equitable estoppel as stated in Walton’s Stores by Brennan J. that 1) The plaintiff presumed that there existed a mutual correlation with the defendant and the defendant is binds that relationship. 2) The defendant induces the plaintiff into the relationship. 3) There must be a breach on the site of the plaintiff contrary to the existence of the relationship. 4) The defendant must prove that plaintiff was aware of existence of the relationship. 5) The loss occurs as a result of breach of the relationship by the plaintiff. 6) The defendant was not in a position to prevent loss following the breach by the plaintiff. In line with the estoppels as per the Australian law there the element of unconsionability does come to light which is put into effect when one party makes the other through assumptions of his own rely that there is and will be a relationship to rely upon. Estoppels recently give the parties obligation that the law will oversee and hold both parties accounted to even without consideration even if there is no legal relationship to rely on that but that can only come into effect with existence of the following: Existence of a promise. The dishonest behavior of the one to perform the promise. Existence of a special relationship. No possibility of changing the situation that exists in relation to the one who will benefit from the promise that exists. Moreover promissory estoppels are made possible when false statements or utterances are made to the other party and that party relies on that utterance or statement in good faith as being true and hence to his or her advantage at the end of making that promise and performing his or her duty. The court at the end will make sure that some level of fairness or as such justice in relation to that statement which resulted from the promise which was made. Judges on making ruling are prompted to prevent statement denial by either parties, this referred to "promissory estoppel”. Being one of the doctrines of equity the promissory estoppel may serve in order to restrict a party in the exercise of an existing contractual right, it cannot, however, serve in order to create new obligations between the parties.7 In promissory estoppel a promise is legally binding as previously sated and as such the promise can use it as a defence in light evidence that the promise upheld and the one setting out the promise which does not uphold the original contractual rights that he had been held to perform.8 The cumulative requirements of promissory estoppel are that: (I) in an existing legal relationship a party makes a clear and unequivocal representation to another party, (ii) The representation is that the promisor's legal duties will not be forced upon or will be suspended, (iii) That there dependence on the promise by the promise and alters its position to its detriment and that (iv) The promisor seeks to withdraw the promise, and that this withdrawal is considered inequitable. The promise can be made expressly, including by conduct and even by silence provided that there is a duty to act.9 English courts seem to apply an objective standard in determining whether or not the promise was made clearly and unequivocally, as it is sufficient that the promise induces the promisee 'reasonably' to believe that the other party will not strongly persist in the enforcement of the legal rights that he can put forward as defence. Secondly, the withdrawal of such a promise will be termed of as 'inequitable', a test that requires the judge to consider all circumstances of the specific case, such as the commercial experience of the parties or other obligations they have to fulfill.8 In cases where there is need for fairness and reasonableness and demand that strict legal rights and 'normal' legal rules can, and should, be overridden, then promissory estoppels comes in when it relates to such cases. In this context, it is not so important whether or not that promissory estoppel is considered as part and parcel of good faith.10 Instead, the pivotal point is that it acts to resolve a conflict between strict law and justice as stated in English law. The same conflict is dealt with in German law, in relation to good faith in form of venire contra factum proprium (inconsistent behaviour) and Verwirkung (suspension of a right because it was not exercised timely). According to Denning J, a promise is one in which was made to give rise to some relationship which can be considered as law in the legal opinion and is apparent to the person making the agreement will be done by the person to whom he is making that promise. The courts will then put forward that the promise ought to be honored.11 The principle of promissory estoppel is based mainly on a promise created by the two relevant parties but two main problems have emerged. The first is whether the promise is compelled to have relied heavily on the promisor’s promise. It is very necessary in that any change of position made by the promise or the failure by the promisee to take action for his own protection will affect the agreement or by use of the correct context, the promise that they made. A second area where a problem arises is in relation to the effect of the representation. It is viewed differently as to whether the representation made by the promisor is sufficient to suspend or to extinguish his rights under the original obligations made to the respective parties. At common law, there is an irrevocable effect on the original contractual rights of that party but this does not stand if a reasonable notice is given.12 In a certain case a Rolls Royce chassis was ordered by the defendant from the plaintiffs for delivery on a specified date. The work was not complete by that date, to which the defendant agreed to wait for another three months, by which time, the chassis remained incomplete. The defendant gave proper notice to the plaintiff that if the chassis were not completed within four weeks he would not continue to pursue the agreement with him, which he did. It would be noted that since provision of the notice was made to the defendant must assured that the chassis would be available in two weeks. The decision of the Court of Appeal was that that defendant could not insist on delivery by the original contract date which had already passed, but had made time of very great importance by his notice requiring delivery within four weeks.13 Under the equitable doctrine of promissory estoppel, there are judicial statements which can suspend or make extinct the effect of the promise. In such an instance the promisor can have right to perform the original contract terms where this would only be extinguished to make another side track not possible. Lord Hudson ruled out a case where the owners of certain Lorries had let to the defendant the vehicles on a hire purchase type of agreement. The defendant could not get the vehicles services due to some difficulty experienced, with the result that the owners agreed to installments under the hire-purchase contract being withheld whenever the vehicles were not in use. These owners sought to revert to the original terms, requiring the defendants to pay all installments due. The owners’ claim was not defeated by promissory estoppel as there was no proof to show that the Lorries were not in use by the defendant. According to Lord Hudson the defendant’s final reaction was that having him changed his decision showed that there was lack of a notice of period suspension from the owners before handing over their petitions. In addition, since there was failure in taking back or not utilizing the Lorries the defendant could rely upon equitable defense. Further more the promise given in the letter dated 22 July was irrevocable. This however could be revocable if the Lorries were provided for service. Consequently, the court of law could not recognize the owners’ claim since the Lorries were unavailable.14 The principle of promissory estoppels is where one party agrees not to perform his duties as per a contract where the other party can enforce his rights with the use of equity found in the parties’ relationship. This equity must have certain qualifications such as: a party’s position alteration; refusal of the party that has made the promise to take up his obligations according to the promise given with notice given ahead of reasonable time which need not be formal but giving the promise enough time and chance to resume his position and the promise will become final if the promise refuses to resume his position.15 Equity As part of promissory the issue of equity does arise and hence the need to look into this in the simplest form. Equity is based mostly on Aristotle. According to him “For equity, it seen to be above and better than justice, but in essence they coincide though equity is ranked higher. Complexity in this arises where equity is the same as just and not anything that is just according to the law, but correcting of justice accorded by law.16” Equity is used to correct mistakes committed when applying common law to factual conditions not intended by the developers of principles of common law and statutes. Equity is developed towards defending against unconscionable behavior and hence a more moral and ethical backs it up as compared to it defending against fraud. Fraud is based on being untrue and it does not contain complex questions on morality. On the other hand, the idea of moral, that is, good or bad as found in the conscience is very complex. The doctrine of equity provides a lee way for the dependant to be heard well as opposed to common law which is rigid in itself. James LJ argues that Equity is a means that ensure every individual is give enough attention and have their story heard. It is the potentiality of the doctrine equity that has enhanced the liberty of the individual in the face of law. Promissory estoppel: sword and shield The case of Central London Property Trust set a precedent in the aspect using promissory estoppels as a sword or as shield. According to the words of Denning J., he seemed to think that all promises are binding with the sense that they are enforceable and should be acted upon.17 The inevitability of the judgment in the High Trees was a major set back. Denning L.J. himself in Combe v. Combe is one of the major significant undertakings which form the basis of many rulings on the spouse dispute.18 However, the doctrine is only accepted to be applied as a defense or as part of a cause of an action. It is viewed that the doctrine can be used as a “shield” but never as a “sword”. The differences between the use of this principle shield or sword has receive a lot of criticism. Enforceability of this principle is base on the reliance of the defendant or the promise of the plaintiff. The Reliance which is contained in the principle induces promise largely due its shortfall. The illustration of shield and sword can be clearly distinct by a case where plaintiff makes a gratuitous promise to sell a pool of share in he company. The defendant was to receive the entire share from the plaintiff. On realizing that the price of share was rising plaintiff attempted to breach the agreement. The court decision was to estopped the plaintiff from going back on his promise to the dependant. Conclusion It is primarily through the use of equity in cases that they are faced in terms of their own facts and the principles based on these cases so as to arrive at a reasonable solution which is fair in all honesty, on contested judgments. As such, the value of promissory estoppel and other equitable doctrines, so as much as it may be argued to have been first applied as a defense but is also acceptable to be use as evidence and suitably so in these recent times and arguably so as a means to put aside strict rules of the law and administer justice at the same time. Bibliography Books Beatson, Friedmann D. (1997). Good faith and fault in contract law. London: Oxford University Press. Elizabeth, C. (2000). The modern law of estoppels. London: Oxford University Press. Friedrich Kessler and Grant Gilmore. (1997). Contracts: cases and materials. London: Little, Brown. John Carter, David Harland and Kevin E. (1996). Contract law in Australia. Sydney: Butterworth. Helewitz. (2010). basic Contract Law for Paralegals, Sixth Edition. Adelaide: Aspen Publishers Online. Hudson Alastair. (2009). Equity and Trusts. Perth: Taylor & Francis. Peter, B. (2001). The theory of contract law: new essays. London: Cambridge University Press. Sean Wilken and Villiers Theresa. (2002). the law of waiver, variation, and estoppels. London: Oxford University Press. Sean Wilken and Theresa Villiers. (1998). Waiver, variation, and estoppels. London: J. Wiley. Maree Sainsbury. (2003). Moral rights and their application in Australia. Sydney: Federation Press. Michael, Joachim. (2005). An international restatement of contract law: the UNIDROIT principles of international commercial contracts. Brisbane: BRILL. Cases Central London Property Trust v. High Trees House. Retrieved May 13, 2011 from http://www.dpsd.unimi.it/fonti/1041.pdf. Insite law. Promissory Estoppel. Retrieved on 5/13/2011 from http://www.insitelawmagazine.com/ch6promestoppel.htm. Charles Rickards Ltd v Oppenheim. Retrieved May 13, 2011 from http://docs.google.com/viewer?a=v&q=cache:X4uN3AhMPvwJ:www.a-level-law.com/caselibrary/CHARLES%2520RICKARDS%2520v%2520%2520OPPENHEIM%2520%255B1950%255D%25201%2520KB%2520616%2520-%2520CA.doc+Charles+Rickards+Ltd+v+Oppenheim&hl=en&gl=ke&pid=bl&srcid=ADGEESiiqWMl2TfJLm_M1Z1kZ4uj2wowOD2X-mbVOdh1YIVA2Af1FuKSkEsrbxqgo063zBFpVc4s6np39Wp0tOAHclhedyDZHjWuYrM4Wx4Y5lyd8yKmr6GqmzFSFjCHLy4TiHQJNUjG&sig=AHIEtbRWFrngUnk9B-GUZ6yJFqVyGAFriQ&pli=1. Watson v. Canada Permanent Trust Co. (1972). Retrieved on 5/13/2011 from http://www.lawofcontract.co.uk/formation/options.php. Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd http://www.uio.no/studier/emner/jus/jus/JUR5260/v06/undervisningsmateriale/JUR5260%20Estoppelsp06.doc. Legione v. Hateley (1983) 152 CLR 406. http://netk.net.au/Contract/Legione.asp. EA Ajayi v RT Briscoe (Nigeria) Ltd. http://personal.cityu.edu.hk/~bsskcerc/education/teaching/10%20Con%20ContractsWeek4Consideration.pdf. Websites Adam Kramer. Contract law, the many doctrines of promissory estopppel. http://www.kramer.me.uk/adam/documents/AMK-%20SLR%20%282002%29%2037%20%2817-19%29%20The%20many%20doctrines%20of%20promissory%20estoppel.pdf. Law of contracts, retrieved on 5/13/2011 from http://www.kramer.me.uk/adam/documents/AMK-%20SLR%20%282002%29%2037%20%2817-19%29%20The%20many%20doctrines%20of%20promissory%20estoppel.pdf. Read More