Australian Law: Promissory Estoppel - Term Paper Example

?Promissory Estoppel al affiliation The purpose of this paper is to clearly show an understanding of promissory estoppel’s doctrine as applied in Australian courts. The project will therefore involve detailing facts about promissory estoppel based on Australian law. The project also involves a review of two case briefs involving promissory estoppel’s doctrine. The two cases included in the review are Collier V P&M J Wright and D & C Builders v Rees (Mulcahy & Tillotson 2004). The paper also shows how promissory estoppel was adopted in the Australian law. The case examples highlight important elements required for promissory estoppel to be applicable. Keywords: Promissory estoppel, detriment. Content Introduction…………………………………………………………………………. 3 Promissory estoppel………………………………………………………………….4 Collier v P&M J Wright (Holdings)…………………………………………………5 Collier v P&M J Wright case review………………………………………….……..5 D & C Builders V Rees………………………………………………………………6 D & C Builders V Rees case review…………………………………………………6 Conclusion……………………………………………………………………………7 References……………………………………………………………………………9 Introduction Estoppel in law implies to stop or bar a person from denying matters or truths that he/ she expressly or impliedly stated (Sharma 1994). Promissory estoppel can therefore be defined as legal doctrine that bars a person from making a promise and then withdrawing it at a time when a second party has reasonably acted upon the promise to their detriment (Spence 1997). If an individual makes a statement that causes a second party to act in a particular way, then that person will be “estopped” from denying the truth (Spence 1997). In order for promissory estoppel to hold, the promise or statement made must be reasonable. The statement must also be unequivocal; meaning that there is no element of ambiguity in it. In Australian law, the doctrine holds even if the parties did not have any preexisting relationship. The doctrine stipulates that it is necessary for the promisee to act to their detriment for it to hold. Promissory estoppel was established back in the 19th century in the English Law Courts. The case involved Metropolitan Railway Co v Hughes in the year 1877 (Cartwright 2006). The doctrine is especially important to the business world since it ensures that individuals are compensated if they incur losses when they act based on promises delivered by others. Australian law adopted promissory estoppel doctrine in the case of Legione v. Hateley, 1983 (Nolan 2000). In that case, the plaintiff had sued the defendant after he rescinded the contract on sale of land, which had already come to pass. The plaintiff had asked for more time to pay the balance he owed. Promissory estoppel usually applies in business dealings. It is meant to protect those who act upon statement and promises and in the process experience a disadvantage or detriment. In Australian law, the doctrine is enforceable under certain conditions. These may include dishonesty from the person who makes a promise, presence of a contractual relation between individuals, or where a person has duty of information. It is important to note that there are some limitations on the doctrine of estoppel. As mentioned earlier, the doctrine holds only when the statement or promise made is of a factual nature. The other limitation is that the doctrine does not hold for promises meant to be fulfilled in the future (Cartwright 2006). Promissory estoppel In simple contracts, a person may be able to break an agreement and cause injury to others. This doctrine ensures that the promisee is held liable for his words. Promissory estoppel cases arise only when certain elements can be clearly identified in the court of law. These include responsibility, assumption, factual matter, reliance, intent, detriment and unconscionability. The element of assumption specifies that the plaintiff must have assumed certain facts as influenced by the defendant. The defendant must the one responsible for causing the assumption. In addition, the assumption must be unequivocal. The assumption made must be enforceable by law. Assumptions which may not be actionable by law may not hold. Reliance stipulates that the plaintiff must have based his actions (or lack of) on defendant’s words (Handley 2006). In order to hold, the defendant must have relied on a reasonable assumption from the defendant. Also, there must have been intent from the defendant for the plaintiff to rely on the assumption. Unconscionability is also considered. This is a situation whereby one party may suffer significance loss based on certain outcomes (Handley 2006). Lastly, the plaintiff must have acted, based on the defendant’s assumptions, to their detriment. This involves incurring an economic or financial loss. It is possible for the promisor to withdraw the promise made provided that there was ample time when the notice is given. However, if the promisee had already acted upon the assumptions when the notice is given, the doctrine still holds. The promise made may either be expressed or implied (Pyke 2013). The following case laws illustrate promissory estoppels. Collier v P&M J Wright (Holdings) This case concerns the promissory estoppel doctrine. In this case, Mr. Collier was in a partnership with three other persons. The partnership involved property development. The three had lost a court case in which they were required to pay a debt amounting 46,000 pounds in installments to Wright Ltd (Baker 2008). The three partners were jointly liable for the payment of the debt. After making several installments, Mr. Collier’s partners went bankrupt and hence could not be able to make further payments. Mr. Collier then claimed that Wright Ltd had promised that if he paid a third of the total amount owed, he would not be further pursued for the remaining debt. According to Mr. Collier, Wright Limited would only pursue the other two partners. Mr. Collier managed to pay his share of the debt, which was a third of the total owed (Baker 2008). However, Wright Ltd still pursued Mr. Collier for the outstanding amount. Wright Ltd brought the matter before the court seeking for whole settlement of the debt (Baker 2008). Promissory estoppel is applicable in this case. Wright Ltd had made an assurance that it would not pursue the remaining part of the debt, on the condition that Mr. Collier paid a third of it. Mr. Collier had paid a third of the debt relying on the assurances that he would not be sued (the detriment) for the balance. Wright Ltd in doing so had therefore accepted to receive a lesser payment from Mr. Collier, maximum of which would be 15,600 pounds. It is not fair that Wright Ltd resign on the promise that it had made to the defendant. Wright Ltd had to be held liable for the promise it made to Mr. Collier. The promise made was clear and unambiguous. It was also reasonable for the defendant to rely on the promise made. It is clear that Mr. Collier acted based on the promises made by Wright Ltd. It might also be argued that Mr. Collier, relying on the promise given, refrained from seeking more money once he was able to raise a third of the total required. Wright Ltd was therefore not right in pressing charges for the full amount. It is also clear that Wright Ltd intended Mr. Collier to act on the promise and pay only a third. Resigning the contract would be inequitable. D & C Builders V Rees Rees was a shop owner who had commissioned D & C Builders, the plaintiff, to do some renovation work on the shop he operated. The company completed the task which they charged 746 pounds. They gave Rees the bill plus a discount of 14 pounds. Rees settled paid part of the total amount, 250 pounds, and promised to pay the debt later. The company was in dire financial need at the time and for this reason contacted Rees several times requesting for the payment of 482 pounds. There had been no complaints of poor workmanship (Mulcahy & Tillotson 2004). When the company contacted Rees over the telephone, he objected to settling the whole debt arguing that there was poor workmanship and that he could only pay 300 pounds in settlement of the whole amount owed. The company objected this and instead agreed to take the 300 pounds and give Rees a year to settle the remaining debt. When it was time to collect the money, Rees insisted that he would only pay the 300 dollars or nothing at all. Further, he insisted that the receipt be written “in settlement of the debt”, or he would pay nothing. Due to the dire need of money, he reluctantly agreed to take the sum offered but stated that his intent was to pursue the whole amount owed. Afterwards, the company sued Rees for the balance. Rees sought to rely on promissory estoppel’s doctrine on the case, arguing that the receipt was proof of the plaintiff’s promise to accept a lesser amount. The defendant lost the case (Mulcahy & Tillotson 2004). Promissory estoppel principle could not hold in this case. This is because there was no true agreement between the plaintiff and the defendant as to accept settlement of a lesser amount. Rees had taken advantage of the fact that D & C Builders was in a difficult financial situation. Even though the plaintiff wrote the receipt stating that it was in full settlement, it was clear that he wanted the full amount. There was no assumption created on the mind of Rees that the company was willing to accept a lesser amount. Therefore, promissory estoppel could not hold in the case. In order for promissory estoppel to hold, both the element of reliance and intent must be fulfilled. It is clear that Rees had not relied on any assumption. Also, it was not the intent of D & C Builders that Rees acted on the assumption. D & C Builders accepted the part payment under pressure from Rees. There was no clear promise on the part of D & C Builders not to receive the whole amount of the amount owed. Promissory estoppel is primarily relies on the promise made by the promisor to the promisee who acts upon it for his detriment (Helewitz 2010). In this case, there was no detriment experienced by Rees. The doctrine requires that the promise made be unequivocal. However, the promise made in the case was not unequivocal since it stated that D & C Builder’s intent was to collect the full amount. Conclusion Promissory estoppel is a doctrine that prevents people from going back on promises they had made which could have resulted to loss on others who acted upon the promises. It is immaterial whether the promise made was true or false (Helewitz 2010). In order for the doctrine to hold, there must be an unwarranted promise made by the promisor (Graw 2011). The promise made must have caused the promisee to either act or result to forbearance of some action. The doctrine also requires that the promise made be reasonable, and unambiguous. If the promisee relies on the promise made and suffers a substantial detriment, then he can be able to recover the loss suffered using the promissory estoppel doctrine. Promissory estoppel is enforced in circumstances where the detriment or loss can only be avoided through an enforcement of the promise. It is important to note that the doctrine is not extended to future promises. The assumptions made must be within law otherwise the doctrine may not hold (Graw 2011). The above case reviews help shed light on concerning the doctrine. In the first case review, promissory estoppel was used as a shield. Wright Ltd had already made a promise to Mr. Collier that he would only be required to settle a third of the debt owed. Promissory estoppel prevented the company from going back on its word. In the second case review, promissory estoppels could not hold simply because there was no promise or clear agreement between the two parties involved. Promissory estoppel was established to counter the rule that was in place requiring that a consideration be present in all kind of contracts (Nolan 2000). This rule enabled people to break their promises at will causing losses to others. It was therefore necessary to establish the doctrine so as to protect individuals from loss occasioned by people going back on their promises. The courts may employ objective tests in determining whether the plaintiff reasonable relied on the promise (Blum 2007). Promissory estoppel may be used to permanently hinder the promisor from receiving the full sum in cases where part-payments have been made (Nolan 2000). In case of periodic payments, the doctrine is only used to postpone payments until it is right for the promissory to claim the remainder. References Baker, Austen, R 2008, ‘A strange sort of survival for Pinnel's case: Collier v P & MJ Wright (Holdings) Ltd', Modern Law Review, vol. 71, no.4, pp. 611-620. Cartwright, John 2006, ‘Protecting Legitimate Expectations and Estoppels in English Law’, Electronic Journal of Comparative Law, vol. 10, no.3, pp. 23-32. Graw, Stephen 2011, An introduction to the Law of Contract, Thomson Lawbook Co., Australia. Handley, Kenneth 2006, Estoppel by Conduct and Election, Sweet and Maxwell, United Kingdom. Mulcahy, L & Tillotson, J 2004, Contract Law in Perspective, Routledge, London. Nolan, Donal, K 2000, ‘Following in their footsteps: equitable estoppel in Australia and the United States’, King’s Law Journal, vol. 53, no.3, pp. 87-95. Spence, Michael 1997, ‘Australian Estoppels and the Protection of Reliance’, Journal of Contract Law, vol. 11, no. 3, pp. 200-220. Sharma, Kumar L 1994, Doctrine of Promissory Estoppel, Deep & Deep Publications, India. Blum, Brian A 2007, Contracts: Examples and Explanations, Aspen Publishers, London. Helewitz, Jeffrey A 2010, Basic Contract Law for Paralegals, Aspen Publishers, London. Pyke, James 2013, A-Z of Civil Litigation, Sweet and Maxwell Ltd, United Kingdom. Read More