Definition of the Doctrine of Promissory Estoppel - Essay Example

If A Creditor Promises To Accept A Smaller Sum In Full Settlement Intending The Debtor To Rely On That Promise, And The Debt Or Does Rely On It, The Debtor May Have A Defence Of Promissory Estoppel When Sued For The Balance By The Creditor Table of Contents Introduction 3 Discussion 3 Definition of the Doctrine of Promissory Estoppel 3 Definition of the Doctrine of Consideration 4 Relationship between Doctrine of Promissory Estoppel and Doctrine of Consideration 5 Justification of Enforceability of a Creditor’s Promise As per the Above Quotation 7 Conclusion 11 References 12 Introduction A contract is generally made between two or more parties with taking into concern their interests and having appropriate relating terms and conditions mentioned in it. Contract can also be considered as a promise made by one party to the other, wherein each of the parties is liable to enjoy both the benefits as well as detriments associated with the same. However, a promise without a proper consideration amid the parties involved will not be considered to remain enforceable legally. In such scenario, the contract or the promise will only be analysed under the legal tool of promissory estoppel. However, it can be clearly observed that there are exceptional cases wherein contracts have been enforced under law, despite the absence of proper or visible consideration amid the two parties1. Contextually, in order to depict a comprehensive understanding, this paper would analyse a particular quotation in order to depict relevancy amid promissory estoppel and consideration and how they could be replaced with one another in legal terms. Discussion Definition of the Doctrine of Promissory Estoppel As per legal norms, a promise can be stated to be enforceable under law only when a particular individual or a promisor conveys a promise to the promisee, where he/she is affected from the words or the statements of the promisor detrimentally. Notably, an individual who makes a promise is termed as a promisor in legal scenario, while a person who receives the promise is known as promisee. Contextually, a promissory estoppel is a lawful approach, which intends to hinder a promisor from denying his/her statements or words that have been conveyed to a promisee. This is often viewed as a legal doctrine, which is being used in various nations of the world in order to deal with the scenarios that are associated with the violation of promissory contract. Observably, a promissory estoppel will allow a party or a promisee to recover compensation or any other remedy from that of the promisor. As per legal norms, owing to promissory estoppel, the promisor will not be liable to demand or argue for upholding his promise2. Definition of the Doctrine of Consideration Consideration is a particular approach or an act of ‘forbearance’ or a promise of one party for which a price (might not necessarily be in financial terms) is paid to the other party (promise is bought), further making the promise enforceable under legal norms. Observably, consideration is one of the most vital components of any form of contract and in the absence of it, a particular contract will not be enforceable under law. Consideration is also stated as a declaration of promise of one party to the other, wherein the promise is supported by a good motive and the promisor will be bound to fulfil his promise at a certain stage. Apparently, a consideration is not only needed in newly formed contracts but its presence can also be ensured to make the contract valid as per legal norms3. Relationship between Doctrine of Promissory Estoppel and Doctrine of Consideration Apparently, a promissory estoppel is a particular approach, which prohibits a promisor from denying his/her promised statements or words. On the other hand, a consideration is a particular element of any contract where one party made a promise to the other by paying a particular price (might not be in financial terms), which further validate the terms and conditions of the contract. This means that a contact becomes legally binded and valid when the aspect of consideration is involved in it. The relevancy of both the doctrines amid each other can be analysed with the quotation of Lord Denning i.e. “If a creditor promises to accept a smaller sum in full settlement intending the debtor to rely on that promise, and the debt or does rely on it, the debtor may have a defence of promissory estoppel when sued for the balance by the creditor. The promise will in this way be enforced despite the absence of consideration to support it.”4 The above quotation depicts that if a creditor promises to pay a sum of money to a debtor towards full settlement of any particular contract, the debtor will be liable to claim for promissory estoppel despite of the absence of a consideration in the contract. In this regard, the creditor acts as a promisor, while the debtor acts as a promisee. The promisor as per this particular quotation wishes the debtor to believe or validate his/her contract owing to the aspect that the promisor is agreed to pay a sum amount to the promisee towards full settlement of the contract. Though it is a particular promise made in the presence of the payment of a particular sum, a proper consideration is apparently absent in this particular contract. However, the quotation above depicts that the promise of the creditor or the promisor is legally enforceable and the promisee or the debtor will be liable to enjoy the benefit of promissory estoppel despite of the absence of a proper consideration. This particular quotation depicts the relevancy prevailing between promissory estoppel and consideration. In legal terms, the doctrine of consideration and promissory estoppel are identified to be quite different aspects altogether. The definition of consideration explains that the way parties bargain amid each other with regard to the terms and conditions of the contract are liable towards attaining significant benefits as well as experiencing the disadvantages associated with the contract. It primarily involves the exchange of promises amid the parties. On the other hand, promissory estoppel is a particular doctrine wherein the parties involved make formal promises that further hinders each of the parties involved to deny their respective statements. However, the similarity between the two doctrines can be understood on the basis that promise is the foundation of both the doctrines. Both consideration as well as promissory estoppel is enforceable in law at the time when a particular promise is conveyed by one party to another and vice versa. Both the doctrines intend to prohibit the parties from conducting fraudulent activities. Again, a promise might not simply form a contract owing to the absence of consideration from both the parties. However, the legal tool of promissory estoppel will hinder any of the parties to deny his/her statements. Again, when one party makes a particular promise to the other wherein a party accepts the promise and conveys another promise in return to the opposite party, a consideration is deemed to be made. This scenario will further mean that both the parties involved in the contract agreed on each other’s terms and condition and their approach towards the same will be binded legally5. Contextually, the above quotation depicts that a creditor has already made a promise to a debtor about paying a sum towards full settlement of a contract. The creditors generally insist the debtors to rely on the promises made and act accordingly. Furthermore, the debtor believing in the promise of the creditor affirms the deal and considers the promise of the creditor towards full settlement. This aspect depicts that both the parties agreed on common terms with regard to reach a conclusion for their contractual relation. This aspect further portrays the formation of an unsaid consideration, which further makes the contract to be a legally enforceable one. This aspect also reveals that the promissory estoppel can be replaced with a consideration, further making a contract a valid one. This aspect can be made visible in the landmark case of Central London Property Trust Ltd v High Trees House Ltd6. Justification of Enforceability of a Creditor’s Promise As per the Above Quotation It has been stated earlier that in legal terms, a contract cannot be considered valid and legally enforceable until and unless a proper consideration is made. In case a consideration is not made amid the two parties involved, the contract will not be considered a valid and an enforceable one under legal terms. In such scenario, the promise made between the two parties will only be considered under the law of promissory estoppel and benefits will be conveyed accordingly. This aspect can be better understood from the case of Central London Property Trust Ltd v High Trees House Ltd. This was a particular case relating to the ‘English contract law’, wherein the doctrine of promissory estoppel was reaffirmed as well as extended in the contract law. In this particular case, both the parties i.e. Central London Property Trust Ltd and High Trees House Ltd agreed on reducing rent owing to the decrease in demands of the flats that were provided by the former to the latter. In the contract, the time up to which the reduced rent would be accepted by Central London Property Trust Ltd from High Trees House Ltd was not mentioned. However, when the flats began to fill after five years, Central London Property Trust Ltd sued High Trees for not paying full rent in the last two quarter of 1945 despite full occupancy. The decision of the court in this regard was made on the basis on promissory estoppel since no consideration was made in the initial contract between the two parties with regard to the tenure, until which the reduced rent was to be paid. This shows that consideration is vital in the initial stage of a contract to make it legally enforceable7. In the quotation, it is quite clear that the involved parties do not move into a consideration in the initial phase of contract formation. This can be justified with reference to the notion that the creditor will pay a sum to ensure a full settlement of the contract. This aspect further depicts the quotation to be unjustifiable, wherein a consideration was not made by the parties while initially forming the contract. This aspect relating to the importance of proper consideration in the formation of a valid contract was also present in the case of Thomas v Thomas (1842), 2 QB 8518. However, on the other hand, there lay certain exceptional scenarios wherein despite the absence of direct consideration, contracts have been made valid and legally enforceable. In this regard, the case example of Ward v Byham [1956] 1 WLR 496 will be crucial to be considered. In this particular case, the women of the unmarried couple agreed to look after the child provided the condition that she would keep the child happy. The father agreed to pay a sum of money on a monthly basis. However, after the women got married, the father or the man of the unmarried couple stopped making the payment on the ground that the woman was not properly looking after the child and hence a consideration was not made for payment in such scenario. However, the court decided that the women had gone beyond her legal responsibilities to ensure the wellbeing of the child and a consideration was made indirectly. The provided scenario in the quotation can also be judged in this particular context. As per the quotation, the creditor has gone a step further to ensure the complete settlement of his/her contractual term with the debtor. Since the creditor intended the debtor to rely on his/her promise, a consideration is deemed to have made. Hence, this aspect justifies the aspect that a promise is enforceable legally amid the two parties despite of the absence of a proper consideration. Again, in order to add depth to this particular stand, the case example of Williams v Roffey Bros & Nicholls (Contractors) Ltd will also be crucial to be considered. In this particular case, Roffey Bros contracted with Mr Lester Williams to refurbish 27 flats at an agreed amount of 20,000 pounds. However, in the middle of fulfilling the contractual terms, Williams ran out of money owing to fact that the amount paid by Roffey Bros was too less. In the later context, Roffey Bros was promised to pay an extra amount of 575 pounds for each flat. Owing to this particular promise, Williams began the work but stopped in the later stage as he was still to be paid the extra promised amount. Roffey Bros claimed that Williams was liable to get payments only for only the eight flats that he had refurbished after restoring the work for the second time. It is quite apparent in this particular case that Roffey Bros made the consideration of paying an extra amount owing to the pressure that the work will not be completed on time if they deny to do the same. However, the court of law depicted that Roffey Bros was aware that the payment made to Williams as per the iniquity contract was quite low and hence decisions have been made to pay the extra amount9. Therefore, the judgment was made in favour of Williams. Contextually, as per the scenario mentioned in the quotation, it can be assumed that the debtor has agreed to accept a sum of amount from the creditor, as the debtor was aware that the creditor was not capable to fulfil all the terms and conditions of the contract. Therefore, the debtor has made an indirect consideration, which further made the promise enforceable legally. Conclusion From the overall analysis, it can be comprehended that both consideration and promissory estoppel are different from each other with regard to legal terms. A promise in a particular contract might not be legally enforceable if it lacks the presence of a proper consideration made amid the two parties. In such scenario, the application of a promissory estoppel is justifiable. However, the given quotation of Lord Denning suggests that a promise can be enforceable despite the presence of direct consideration amid the two parties involved. It can be apparently observed from various cases that an indirect consideration amid the parties involved made promises legally enforceable. In similar context, this particular quotation can also deemed to be justified owing to the scenario that the debtors rely on promises made with regards to the settlement of the contractual terms. Hence, this aspect eventually makes a contract or a promise amid the two parties legally binded. References E-lawresources, ‘Central London Property Trust v High Trees House [1947] KB 130’ [No Date]. (Home) < http://www.e-lawresources.co.uk/Central-London-Property-Trust-v-High-Trees-House.php> (accessed 04 March 2014). E-lawresources, ‘Williams v Roffey Bros [1990] 2 WLR 1153’ [No Date]. (Home) < http://www.e-lawresources.co.uk/Williams-v-Roffey-Bros.php> (accessed 04 March 2014). E-lawresource, ‘Contract Consideration’ [No Date]. (Home) < http://www.e-lawresources.co.uk/Ward-v-Byham.php> (accessed 04 March 2014). E-lawresource, ‘Ward v Byham [1956] 1 WLR 496’ [No Date]. (Home) < http://www.e-lawresources.co.uk/Consideration.php> (accessed 04 March 2014). Jill Poole, Casebook on Contract Law. (Oxford University Press, 2012). Lawnix, ‘Promissory Estoppel and Detrimental Reliance’ [2013]. (Home) < http://www.lawnix.com/cases/promissory-estoppel.html> (accessed 04 March 2014). Ng Chi Yan, ‘Does the Doctrine of Promissory Estoppel Alleviate the Unfair Effect of Consideration?’ [2014]. (Academia) < http://www.academia.edu/2301115/Does_the_Doctrine_of_Promissory_Estoppel_Alleviate_the_Unfair_Effect_of_Consideration> (accessed 04 March 2014). Read More