Application of the Doctrine of Promissory Estoppel in Contracts - Essay Example

Application of the Doctrine of Promissory Estoppel in Contracts Generally speaking, all promises or agreements entered into by parties are contractually binding on both parties only if supported by a consideration. Consideration in this case implies that each of the parties to the contract must either receive or be promised something in return for letting or promising something1. Consideration is important in a contract since it ensures that only bargains, rather than promises are binding on the parties. This implies that, if X promises something to Y, Y cannot proceed to enforce the promises since Y has provided no consideration for the promise. In other words, a consideration is the benefit to the promissory. Although contracts are only binding on the parties when they are supported by a consideration, the English law allows a person to desert his/her promise to another without recourse. Nevertheless, there have been many incidences where persons end up claiming back their rights after deserting such rights by making promises to the other parties to a contract. Therefore, to help the promisee in such situations, the doctrine of promissory estoppels was developed to prevent people from claiming back the rights they had waived by promising the party to the contract that they are no longer willing to receive consideration either partially or in full in return for making such a move2. In plain, the doctrine of promissory estoppels requires that the promisor must be true and faithful in making a promise. Accordingly, the doctrine bars the promisor from changing the promise that he or she had made to the promisee. Therefore, from the definition, it can be stated that the promissory estoppel acts as an alternative to consideration. This is because, instead of having to provide a consideration for the contract to be enforceable, an aggrieved party can argue promissory estoppel as a defence for a promise made by the promisee in a contract. This is because the doctrine of promissory estoppel prevents the person who has made a promise to reclaim the gratuitous rights that they had given back. In this regard, promissory estoppel doctrine offers an effective defence to an aggrieved promisor in the event that the promisee breaches their promise by reclaiming initial terms of the agreement. This is because the doctrine makes a promise binding to both the parties to the promise without the need of consideration3. Nonetheless, some legal experts have argued that, as much as equitable promissory estoppel can offer effective defence in a contract, the doctrine cannot offer the same defence in the absence of a consideration to enforce a gratuitous representation. The argument is made in reference to the fact that promises are only enforced when they are supported by consideration4. A consideration as earlier stated is the benefit given in return for the promise. This may include things, such monetary benefits, and things in kind or interests. Therefore, the doctrine of promissory estoppels can be effectively used to assist a debtor whose debt has been gratuitously forgiven by the creditor. In this regard, once a creditor has promised to forgive the debt of his debt, the court will stop the creditor from changing his mind and demanding the debt once again from the debtor. This is because the creditor has given a promise that the debtor has relied on for some time. However, the extent to which the debtor would be assisted by the promissory estoppel doctrine would largely depend on the debtors ability to prove the various elements of promissory estoppels. Firstly, the debtor would have to prove that an assumption was created on his mind by the creditor of deserting his right to receive money for the debts owed5. Accordingly, it does not matter whether the assumption is created by representation or express promise. As such, if the debtor is able to prove that an assumption was created by the creditor of forgiving his debt, then the courts would bar the creditor from claiming back his right to the debt as was seen in Di Lione v Turco case. In Di Lione v Turco case, a vendor relied on the false statement of a prospective buyer who said that he had obtained money6. The vendor went ahead and incurred expenses based on the buyers falls statement. When the buyer attempted to avoid the promise he had made to the vendor, the court prevented him from doing so. The court stated that the buyer had to fulfil his promise since he had created an assumption, which the vendor relied on and incurred expenses. Therefore, because the creditor appears to have created an assumption that he has gratuitously forgiven the debtor of his debt, the courts would prevent the creditor of reclaiming his right in case the creditor changes his mind. Secondly, the doctrine of promissory would only assist the debtor in his current situation only if he can prove the existence of unequivocal conduct. In this regard, the creditor will get recourse if he can prove that the creditor made an unequivocal statement that created the assumption. Otherwise, the promissory doctrine will not aid him in any way as was in the case of Central London Property Trust Ltd v High Trees House Ltd [1947]. In this case, the claimant a landlord let his flats to the defendant (tenant) in 1937 for a 99-year lease at £2,500 annually7. As World War II was first approaching, many people were deserting London in fear of the war. As a result, the tenant was unable to sub-let the flats. In January 1940m, a discussion was organized between the directors of the landlord and the tenant companies. The deliberations resulted in a deal where the parties agreed that the rent be reduced as from the date of the lease was commenced to £1,250 annually. In September the same year, the representative of the landlord realized that the lease price was initially agreed at £2,500. As a result, he immediately wrote to the defendant demanding that the defendant pay the full lease amount for the future including arrears. Lawsuit was filed as a consequence to test the law with regards to the matter in which £2,500 amount that was in arrears plus £625 was claimed. Judge Denning J ruled that the promise made by the claimants representatives to accept less rent during war-time was binding, despite there being no consideration. Accordingly, the debtor in the case will get help through promissory estoppel by relying on this ruling. Otherwise, it would become difficult for the debtor to use promissory estoppel as a defence against the any inconsistent move that a creditor might make in breach of the promise. Failure of the debtor to prove unequivocal conduct would, however, make it difficult for the debtor to get assistance from promissory estoppel as was in the case of Legione v. Hately (1983). This case involves the sale of land in which the buyer was unable to complete by the date agreed8. The buyer went ahead to request an extension of settlement dates from the vendors solicitor, which was accepted. When the vendor requested for the balance of the buying price, the buyer relied on the agreement made with the solicitor, citing that the money was not yet ready. By adopting the High Trees authority, the HCA stated that the estoppel doctrine can exist if there is a clear representation even in situations where the representations are merely a promise. Accordingly, the judges handling the case ruled that there was no ground for estoppel and relief for forfeiture. This implies that, for the debtor to succeed in getting recourse through promissory estoppel, the debtor would have no option, but to prove the existence of unequivocal conduct. The promissory estoppel can also be used to aid the debtor if the debtor is capable of proving that it would be unconscionable to allow the creditor to do so. There is no general rule under the English law that prevents a person from breaking his promise9. This implies that a creditor can break his promise to the debtor by reclaiming the payment of the debt that he had gratuitously forgiven by making a fresh demand. However, the debtor can get recourse from such change of mind by the creditor by proving to the court that such a change of mind is unconscionable. For instance, it is clear that, since the creditor has agreed to forgive the debtor of the debt owed, changing mind and making a fresh demand for the debt would inconvenience the debtor. This is because the debtor had forgotten about the debt. Accordingly, forcing the debtor to look for money to pay the debt would be unjust and unfair. As such, the promissory estoppel can be used to prevent the creditor from going back to the initial promise by proving that allowing the creditor to do so would be not only unfair, but also unconscionable. The promissory estoppel doctrine can also be used to aid the debtor if the debtor can show detriment. In other words, the debtor would only receive assistance through promissory estoppel in the event that the debtor can show that he would suffer detriment by relying on the promise. This implies that the debtor must demonstrate that he would be in a pathetic situation in if the creditor is allowed to go back to demand the debt, which he had promised to gratuitously forgive as was in the case of Devecmon v. Shaw10. In this case, the complainant travelled to Europe upon relying on his uncles promise that he would be reimbursed for the expenses incurred. When the uncle refused to reimburse the travelling expense to the plaintiff, a lawsuit was filed, which was admissible as the court established that the mere fact that the trip benefited the plaintiff was irrelevant. Accordingly, the court ruled for the plaintiff, citing that the complainant had detrimentally relied on his uncles promise. The court evidently ruled for the plaintiff because allowing the defendant not to reimburse the plaintiff would result in monetary loss. Therefore, the best way to put the plaintiff in his original position was to compel his uncle to fulfil his promise, which the plaintiff relied on before travelling to Europe. As such the promissory estoppel made the promise enforceable. Similarly, the doctrine of promissory estoppel would aid the debtor if the debtor can prove that he would suffer detriments if the creditor fails to fulfil the promise. The promissory estoppel doctrine can also be used to aid the debtor in the event that the creditor fails to fulfil the promise in the sense that the doctrine is easy to satisfy. This is because the promissory estoppel is a doctrine that binds an agreement without necessarily having to provide a consideration11. For instance, a consideration is usually difficult to satisfy because it must be sufficient. The doctrine of promissory estoppel, hover, is easy to fulfil since its requirements are well-defined. Therefore, the doctrine will aid the debtor by ensuring that the creditor is compelled to stick to the promise made without necessarily demanding a consideration from the debtor. Lastly, the doctrine of promissory estoppel can effectively be used to aid the debtor in the event that the creditor acts inconsistently to the promise by proving that they had a contractual relationship. Normally, in order to succeed in proving promissory estoppel, the aggrieved party must prove that there was a contractual relationship at the time the promise was made12. Indeed, according to the statement, it becomes clear that the debtor had created a relationship with the creditor by buying goods on credit. As such, the doctrine of promissory estoppel can effectively be used as a defence on the part of the debtor by showing that they had a binding contractual relationship. In conclusion, promises or agreements entered into by parties are contractually binding on both parties only if supported by a consideration. Consideration means that each of the parties to the contract must either receive or be promised something in return for letting or promising something. These might be monetary benefits, interests or benefits in kind. Accordingly, any promise not supported by a consideration cannot be enforced under the English law. However, the concept of promissory estoppel was developed to protect people from dishonest promisee who give promises in a contract and later withdraw the promises. Accordingly, the doctrine of promissory estoppel stops people from claiming back the rights they had waived by promising the party to the contract that they are no longer willing to receive either partially or in full their rights without consideration in return for making such a move. Therefore, although the doctrine of equitable promissory estoppel does not constitute a cause of action in the absence of a consideration to enforce a gratuitous representation, the doctrine can be used effectively to assist the debtor in case the creditor breaches the promise of gratuitously forgiving him the debts owed. This is because the doctrine will prevent the creditor from not honouring the promise he made to the debtor. However, the extent to which the debtor will have recourse will largely depend on the debtors ability to prove the existence of various elements of the doctrine. The elements include the existence of unequivocal promise, that the promisee acted on the promise and that the promise in unconscionable for the creditor to act inconsistently with his promise. It is only after proving the existence of these elements that the debtor would be protected in the event that the creditor acts inconsistent to the promise he had made to the debtor. Otherwise, the debtor would not get any recourse if the creditor breaches the promise. Bibliography A Kramer, The Many Doctrines of Promissory Estoppel’ Student Law Review (2002) Volume 37, 1-26. B. A. Blum, Contracts: Examples & Explanations (Aspen Publishers Online, London 2007) L Steyn, ‘Contract Law: Fulfilling the Reasonable Expectations of Honest Men’ (1997) 113 LQR 433. M Hogg, Promises and Contract Law: Comparative Perspectives (Cambridge University Press, Cambridge 2011). S Emanuel, Contracts (Aspen Publishers Online, London 2006). Read More