Principles of Contract Law - Case Study Example

Contract Law Introduction Is a mere promise enforceable as a cause of injustice? Promissory estoppel is a doctrine in which a non-contractual promise, lacking consideration, is rendered enforceable, to avoid an injustice as in the case of Peoples Nat. Bank of Little Rock vs. Linebarger Const. Co ., 240 S.W.2d 12, 219 Ark. 11 (Ark. 1951). A promissory estoppel applies, where a promisee relies on a nonbinding promise made by a promissor, which would otherwise be unjust if not enforced. The doctrine is common in charitable activities context, in which reliance on the promise is not always a necessity. It arises as a legal inability of the person, who made a promise to deny it, when an injustice can be avoided only by enforcement of the promise; which would otherwise be unenforceable for lack of consideration. It thus hinders a party, from revoking a promise he/ she made to another, who reasonably relied on it. Discussion Invocation of promissory estoppel, relies on three major elements. To start with, if a party by his words or conduct, makes a promise, which he reasonably expected to induce action or forbearance of substantial character on the part of the promise; with the intention of creating a legal relationship, the doctrine holds as was in the case of Central London Properties Ltd. Vs. High Trees House Ltd., [1947] K.B. 130. Secondly, the doctrine holds, if the promisee reasonably relies on the promise. This means that the promise did in fact, induce action or forbearance, as was held in the case of Hoffman Vs. Red Owl Stores, Inc. 26 Wis.2d 683, 133 N.W.2d 267 (1965). It also holds if, from action or forbearance, promisee suffered economic loss. However, the detrimental loss suffered is not a necessity, as in the case of Alan & Co vs. El Nasr (1972), and as such, a plaintiff or the promise, ought to prove that upon reliance on the promise, his position changed. Most importantly, from its origin, “waiver,” the doctrine of promissory estoppel is regarded as an equitable doctrine. As such, it must be evidently inequitable, for a promissor to go back on a promise he/ she made, before applying the doctrine. In effect, this element covers certain contexts, in which promisee takes advantage of the promissor, by extracting a promise as was held in the case of D & C Builders vs. Rees (1966). In such cases, the judge must evaluate whether it is just to enforce the promise. A promise may be limited by time. In regards to this, a promissory estoppel as opposed to a contract modification, supported by consideration, is not of permanent effect. As was held in the case of High Trees, where the promise last only during the world war and initial terms of contract revived thereafter, it is evident that a promise can only be viable for certain duration of time. In other circumstances, a promissor giving prior reasonable notice, may revoke the promise made. Evidently, promissory estoppel is generally suspensory in its effect. This was held in the case of Tool Metal Manufacturing Co. Ltd vs. Tungsten Electric Co. Ltd (1955). However, the docrine may instead of delaying the enforcement of rights, ban them. Application of promissory estoppels may be limited, if a promise is prohibited by legislation. As was evident in the case of Evans vs. Amicus Healthcare Ltd (2003) EWHC 2161,(2003) 4 All E.R. 903, promissory estoppels was not created since the assurances made by the man were not sufficient, as he was allowed by legislation to withdraw his agreement as to the storage of the embryos, whenever he felt the need to. A promise without necessary having a consideration will, successfully enable a plaintiff, to recover damages on the basis of promissory estoppel. This is so because, it is a shield and not a sword, which seeks to provide protection for the promisee. This was held in the case of Combe vs. Combe (1951). Estoppel is a preclusion of a person, to deny anything, to the contrary of that which has been lawfully established as the truth; expressly or implied by his deeds or judicial acts. In essence, promissory estoppel helps prevent parties from withdrawing promises they made, that induced action or refrain from action by second parties, who on reliance of such promises suffered loss. As such, it enables parties that reasonably relied on promises made by others, to recover damages resulting from those gratuitous promises. Such damages are only recoverable on enforcement of a promise, through the doctrine which would otherwise not hold for lack of consideration. Promissory estoppel supplements the common law rules. In respect to this, certain modified performance of contracts are held binding upon acceptance as promises more so, in the absence of consideration; such modification initially was only binding if consideration was sufficiently supplied. As a defense tool in opposition to a separate cause of action, the doctrine has enabled many parties to succeed in the context of breach of contract; this action would otherwise fail. In retrospect, many employees have benefited from the doctrine in recovering damages for wrongful discharge claims. Significantly, promissory estoppel has aided promisees’ in affording relief for negligent misrepresentation to their advantage. Liability has been imposed by courts on promissors solely on the basis of this doctrine in commercial cases involving implicit bargains. This has often rendered contractual agreements as not holding as express contracts. This was held in the case of United Electric Corp. vs. All Service Electric, Inc., where remedy was seen necessary to prevent unfair enrichment of the general contractor; who without paying the promised amount to United would enjoy benefits of the United’s reliance on the gratuitous promise. The court, by use of the doctrine, offered protection to the United. Generally, in the commercial sector, promissory estoppels has effectively assisted in reducing instances of unfair manipulation of parties who reasonably engage in contracts they perceived they would benefit from. In essence, the doctrine has helped curb unjust acquisition of property by certain parties at the expense of others (Fafinski and Emily 3). It is important to note that promissory estoppel has been used to enforce firm offers implicitly and which require consideration to be supplied for it to be enforced by the common law. In addition, it is used as a basis for enforcing assurances otherwise regarded as part of the whole transaction and hence binding legally. In retrospect, post- contract misrepresentations of a firm’s terms of policy may hold an insurer liable as was held in the case of Travelers Indemnity Co. vs. Holman (Burton and Melvin 5). Not withholding is the extent to which the promissory estoppel doctrine has lessened buyer’s struggle in trying to reach for compensation of damages resulting from contracts entered into. Estoppels certificates exist as a result of this doctrine. They serve to confirm the representations made by a seller under oath as well as to deter him from withdrawal or assertion of a fact that is not consistent with the initial and binding terms of the contract (Murdoch and Will 10). The doctrine has in a significant manner complemented the consideration requirement in contract law and extensively provided solutions to oral contracts in which no wrongful discharge claim exists in common law under tort. This so far is commendable about the doctrine (K). In as much as promisees would want to seek compensation for detriments suffered, damages offered should be designed as necessary to curb injustice and evaluation should be made as to whether enforcement of the promise is the only way to avoid occurrence of injustice. In addition, the damages should be such that they do not enforce promises that induce parties to act or refrain from action upon reliance on the promises. Respectively, attaining justice does not require that promisee is awarded damages exceeding actual loss suffered. It is remarkable to state that the doctrine has its limitations. As such, certain reformations should be made to it. To start with, as the doctrine does not bind the statute, provisions should be made to hold the government liable when due. For instance, tax payers may reasonably respond to a promise by the government in action or forbearance to their detriment. The government may have made the promise intending or with the knowledge that the promisee will act on it and as a result, his position is altered upon reliance on the promise. The provisions should be such that they bind the government and the promise made enforceable regardless of having consideration or not and should not be in contractual basis (Nelson 34). A promise however, cannot be taken as an estoppel if it is derived indirectly or it is vague. In relation to this, as there is no estoppels on the legislative powers of the government, and much more against the taxpayer, upon misuse of a concession promised, the government may withdraw the promise. This will require that the taxpayer proves a change in his position in order that the promise constitutes an estoppel (Kelkar, Parrthasarathy and Raja 37). Secondly, an estoppel does not exist against classification of goods. This is so because promissory estoppel is an equitable doctrine. As such, demands for the public good will deter application of the doctrine and continuity of a promise to an individual. Public good will thus holds over private needs. This calls for change since innocent parties suffer economic losses as a result of induction by a promise made causing them to act (O'connor 24). As noted earlier, there is no promissory estoppel against the legislature or statute. Thereby, provisions that provide that the promise to confer tax benefits for certain periods of time lie under the legislature should be removed (Wirshart 27). In retrospect, there is no violation of promissory estoppels where tax exemptions to companies are not protected in the shareholder’s hands. Shareholders suffer innocently the impact of tax as a result of tax avoidance by the company. Consequently, the burden of tax will lie at the corporate level. The shareholders will be exempted. As such, the cumulative burden on corporate profits will not change; shareholders suffer damages. It is with great concern that, the doctrine be reformed to accommodate the grievances of such parties (Cartwright 47). In other cases, the doctrine will be inequitable. Incentives retained on grounds of this doctrine result in a shift of tax burden upon income earners who are not equity shareholders. In aid of the vulnerable taxpayers and income earners, the doctrine should not be applicable since it is a rule of equity. Conclusion From a considerable evaluation, the promissory estoppels doctrine has done more good than harm. Principally, it aims at preventing persons from avoiding liability as a result of their deeds or words knowingly or intentionally inducing others to act to their detriment. In regards to this, the doctrine has enabled so many parties to receive compensation which otherwise they would not have had (Cartwright 25; Sharma 39). Its application more so, has enabled people to be more responsible of their actions. Employers for instance, are cautious about how they treat their employees; constant layoffs from work, since the promissory estoppels doctrine has developed as a recovery aid to the advantage of the employees. Promisees on the other hand, are also keen since the doctrine does not hold always. They are careful not to take advantage of the promissor by unfairly replicating a statement as a promise. The doctrine, in such circumstances does not hold and instead the promisee would be held liable to the promissory. Several changes as discussed earlier should be made on the doctrine for effective results. This will ensure that all parties liable for the detriments of other parties take full responsibility of their actions. Reflective Journal In tackling the assignment, my writing skills were enhanced. Reading through the research materials and compiling a comprehensive summary aided in improving self-management skills. From a law perspective, there was much to learn. Most importantly, being responsible and cautious of my actions at all times, so as not to cause damage on others, is critical. In addition, great value has been added to my course work by learning more about cases cited. It was however, difficult to distinguish between equitable estoppels from promissory estoppels. Whereas the latter involves a definite promise, equitable estoppel involves representations and inducements. An earlier review and assessment of all facts of the doctrine would have enabled me do a better job. In future, I will ensure that I have a detailed outlay of the course for better performance. Elaboration about the doctrine was profoundly easy. This was aided by comprehensively researching from all available sources. However, citation was a little bit a hard tasks. This was because most cases did not have full inferences and information to aid in citing. The work has been comprehensively done. Works Cited Burton, Steven, and Melvin Eisenberg. Principles of Contract Law. London: United Publishers, 2010. Cartwright, John. Misrepresentation, Mistake and Non- disclosure. London: Sweet and Maxwell, 2012. Cartwright, John. Anson's Law of Contract. London: Sweet and Maxwell, 2009. Fafinski, Stefen, and Emily Finch. Contract Law. London: Longman, 2009. Kelkar, Vijay, Parrthasarathy, Shome, and Raja Chelliah. India's Tax Reforms. New Delhi: Deep and Deep Publications, 2001. Murdoch, John, and Will Hughes. Construction Contracts: Law and Management. London: Taylor and Francis, 2008. Nelson, William. The Legalist Reformation Law; Politics and Ideology in New York. New York: New York Publishers, 2003. O'connor, Terrence. Understanding Government Contract Law. New York: New York Publishers, 2007. Sharma, Lama. Doctrine of Promissory Estoppel. New Delhi: Deep and Deep Publications, 2001. Wirshart, Chen. Contract Law. Oxford: Oxford University Press, 2005. Read More