The Principle of Promissory Estoppels in English Law - Essay Example

Promissory Estoppel represents a series of legal doctrines that serve both as a shield and a sword, guarding against the unconsciousnable, discuss Australian law now has gone beyond the High Trees case; it has gone further other cases where legal relationship had not existed before between two parties. According to Mason CJ and Wilson J, Promissory estoppel can be looked at as a "sword", not just as a "shield" which was verified in the case of Waltons Stores (Interstate) Ltd v. Maher (1988) 164 CLR 3871, the two held that if estoppel is verified, it ascend to justice which favours the plaintiff, with the court doing minimum justice depending on the circumstances. Basing on the above case, it is also possible to make a promise without talking or acting. The element of unconscionability in Australian law can be satisfied if two parties encourage one another to create assumptions that lead to them trusting each other. Nowadays, the principle of estoppel yield to an enforcement of an obligation even without a consideration under the following conditions: a) Promise b) Dishonest behaviour of the promissor c) Special relationship between the promissor and the promise (e.g.: duty of information) d) Irreversible or ability to change of the circumstances of the promise by the promissor. By definition, promissory estoppel is a principle of justice and of equity by theEnglish Law (Stone, 2008). This is applied when a man, by his words or conduct, leads another to believe a particular state of affairs, one is not allowed turn down the promise it in case it becomes unjust or inequitable for him, even if no consideration has been given.  The significance of promissory estoppel in contract law is that, it has facilitated legal obligations. The role of estoppel is to provide a way in which promises can become legally binding with reference to contract law, without showing any consideration, to be argued for (Stone, 2008).  Promissory estoppel primarily deals with the expectations of contract or a conduct, where a promise is made between two parties about what is expected not to be done in future. It prevents a party from acting against the promises that had been made (Dancon, 2005). The first party promises to abide by the promise, and the second party is to relies on that promise and act upon it. The promissory estoppel doctrine within the English contract law is within is applicable within of a limited scope. The English law requires that a party must provide consideration before enforcing an informal promise, there should be something promised in compensation for the promise, or as the cost of the promise, at the promisor’s expense or implied request. Even if the promisor anticipated that the promisee would take the promise, or it was the expected by the promissory that the promise would take it, is not a justification for the promisee to accept the promise (Dancon, 2005). A person is not legally responsible to be estopped from referring to his promise basing on the fact that the promisee had accepted his detriment. Although when one promises to give an interest in return, it can be favored under the doctrine of proprietary estoppel to the extent that the representee is allowed to sue in order to obtain compensation (Groves, 1989). The estoppel in this case will act as a ‘sword’, outside the law of property, in particular promissory estoppel is not an option to the doctrine of consideration as a condition for the legal enforcement of a promise, also is it not used to create new rights (Australia, 1991). In English contract law the role of promissory estoppel is more limited than in the law of the United States or the contract law of Australia. Promissory estoppel has been used to get ways of coming up with proper remedies when one fails to fulfill the promises that are not supported by consideration (Dancon, 2005). In English law, the doctrine of promissory estoppel can only be implied as a ‘shield’, in that, if one is party to a contact that existed before and has represented to the other party that he will be fair in demanding his legal rights as per the contract. The representee may not able to trust the representation; therefore the representor can be estopped from persisting on the true contractual position after accepting the reduction in his contractual rights, until he gives the representee the opportunity to reviewing the contract, to enable the performance of the contract according to its firm terms (Dancon, 2005). The conditions only act as a means by which contractual rights can be delayed or sometimes permanently eliminated, but not a way of creating new rights (Stone, 2008). When the representor is estopped from enforcing the contract, in promissory estoppels it would be unfair or ‘unconscionable’ for the representor to be stopped from enforcing the deal, because of the trust by the representee on the demonstration. ‘Unconscionability’ is also evident as the in the modern cases on proprietary estoppel. Promissory estoppels as a shield             The “promissory estoppel may be used as a shield by using it as a defence mechanism to protect someone who is supposed to suffer from a promisor’s enforcement of their strict legal rights after an occurrence that had caused some changes for whatever reason, to a previous contract in the English dictionary a “shield,” is defined as “an article of defensive shell, used for protection. This definition demonstrates that if something is used, its purpose being as a shield, then its function is provide a person with protection not to attack another person (Dancon, 2005).             Lord Denning is a leading figure in the field of promissory estoppel he has brought its implementation back into the spotlight as a shield, with the case of Central London Property Trust v High Trees House Ltd, after its use, the doctrine of promissory estoppels has remained inactive after the cases of Hughes v Metropolitan Railway Co. Lord Cairns2 alleged that, it is the first rule upon which all Courts of justice proceedings should adhere to, it states that if parties who have agreed to adhere to certain legal results, or definite legal forfeiture, later by their own actions or with their own approval enter upon a course of negotiation whose results leads one of the parties to deduce that the firm rights arising under the deal will not be enforced, or delayed, or held in abeyance, the person who might have enforced the rights will not be approved to impose the rights in situations where it would be inequitable to consider the deals (Australia, 1991). In the case of Birmingham & District Land Co v London & North Western Railway Co3 although estoppel was applied it used the sense of the negative promise that one needs not perform the contract that is written, thus demonstrating that promissory estoppel was used as a form of protection, as it prevented the promisee from having privileges of the promisor, where necessary to abide with the firm legal            In the case of Central London Property Trust v High Trees House Ltd4 this was about the landlord who had informed the tenant that, in the time of the war, the rent would be reduced. The landlord company went on to receive the rent; the landlord noted that the tenant had paid the reduced rent for some 5 years, therefore the landlord opted to demand the sum that was not yet paid. Basing on this, the case was tested to see if the landlord's promise to lessen the rent could be enforced legally. The principle of promissory estoppel demonstrated the fact that, the principle does not grant a change in the penalty to the promise that previously didn’t exist.  This idea involves the suspending of the promisor’s legal rights and this use of promissory estoppel has sometimes been doubted or ignored in later dicta, the primary reason for this being that, in English law consideration, new legal rights have to be formed, without neccassarily modifiying or exposing them, thus demonstrating that promissory estoppel supplies the promisee with a shield of protection as opposed to a sword. Lord Denning expanded his interpretation of promissory estoppel by encouraging its use as a shield in the case of Combe v Combe5 by an ex-wife to extract funds from her destitute husband.  Lord Denning stated that, where one party either by words or conduct, has promised the other party or assured another party, whose intention was to affect the legal relations between the two parties, that were to be acted on as agreed, once they two parties has trust one another through word and action on the promise, the party that gives the promise or assurance is not allowed afterwards to revert to the former legal relations as if there was no promise or assurance between the two parties (Dancon, 2005). The promisor must accept their legal relations subject to the requirement which were introduced by him, regardless of it not being supported by law or by any consideration but by his word only. The case gives a demonstration that, the principle of estoppel highlighted in the High Trees case does not create new penalties that were not there before. Lord Denning goes on further to recall that it only prevents a party from demanding for the strict legal rights whenever there is a feeling of inequality that will allow him to demand it, with consideration to the dealings that took place between the parties. In this way promissory estoppel is used to protect people from unfair damage rather than a weapon against another.  This case demonstrates how promissory estoppel is implemented as a shield in the English legal system The effect that promissory estoppel has on the promisee’s position is that although the promisee is not required to provide any consideration for the promisor’s promise, because one cannot sue on that promise, due to lack of consideration.  Within this context, the doctrine of promissory estoppel is not used as a remedy in itself since it does not act in a way that it confers new rights on the promisee, instead it only operates to prevent the promisor from fully enforcing their rights against the promisee, and therefore it was used as a form of protection. The effect of promissory estoppel on the legal rights of the promisor is, to delay the promisor, but not to fully get rid of the promisor’s strict legal rights, it enables those rights to be re-established and resumed.  This is possible once a sensible notice has been given to the promisee stating the purpose of their plans and providing the promisee’s ability to resume their previous position.  In this way promissory estoppel ensures that the promisee is shielded from any unfair dealings of the promisor but the promisor is not in danger of any reverse action such as being sued (Australia, 1991). The case of Durham Fancy Goods Ltd v Michael Jackson (Fancy Goods) Ltd6 concerned a bill of exchange drawn by the plaintiff on the defendants. The plaintiffs made an error by putting on the bill ‘accepted payable for and on behalf of M Jackson (Fancy Goods) Ltd’. The director of the defendant company signed the bill in his name and returned it without pointing out the error. The bill was later dishonoured, and the plaintiff tried to personally go against the director. A personal liability like this one would not have come up if the bill had been in the correct form. When we argue that promissory estoppel can arise where there is an existing contractual relationship, this does not seem to be essential, but in this case there legal relationship that existed before, which could in certain situations give rise to liabilities and penalties. Such relationship is created in the companies Act 1984, the fact that Mr Jackson was a director and whatever contractual arrangement existed between the plaintiffs and Jacksons, led to the plaintiff drawing a 90 days bill on Jackson. Thus the promissory estoppel acted as a sword. The idea that promissory estoppel acts as a shield, is to a great extent, true in relation to English law.  In the English law the court only does the necessary, but it does stop a person who has dwelled upon an assumption that the promissory estoppel acts as a shield, promise or representation from suffering detriment. And in this way the promisee is protected by the law. Promissory estoppel as a sword             A “sword” can be defined as something that wounds or kills, or something that is able to cause death or destruction, a destroying agency; also, something used as a weapon of attack. A sword is something to be used to attack another and therefore, promissory estoppel may also be used to cause harm, its function is to solely protect the promisee from falling prisoner to an unjust enforcement of the promisor’s strict legal rights. In Australia, promissory Estoppel can now be used to commence an action, in addition to being a way of protecting one. In Waltons Stores Interstate Ltd v Maher (1988) (HC)7, the plaintiff (Maher) owned a commercial property that the defendant (Waltons) commenced negotiations to lease. The plaintiff was to agree to contract a building according to the defendant’s plans and specifications. A building that was there had to be demolished before of the construction of the new store commenced. On October 21st 1983, a draft agreement for lease was sent to the plaintiff’s solicitors, who substantially requested amendments. On November 7th 1983, the plaintiff needed the agreement signed; otherwise they could not build the new store within the required time. In addition, they also indicated that the plaintiff did not want to demolish the existing building until the proposed agreement was clear (Stone, 2008). Later that day, the defendant‘s solicitors forwarded a new agreement incorporating the requested amendments accompanied with a letter, which stated that they had not yet obtained their client’s specific instructions to each amendment required, but they believed that the approval was forthcoming, they continued to say that, the they shall let them know the following day if any amendments were not agreed to. The agreement was signed by exchange on 11th November 1983. As they heard nothing further, the plaintiff commenced work by demolishing the existing building, a reality that was known by the defender by 10th December (Stone, 2008). The defendant, having changed their commercial plans, they instructed their solicitors to go slow and chose not to execute the agreement. In early January, the plaintiff commenced building the new premises. On 19th January 1984 with about 40% of the new building completed, the defendant finally informed the plaintiff that they would not be proceeding with the agreement. The plaintiff subsequently sought, inter alia, a declaration that a binding agreement existed. At first instance, Kearney J held that the defendant was not supposed to deny that an agreement with the plaintiff existed before. This decision was confirmed by both the NSW Court of Appeal and the High Court. The trial judge and the NSW Court of Appeal found that common law estoppels existed rather than promissory estoppels because, the defendant had misrepresented an existing state of facts that a contract existed between the parties. By distinction, a majority of the High Court found the plaintiff on the basis of promissory estoppels, that an exchange of contracts would take place. More significant was the High Court’s pronouncement those promissory estoppels now applied to pre- contractual statements as to future intentions. In other words the doctrine can apply even where contractual relationship had not existed before between the parties. In Waltons Stores, the High Court also reiterated the requirement that the promisor must have acted unconscionably and the detriment of the party relying on promise. The requirement of detriment was further confirmed in Commonwealth of Australia v Verwayen (1990) (HC)8. In reimbursement of a debt the doctrine of promissory estoppel does not apply when one party offers to accept a lesser payment for the full payment of a debt they are owed, unless the debtor offers to pay the amount at an earlier date than was previously agreed so as to pay lesser amount, thus demonstrating consideration for the promise.  In this way promissory estoppels caused harm to the owner of the money as no consideration was been shown and there were no grounds which cause promissory estoppel to apply.  This rule was formulated in Pinnel’s Case that “payment of a lesser amount of money earlier in satisfaction of a larger amount, does not mean that one has cleared the whole debt, because it is impossible even to the Judges for a lesser amount to settle the debt of the plaintiff by paying a greater amount, but when one provides the gift of a horse, hawk, or robe, etc. in satisfaction, may be more beneficial to the plaintiff than the money. The rule in Pinnel’s Case is later toughened in the case of Foakes v Beer9, where the appellant, Foakes, owed the respondent, Beer, a sum of £2,090. Beer approved that no action would be taken against Foakes by her for the amount owed, if Foakes would enter into an agreement, where he will promise to pay an initial sum of £500 and pay £150 twice in a year until he settles the whole debt. At that time, Foakes was having a financial problem therefore; Beer did not include any interest on the amount owed.  Foakes completed the payments as agreed without any interest but later Beer sues Foakes for the interest.  The Court of Appeal, favored Beer, and Foakes was required to pay the interest on the money owed.  The logic behind their judgment was that even though the interest owed was not included in the agreement, the interest could still be implied given an enforceable agreement. The consideration of one promising to pay the debt was not satisfactory, because there was no extra benefit gained from Foakes to Beer, because Foakes already owed her the benefits. These two cases demonstrated that the promissory estoppel was used as a weapon. The doctrine is unlikely to apply in large commercial transactions. In Austotel PTY Ltd v Frankline Selfish Pty Ltd (1989) NSW10, the court noted that the parties were large commercial entities with equal bargaining power unlike the plaintiff in Stores. The court rejected the plaintiff’s (Frankline’s) argument that promissory estoppel applied and concluded that the plaintiff had acted in reliance on its own commercial interests rather than on any promises made by the defendant (Austotel). Conclusion The principle of promissory estoppels is not applicable where the state or its instrumentality in exercising of its sovereign taxing power grants any exemption, concession or rebate for a specified period to a class of persons in public interest and withdraws the same prior to that specified period again in public interest under changed circumstance. Promissory estoppel is also inapplicable where the state acts in exercising of delegated legislative function which can be assailed if it is unreasonable or arbitrary. Promissory estoppel may be implied as a shield and as a sword, because I believe that it is a metaphor which when interpreted, describes the way in which the legal system has great, but limited, powers. With these powers they can protect citizens from other parties going back on an assumption or promise when it would be unjust, within their strict legal rights, to do so as shown in Central London Property Trust v High Trees House case11. However as they also have powers within the doctrine promissory estoppel to provide the promisee with weapon like having the right to sue the promisor, as has been demonstrated through in Waltons Stores Interstate Ltd v Maher (1988) (HC)12. Thus the inference of the statement that “promissory estoppel may be a shield and a sword, (Groves, 1989) Promissory estoppel being implied as a shield but not a sword is true in English law, from the evidence provided from the cases brought in the English courts that the idea of promissory estoppel being implied as a shield but not a sword is, to a great extent, true of English Law. In Central London Property Trust v High Trees House Ltd13 and Combe v Combe 14we can clearly see how this metaphor is translated into action, as the court will only act, appropriately, in so as to defend a person who has relied on a particular promise from detriment. Likewise, it was thought that estoppels did not generate a cause of action; it was a shield. This thinking was based in part on the notion that estoppel was merely a rule of evidence. In Walton’s Stores, Brennan J said that the effect of estoppels is not to create a right in one party against the other, but to establish the states of affairs by referring to the legal relationship ascertained to exist between the parties. An estoppel is not in itself a cause of action. Its operation is in holding the parties to an assumed situation which will enable a party to claim and maintain a penalty which could not be maintained between the parties. In other words, when a particular situation is given, the appropriate penalty may also be available under the general law. If so the penalty arises independently, though it would only exits for the assumed facts. Promissory estoppel comes closest to an estoppels base cause of action. If the remedy is found on the promissory representation, then it can be said that the penalty is provided by the law of contract where estoppel operates to rule out the idea of the party estoppels from denying the promise. References Cases 1. Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 2. Hughes v Metropolitan Railway Co. Lord Cairns 3. Birmingham & District Land Co v London & North Western Railway Co 4. Central London Property Trust v High Trees House Ltd 5. Combe v Combe 6. Durham Fancy Goods Ltd v Michael Jackson (Fancy Goods) Ltd 7. Waltons Stores Interstate Ltd v Maher (1988) (HC) 8. Commonwealth of Australia v Verwayen (1990) (HC) 9. Case of Foakes v Beer 10. Austotel PTY Ltd v Frankline Selfish Pty Ltd (1989) NSW 11. Central London Property Trust v High Trees House case 12. Waltons Stores Interstate Ltd v Maher (1988) (HC) 13. Central London Property Trust v High Trees House Ltd 14. Combe v Combe Others Australia, N. L. (1991). APAIS, Australian Public Affairs Information Service:a subject Index to. Melbourne: National Library of Australia Dancon, W. (2005). Joint Ventures Law in Australia. Sydney: Federation Press Groves, M. (1989). Law and Government in Australia. Sydney: Federation Press Stone, R. (2008). The Modern Law of Contract Eighth Edition. Abingdon: Routledge Read More