Estoppel Does Away with the Need to Have Consideration Present in a Contract - Essay Example

Running header: Estoppel Student’s name: Instructor’s name: Subject code: Date of submission Estoppel effectively ‘does away’ with the need to have consideration present in a contract. Introduction The need to have consideration in a contract was stated by Lord Wilberforce in New Zealand Shipping Co. Ltd v AM Satterthwaite & Co. Ltd1 who stated that for a contract to be enforceable, a few elements including offer, acceptance and consideration must be satisfied and must not be accompanied by vitiating factors. In Currie v Misa2, the judge stated that a valuable consideration may consist either in some right, interest or benefit that accrues to one party or some forbearance, detriment, loss or responsibility, given, suffered, or undertaken by the other. This implies that consideration is the price at which the promise is bought3. However, despite the role that consideration plays, it has been largely criticized which is why the doctrine of promissory estoppel was developed. Therefore, this paper analyzes the statement that estoppel effectively does away with the need to have consideration present in a contract. Consideration is mainly criticized for the narrowness of the scope of its definition. This narrowness is deemed the reason why critics view consideration as a requirement that denies legal effects to most promises and hence contracts. Consideration has also been criticized for uncertainty and inconsistency owing to courts oftenimplying consideration into cases through manipulation of the vague concept of sufficiency and value which make consideration more of a technicality or formality as opposed to a doctrine. This was seen in the case of Williams v Roffey Bros4 where practical benefits were interpreted as sufficient consideration an interpretation that was controversial given that consideration was usually considered no good in issues involving completion of pre-existing duties. As such, the doctrine of Estoppel was developed in a bid to alleviate the unfair effects of consideration. The doctrine of estoppel has its origin from the doctrine of waiver or the doctrine of giving up one’s rights. The doctrine allows contracts to be enforced without consideration being present provided that certain requirements are met. The doctrine of estoppel was first mentioned in Hughes v Metropolitan Railway 5where the judge stated that if the parties who have entered into definite and distinct terms involving certainlegalresults and afterwards by their own act enter upon a course of negotiation that has the effect of leading one of the parties to suppose that the strict rights under the contract will not be enforced or will be kept in suspense , the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties. The doctrine was then referred by Denning J in the case of Central London Property Trust v High Trees House6 where Central London the landlord wanted High Trees the tenant toresume paying the original rent starting from the 1945 as the war had been over. The judge stated that had the landlord sued the tenant for the difference of rent during the war period, the claim would have failed and hence Central London would have been estopped from making the claim. In other words, the promise to accept a smaller sum in discharge of a larger if acted upon would be binding notwithstanding the absence of consideration7. In other words, estoppel operates where a promise is made which was intended to create legal relations and which to the knowledge of the person making the promise was going to be acted upon was in fact so acted upon. As such, the promisor is bound to the promise he makes provided the one who is promised has done something or promised to do something as a result of the promise. Such an action by the promisee will be deemed as a bargain as it earns him the right to enforce the promise by paying the price through his actions. The initial elements required for the doctrine of estoppel to be enforceable8. The promise in the doctrine of estoppel was supposed to have been made in regard of a preexisting legal relationship. For instance, the parties in the case of High trees referred above had satisfied this element as they had been in a lease agreement and the promise was in regard to the lease terms. As such, it seems that the doctrine of consideration was still relevant during the inception of the doctrine of estoppel9. In Australia, the application of the doctrine of Estoppel differs a lot from its application in other jurisdictions in that courts have made decisions that have effectively done away with the requirement of a consideration in the doctrine. The first decision to have a significant effect on the nature of estoppel in Australian courts was the decision in the case of Walton stores (interstate) Ltd v Maher10. This case effectively removed the need for consideration in a contract. In the case, Walton negotiated for a lease of Maher’s property. It was understood by both parties that Maher was to establish a new building after demolishing the existing one for Walton’s occupation. They also reached agreements regarding rent and other terms. Maher was given a draft in October and he sent a revised draft to Walton and in November, he informed Walton that he had started to demolish the building hence the need to fastrack the conclusion of the lease. Walton later developed reservations in regard of the lease and instructed his solicitors to go slow about the lease. Maher started building in January but when he had substantially built, Walton told him that he was no longer interested in proceeding with the lease. It was held that though formal contracts had not been exchanged, Maher was made to believe that this was a formality and hence could rely on promissory estoppel to bring action against Walton for the enforcement of the promise. Australian courts have unlike other courts held that the doctrine of estoppel can be used both as a shield and a sword in a bid to provide the promised party with a cause of action in a case where a party makes a promise hence creating assumptions that a contract will come into existent then reneges on it. However, for the doctrine to hold, a number of conditions must have been fulfilled. The plaintiff has to proof that an assumption was placed that a legal relationship existed between the two parties and that there as an indication that the promisor expected that a legal relationship would ensue later11. The plaintiff must proof that the promisor induced him/her to accept and adopt the assumption and hence the plaintiff acted or failed to act based on the reliance to the assumption. The plaintiff also has to proof that the promisor was aware and intended him/her to do so and that the plaintiff’s action or failure to act caused or would cause detriment to him/her. It must also be proofed that the promisor did not act in a bid to avoid the plaintiff’s detriment12. As such, it can be seen from these cases that the element of consideration in a contract has been rendered irrelevant and the judges consider the issues in a particular case in deciding whether a contract existed and hence is enforceable13. Conclusion As can be seen above, courts are much more concerned about the detriment that the promised party incurred and the circumstances in a certain case as opposed to being concerned whether a consideration has been given. In the Walton case described above, the judges noted that although the plaintiff may not have believed that a contract had existed, when carrying the action or failing to act to their detriment and in which case he was entitled to have assumed that such exchange was a formality, the plaintiff can have redress by having the contract being declared enforceable14. If it is proofed that the promisor made a promisee to the promisor thus making the plaintiff assume that the promisor would perform their part thus acting or failing to act to their detriment, the contract will be enforced by the court15. Thus in the case of the doctrine of estoppel, the element of consideration has been done away with. For courts, the approach to contracts in the doctrine of estoppel is based on equity and reliance and expectations created in a particular case are much more important in a case which is what the court considers in determining the enforceability of a certain promise or contract16. References: Mindy, C2005, Contract Law, Oxford University Press, 2005, 172. Oxbridge notes, 2014, Consideration and promissory estoppel, Retrieved on 23 April 2015, from; http://www.oxbridgenotes.co.uk/notes/oxbridge/2014/contract-law- notes/samples/consideration-promissory-estoppel Anthony Wright, The British Political Process- An Introduction, London, Rutledge, 2000 Wilken, S& Karim, G2012, The law of waiver, variation and estoppel, Oxford, Oxford University Press. Elizabeth, C2000, The modern law of estoppel, Oxford Australian contract law, 2015, Consideration, Retrieved on 23April 2015. Read More