Principle of Promissory Estoppel - Essay Example

Your [Your of the The Law of Contracts Bert who runs a car rental business approached Cooler Air, in March, to install air conditioning in his cars for use during the summer months. An agreement ensued between them whereby Cooler Air would complete the work for £6000 and within two months from the date of agreement. After one month the manufacturer of some essential parts went bankrupt and these parts had to be imported from France at an additional cost of £2000, which Bert agreed to pay. If one person makes a promise on whose basis another person takes some action, then even in the absence of consideration, the promisor is estopped from retracting such a promise. This is the principle of promissory estoppel and in its modern form it is based on the dicta of Denning J in the Central London Property case (Central London Property Trust Ltd V. High Trees House Ltd) and the decision of the House of Lords in the Tool Metal case (Tool Metal Manufacturing Co Ltd V. Tungsten Electric Co Ltd ). In Williams v. Roffey, Roffey had a contract to refurbish a block of flats. He sub-contracted the carpentry work to Williams, who after the commencement of the work came to realize that he had underestimated its cost and as a result, he was placed in financial difficulties. Roffey, realizing that the work would not be completed on time and that this would result in the breach of a penalty clause in their main contract with the owner, agreed to pay Williams an extra payment per flat (Williams v Roffey Bros & Nicholls (Contractors) Limited). Williams completed the work on these flats but did not receive full payment. He stopped work and brought in an action for damages. In the Court of Appeal, Roffey argued that Williams was only doing what he was contractually bound to do and had therefore not provided any consideration. It was held by the Court of Appeal that where a party to an existing contract later agrees to pay an extra "bonus" in order to ensure that the other party performs his obligations under the contract, then that agreement is binding if the party agreeing to pay the bonus has thereby obtained some new practical advantage or has avoided a disadvantage. In the present case, there were benefits to Roffey such as: (a) making sure Williams continued his work, (b) avoiding payment under a damages clause of the main contract if Williams was late, and (c) avoiding the expense and trouble of sub contracting the work to someone else. Therefore, Williams was entitled to payment (Williams v Roffey Bros & Nicholls (Contractors) Limited). In the CTN Cash case it was decided that the practical benefit accruing to the promisor must be treated as consideration for extra payment (CTN Cash and Carry Ltd v. Gallaher Ltd ). Though the performance of existing contracts is treated as invalid consideration, all the same, under certain circumstances, Courts have held that it constitutes a valid contract. When one party reneges on an agreement claiming that consideration was absent, then the other party can claim that this agreement was a contract and can ask the Court to support the contract. After the installation of the air – conditioning units; Bert refused to pay the additional amount of £2000, as had been agreed upon by him in order to complete the work by importing some essential parts from France. The import of these parts had resulted in substantial expenditure to Cooler Air. The latter had relied on Bert’s assurance and imported these parts and completed the work within the stipulated time. This proved to be beneficial to Bert, because of the onset of summer, when air – conditioners in cars were utilized to the maximum extent and thereby providing Bert with greater profits. According to the doctrine of promissory estoppel Bert cannot evade payment of the additional expenditure incurred by Cooler Air. The air – conditioning units were installed in Bert’s cars within the stipulated time. However, during a test drive there was an explosion in the air-conditioning unit, which caused Bert to lose control over the car. As a result Bert sustained injuries and the car was also damaged. On being informed about this mishap Cooler Air asked Bert to peruse the reverse of the agreement, which stated that it was not responsible for any defects in the air – conditioning units or for any damages resulting from faulty installations. The legal issues to be addressed are, whether Cooler Air can rely on the exclusion clause and whether Bert has any remedy to recover the damages for the loss caused to him due to the exploding air-conditioning unit. Bert has to establish that the Cooler Air cannot rely on the exemption clause in the standard terms of the contract. An exemption clause in a contract purports to exclude liability of one of the parties to the contract, under certain circumstances. The Statute sets out that no contract term can exclude or limit liability in any way for negligently causing death or injury (Section 2. Unfair Contract Terms Act 1977). Furthermore, if there is other loss or damage, liability for negligence cannot be excluded or restricted if the term of notice is unreasonable. Finally, if a contract term or notice makes efforts to exclude or restrict liability for negligence, agreement to or awareness of this is not of itself to be taken as indicative of the voluntary acceptance of any risk (Unfair Contract Terms Act 1977). The contention that Cooler Air was not liable for the loss suffered by Bert, because of the exclusion clauses printed on the reverse of the agreement is untenable, as had been borne out in the case of Thornton v. Shoe Lane Parking. In this case, the plaintiff obtained a ticket from an automatic vending machine, while parking his car. This ticket stated that the car parking company could not be held liable for any damage caused to vehicles or injuries sustained by customers in the car park. The court did not accept this exclusion clause as these terms had not been made known to the customer with sufficient emphasis (Thornton v. Shoe Lane Parking ). Consequently, it is of paramount importance to determine whether a purchaser is a consumer or not. ‘Consumer means any natural person who, in contracts covered by these Regulations, is acting for purposes which are outside his trade, business or profession (Section 3(1). Consumer Contracts Regulations 1999). Bert purchased the air – conditioners for use in his car rental business. He was not a trader in air – conditioners, therefore, for the purposes of this particular contract he is deemed to be a consumer. This is in accordance with the decision in Davies v. Sumner wherein it was held by the court that though the car was a means to earn money, in a courier by car service or a taxi service all the same the sale of the car to such a business could not be considered to be integral to the business (Davies v. Sumner). Similarly, in Stevenson v. Rogers, Potter LJ held that if the business is buying and selling of cars then the sale of a car is integral to the business (Stevenson v. Rogers). In our case the business of Bert is not that of purchasing and selling air – conditioners, hence he is a consumer. The Sale of Goods Act implies a term in contracts that goods purchased will be of satisfactory quality. This is applicable only if the goods were sold in the due course of business. Moreover, the statutory implied terms that goods supplied under a contract must be of satisfactory quality, reasonably fit for the buyers purpose and must conform to the description by which they are supplied offer a number of advantages to a potential plaintiff. They make the supplier liable for the goods supplied. The central requirement is that the goods supplied must be of satisfactory quality and this arises automatically wherever goods are sold in the normal course of business (Section 14(2), Sale of Goods Act, 1979). In order to overcome business losses, Bert borrowed from Jill his business partner. She had inherited an apartment worth about £2 million. This property was offered as security to a bank in order to obtain a loan and Jill signed these papers. Subsequently, the relation between Bert and Jill broke down and she no longer wished to offer her property as security for the loan. In Royal Bank of Scotland v Purvis, a woman stood guarantee for her husband’s bank debts. Later on she tried to escape her liability by stating that she had executed the guarantee agreement with the bank at her husband’s behest and not of her own volition. Moreover, she declared that she had not acquired any formal education, what so ever and that as a result was not conversant with commercial documents. She also stated that the guarantee was to be deemed as void as she had been ignorant of the nature of the document to which she had affixed her signature. The bank rebutted this in court by stating that it had in no way compelled or induced her to sign the agreement of guarantee. Lord McCluskey, opined in his judgment that her contention was not tenable in law and that it was not permissible for her to state that as she had not perused the document she could not be held liable to comply with its contents. Moreover, His Lordship stated that she could have deferred the affixing of her signature to the document till such time as she could have thoroughly read and understood its content. Therefore, she was liable to the bank, in her capacity as guarantor of her husband’s debts to the bank (Royal Bank of Scotland v Purvis). Similarly, Jill cannot escape liability for having offered her property as security for the loan availed by Bert. In the event of the essential parts for the air – conditioning units never having been procured, the doctrine of frustration would have become applicable. The doctrine of frustration has to be applied if an unforeseen event transpires that renders the completion of the contract impossible. This event should be such that it could not have been reasonably anticipated by the parties at the time of entering the contract. In the case of Krell v. Henry, it was held that the cancellation of an event that was central to the performance of the contract would render the contract void (Krell v. Henry). Therefore, the contract for obtaining air – conditioners is void if essential parts are unavailable. Consequently, Bert cannot sue Cooler Air for breach of contract. This is due to the fact that the contract becomes void and with this neither party can be held to be liable for the failure of the contract. Since the seller had infringed the implied terms that have been deemed to be essential conditions by the statute under the provisions of section 14(2) of the Sale of Goods Act 1979, the seller is liable for a claim of full refund of the cost of the air – conditioner that had been sold to Bert. Moreover, Bert can rescind the contract. He can also claim compensation for the personal injuries caused to him and the damage caused to his car by the exploding air – conditioner. Works Cited Central London Property Trust Ltd V. High Trees House Ltd. No. 1 KB 130. 1949. CTN Cash and Carry Ltd v. Gallaher Ltd . No. 4 All ER 714. 1994. Davies v. Sumner. No. 3 All ER 831. 1984. Krell v. Henry. No. 2 KB 740, CA. Kings Bench. 1903. Royal Bank of Scotland v Purvis. No. SLT 262. 1990. "Section 14(2), Sale of Goods Act, 1979." Crown copy right. "Section 2. Unfair Contract Terms Act 1977." "Section 3(1). Consumer Contracts Regulations 1999." Stevenson v. Rogers. No. 1 All ER 613. 1999. Thornton v. Shoe Lane Parking . No. 1 All ER 686. 1971. Tool Metal Manufacturing Co Ltd V. Tungsten Electric Co Ltd . No. 1 WLR 761. 1955. "Unfair Contract Terms Act 1977." Williams v Roffey Bros & Nicholls (Contractors) Limited. No. 1 QB 1. Queens Bench. 1991. Read More