#9047 - Promissory Estoppel - Contracts Law

THEME 14: PROMISSORY ESTOPPEL

Promissory Estoppel (PE) is a tool of equity (discretionary acceptance of the courts). It is used to get around the need for consideration (gets around the harshness of Stilk requiring fresh consideration for any consideration). It was first articulated in the Jordan v Money (1854) HL:

• The idea is that the wife of the person who received the bond told Jordan not to worry about the funds he owed them and to marry

• 5 years after he married, she sought the money

• the court says that you are estopped from making a truthful allegation after there’s been a lie

• the judge basically says “I will not hear of this” – will not allow evidentiary information to come through after a lie has been heard

The idea is that you can only seek an equitable remedy like PE if you have done equity (need to come to the court with clean hands). Estoppel historically only applied in cases about misrepresentations re: present or past (lies). Today it is more expansive and applies to the future representations.

TIMELINE

• at T1, there is a contract or a debt of some sort

• at T2, there is a new promise on the table

• at T3, someone reneges that promise

• at T4 the case goes trial where we ask if promissory estoppel is applicable

THREE ELEMENTS OF A PROMISE THAT CAN GIVE RISE TO ESTOPPEL (ACCORDING TO LORD DENNING):

1. nature of the promise must be made with an intention to be bound

2. the promise must be intended to be acted upon by the person to whom the promise is made (other party came to rely on the promise)

3. the promise was in fact acted upon (can be negative or positive in terms of the actions/consequences)

PURPOSE OF ESTOPPEL

1. shield from the original contract because you’ve reneged on a promise subsequent to the contract

   1. cannot be used as a sword (cause of action), but only as a defence

2. takes the place of consideration to prevent the assertion of a previous contract

3. used so that the court will not consider the original contract, but just hone in on the promise (Original contract does not disappear)

4. DEFENCE for the promisee or the Defendant

5. Founded upon detrimental reliance: I relied on your promise to my detriment because you’ve now sued me

COMPONENTS OF PROMISSORY ESTOPPEL

1. Must be an existing relationship between the parties at the time estoppel is used

2. Must be a clear promise at T2 or representation about the future made by the party against whom the estoppel is raised

3. There must be an reliance by the party raising the estoppel

4. Party to whom the representation was made must be acting in detrimental reliance (I relied on something you promised me and I relied on it to my detriment. Because you promised me, I changed my situation, but you didn’t uphold it so now I’m worse off)

5. The promisee must have acted equitably in order to use the defence of promissory estoppel (she who seeks equity must do equity)

DIFFERENCES BETWEEN PROMISSORY ESTOPPEL AND PROMISSORY WAIVER

With a waiver, there is a representation being made about conduct that does not necessarily speak to future intentions. There is no consideration moving from party benefitting from a waiver.

Waiver: one party to a contract takes steps that amount to foregoing reliance on some known right or defect in the performance of another party

Promissory estoppel: requires a representation to carry an idea about the future that gives rise to an obligation

TWO ELEMENTS OF PROOF FOR A WAIVER

1. party said to be waving must demonstrate that there is a full knowledge of their rights

2. party waiving must express unequivocal and conscious decision to abandon their rights