Contract: Promissory Estoppel

Promissory Estoppel

What is Promissory Estoppel?

Sometimes the claimant promises to vary or waive a contract term, but the defendant does not provide consideration for this. Since there is no consideration, there has been no valid variation of the contract.

In these cases, the doctrine of promissory estoppel can provide the defendant a defence if the claimant tries to enforce the original terms of the contract: Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130. 

Establishing Promissory Estoppel

There are three requirements for establishing promissory estoppel: D & C Builders v Rees [1966] 2 WLR 28

  1. The claimant made a clear and unequivocal promise to vary the contract;
  2. The defendant changed their position in reliance on this promise; and
  3. It would be inequitable to enforce the original terms of the contract.
Clear Promise
promise, marriage, agreement

While a promise can be made by words or conduct, it needs to be sufficiently certain what obligation the claimant is creating or varying and how: Baird Textile Holdings v Marks & Spencer [2001] EWCA Civ 274. The promise must also be intended to affect the parties’ legal relations: IMT Shipping and Chartering v Chansung Shipping [2009] 2 All ER (Comm) 177.

Change in Position
change in position, climbing

A ‘change in position’ can include a wide variety of matters, such as financial expenditure, actions, deliberate inaction and psychological harm: Knights v Wiffen (1870) LR 5 QB 660. 

However, it is not necessary that the change be detrimental to the defendant: WJ Alan & v El Nasr Export and Import [1972] 2 WLR 800.

Equity
abuse, punch, violence, threat

The following factors indicate that it would not be inequitable to enforce the original terms: the promise was extracted by lies or an abuse of the defendant’s position: D & C Builders v Rees [1966] 2 WLR 28; no detriment has been suffered: Emery v UCB Corporate Services [2001] All ER (D) 226. 

Effect of Estoppel on Contractual Rights

The effect of promissory estoppel is to suspend, not extinguish, the claimant’s rights under the original agreement: Tool Metal Manufacturing v Tungsten [1955] 1 WLR 761. The claimant can revive their rights by giving reasonable notice to the defendant. Notice is reasonable if it gives the defendant a reasonable opportunity of resuming their original position: Ajayi v RT Briscoe (Nigeria) Ltd [1964] 1 WLR 1326. 

However, if it is not possible for the defendant to return to his original position, the estoppel becomes irrevocable: Brikom Investments Ltd v Carr [1979] QB 467. The same is true if allowing revocation with reasonable notice would be inequitable: Collier v P & MJ Wright (Holdings) Ltd [2007] EWCA Civ 1329.

Promissory Estoppel is Not a Cause of Action

Promissory estoppel can only be used as a defence (‘a shield’) and does not provide a cause of action (‘a sword’) to specifically enforce the varied terms: Combe v Combe [1951] 2 KB 215. As such, it is mainly relevant in part-payment of debt cases.


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Promissory Estoppel Quiz

Test yourself on the principles governing promissory estoppel.

1 / 4

What two matters must the defendant prove to establish promissory estoppel?

2 / 4

In promissory estoppel, what three factors are relevant when determining whether it would be inequitable to renege on a promise?

3 / 4

Does promissory estoppel permanently extinguish the claimant's rights?

4 / 4

Promissory estoppel can be used to sue for damages or the recovery of payments where a party to a contract reneges on a promise not to enforce terms of the contract. True or false?

 

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