CONSIDERATION AND ESTOPPEL
•Consideration & Estoppel
•Despite Williams v Roffey Bros (supra), as a general rule, consideration is still required for a promise (not made by deed) to be enforceable
•Williams v Roffey Bros only makes it easier to find the existence of consideration in certain cases
•Note also that according to Re Selectmove (supra), the decision in Williams v Roffey Bros does not extend to part payment of a debt which, without more, will not discharge the whole debt
• “Estoppel” relates to exceptional circumstances where the courts may enforce a promise even in the absence of consideration.
•Consideration and Estoppel
•“Estoppel” derived from equity = “equitable doctrine” or “equitable estoppel”
•Origin often traced to Hughes v Metropolitan Rly Co (1877) 2 App Cas 439
–Landlord gave tenants 6 months notice to do some repairs else the lease would be forfeited
–Parties began negotiations for the sale of the lease
–Negotiations broke down after the 6 months deadline for repair work
–Landlord claimed that the lease was forfeited
–Held: Landlord’s conduct amounted to an implied promise to the tenant that he would not enforce the forfeiture at the end of the deadline
–That in not doing the repairs, the tenant had been relying on the landlord’s implied promise not so to enforce the forfeiture
–That the notice period started again from the date that the negotiations broke down
•Consideration & Estoppel
•Summary of ingredients of estoppel (generally)
•Per Lord Birkinhead in Maclaine v Gatty [1921] 1 AC 376, 386
–“Where A has by his words or conduct justified B in believing that a certain state of facts exist, and B has acted upon such belief to his prejudice, A is not permitted to affirm against B that a different state of facts existed at the time.”
•Note: that is a general statement of estoppel; there are different types of estoppel including estoppel by representation, proprietary estoppel and, for our purposes, promissory estoppel
•Consideration and Estoppel
•“Promissory Estoppel
•Central London Pty ltd v High Trees House Ltd (‘High Trees case’) [1947] KB 130
–Clmt let block of flats to defts for £2,500 p.a.
–Defts intended to sublet the flats
–Because of WW2 it was difficult to find tenants
–Clmt agreed to reduce the rent to £1,250
–By beginning of 1945, the flats were fully let again
–Clmt demanded the original rent of £2,500 from the last 2 quarters of 1945; defts refused
•Held (Denning J)
–That the reduction of the rent was a temporary expedient while the flats were not fully let
–That, therefore, the reduction applied only until when the flats were fully let again and ceased to apply from then
–Clmt was, therefore, entitled to demand the full rent from 1945
•Consideration and Estoppel
•Significance of High Trees case
–Clmt would not have been allowed to claim full rent for the period that the flats were not fully let – even though the deft had not provided consideration for clmt’s promise/agreement to reduce the rent
–It was the first case when ‘estoppel’ was applied to a promise i.e. a promise as to future conduct rather than a representation on an existing state of facts
•Consideration and Estoppel
•Elements of Promissory Estoppel
•Promise/Representation
–A clear and unequivocal promise or representation not to fully enforce existing legal rights
–Silence or inaction is not sufficient; but Hughes v Metropolitan Rly (supra) suggests that the promise/representation may be by conduct
•Reliance
–Promise/representation must have been relied upon by promisee i.e. it must have influenced his conduct
–Some cases suggest that the reliance must also have been ‘detrimental’ (i.e. to promisee’s disadvantage)
–For promissory estoppel, at least, the promisee only needs to have altered his position i.e. acted upon the promise; detrimental reliance is not essential;
•consider whether there was any detriment to the deft in the High Trees case
•Per Goff J in The Post Chaser [1982] 1 All ER 19 “… it is not necessary to show detriment, indeed the representee may have benefited from the representation, and yet it may be inequitable, at least without reasonable notice, for the representor to enforce his legal rights
•Notice two elements in that quote from GoffJ.: ‘inequitable’; ‘without reasonable notice’
•Consideration and Estoppel
•Elements of Promissory Estoppel
•‘Inequitable’
–Easier to establish ‘inequity’ if reliance was detrimental; but not necessary
•The Post Chaser
–It is not always inequitable to go back on a promise not to enforce strict legal rights
–D & C Builders v Rees [1966] 2 QB 617
–Small firm was owed £482 by Rees
–Rees offered cheque of £300 in full settlement, knowing that the firm was in financial trouble
–Firm accepted the £300 but later sued for the promise
–Held: payment of the lesser sum was not good consideration to discharge the full debt
–That it was not inequitable for the builders to go back on their promise to accept the lesser sum as there was no true ‘accord’ in that they had been held to ransom
•Consideration and Estoppel
•Elements of Promissory Estoppel
•‘Without Notice’
•promissory estoppel only suspends the legal rights and does not, per se, extinguish them
–In Hughes v Metropolitan Rly (supra), the notice period started to run once again after the negotiations had broken down
–See also Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955] 1 WLR 761
•Consideration and Estoppel
•Promissory Estoppel – “a shield not a sword”
•Can normally only be raised/used as a defence and not the basis of a fresh action
•Combe v Combe [1951] 2 KB 215
–C agreed to pay Ex £100 p.a. maintenance tax free
–Ex did not give consideration for the agreement
–Ex sued for arrears 6 years later
–Ex won at first instance; trial judge saying that C’s promise was clear, intended to be binding and was acted upon by Ex
–Held: (CA) that Ex could not rely on the doctrine of promissory estoppel as the doctrine does not give rise to a cause of action; it can only be used as a defence
•Consideration and Estoppel
•Promissory Estoppel – “a shield not a sword”
•Combe v Combe
–promissory estoppel does not create new causes of action where none existed before; it only prevents a party from insisting upon his strict legal rights when it would be unjust to allow him to enforce them, having regard to the dealings which have taken place between the parties – per Denning LJ
–‘Estoppel’ can only be used as a shield and not as a sword – per Birkett LJ, adopting phrase coined by counsel
•Consideration and Estoppel
•Promissory Estoppel – “a shield not a sword”
•Idea of ‘shield not sword’ attended by controversy
–Proprietary estoppel can be used as a cause of action
–Thus Birkett LJ’s statement that ‘estoppel’ can only be used as a shield and not a sword was described as a misleading aphorism since it is not true of all types of estoppel; Baird Textile etc v Marks & Spencer plc [2001] EWCA Civ 274
•Note: even a clmt may be aple to plead promissory estoppel e.g. as an answer to a defence by a deft, The Ion [1980] 2 Lloyd’s Rep 245
•In Australia, promissory estoppel has been used effectively as a ‘sword’; Walton Stores etc v Maher (1988) 164 CLR 387
•Despite Williams v Roffey Bros (supra), as a general rule, consideration is still required for a promise (not made by deed) to be enforceable
•Williams v Roffey Bros only makes it easier to find the existence of consideration in certain cases
•Note also that according to Re Selectmove (supra), the decision in Williams v Roffey Bros does not extend to part payment of a debt which, without more, will not discharge the whole debt
• “Estoppel” relates to exceptional circumstances where the courts may enforce a promise even in the absence of consideration.
•Consideration and Estoppel
•“Estoppel” derived from equity = “equitable doctrine” or “equitable estoppel”
•Origin often traced to Hughes v Metropolitan Rly Co (1877) 2 App Cas 439
–Landlord gave tenants 6 months notice to do some repairs else the lease would be forfeited
–Parties began negotiations for the sale of the lease
–Negotiations broke down after the 6 months deadline for repair work
–Landlord claimed that the lease was forfeited
–Held: Landlord’s conduct amounted to an implied promise to the tenant that he would not enforce the forfeiture at the end of the deadline
–That in not doing the repairs, the tenant had been relying on the landlord’s implied promise not so to enforce the forfeiture
–That the notice period started again from the date that the negotiations broke down
•Consideration & Estoppel
•Summary of ingredients of estoppel (generally)
•Per Lord Birkinhead in Maclaine v Gatty [1921] 1 AC 376, 386
–“Where A has by his words or conduct justified B in believing that a certain state of facts exist, and B has acted upon such belief to his prejudice, A is not permitted to affirm against B that a different state of facts existed at the time.”
•Note: that is a general statement of estoppel; there are different types of estoppel including estoppel by representation, proprietary estoppel and, for our purposes, promissory estoppel
•Consideration and Estoppel
•“Promissory Estoppel
•Central London Pty ltd v High Trees House Ltd (‘High Trees case’) [1947] KB 130
–Clmt let block of flats to defts for £2,500 p.a.
–Defts intended to sublet the flats
–Because of WW2 it was difficult to find tenants
–Clmt agreed to reduce the rent to £1,250
–By beginning of 1945, the flats were fully let again
–Clmt demanded the original rent of £2,500 from the last 2 quarters of 1945; defts refused
•Held (Denning J)
–That the reduction of the rent was a temporary expedient while the flats were not fully let
–That, therefore, the reduction applied only until when the flats were fully let again and ceased to apply from then
–Clmt was, therefore, entitled to demand the full rent from 1945
•Consideration and Estoppel
•Significance of High Trees case
–Clmt would not have been allowed to claim full rent for the period that the flats were not fully let – even though the deft had not provided consideration for clmt’s promise/agreement to reduce the rent
–It was the first case when ‘estoppel’ was applied to a promise i.e. a promise as to future conduct rather than a representation on an existing state of facts
•Consideration and Estoppel
•Elements of Promissory Estoppel
•Promise/Representation
–A clear and unequivocal promise or representation not to fully enforce existing legal rights
–Silence or inaction is not sufficient; but Hughes v Metropolitan Rly (supra) suggests that the promise/representation may be by conduct
•Reliance
–Promise/representation must have been relied upon by promisee i.e. it must have influenced his conduct
–Some cases suggest that the reliance must also have been ‘detrimental’ (i.e. to promisee’s disadvantage)
–For promissory estoppel, at least, the promisee only needs to have altered his position i.e. acted upon the promise; detrimental reliance is not essential;
•consider whether there was any detriment to the deft in the High Trees case
•Per Goff J in The Post Chaser [1982] 1 All ER 19 “… it is not necessary to show detriment, indeed the representee may have benefited from the representation, and yet it may be inequitable, at least without reasonable notice, for the representor to enforce his legal rights
•Notice two elements in that quote from GoffJ.: ‘inequitable’; ‘without reasonable notice’
•Consideration and Estoppel
•Elements of Promissory Estoppel
•‘Inequitable’
–Easier to establish ‘inequity’ if reliance was detrimental; but not necessary
•The Post Chaser
–It is not always inequitable to go back on a promise not to enforce strict legal rights
–D & C Builders v Rees [1966] 2 QB 617
–Small firm was owed £482 by Rees
–Rees offered cheque of £300 in full settlement, knowing that the firm was in financial trouble
–Firm accepted the £300 but later sued for the promise
–Held: payment of the lesser sum was not good consideration to discharge the full debt
–That it was not inequitable for the builders to go back on their promise to accept the lesser sum as there was no true ‘accord’ in that they had been held to ransom
•Consideration and Estoppel
•Elements of Promissory Estoppel
•‘Without Notice’
•promissory estoppel only suspends the legal rights and does not, per se, extinguish them
–In Hughes v Metropolitan Rly (supra), the notice period started to run once again after the negotiations had broken down
–See also Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955] 1 WLR 761
•Consideration and Estoppel
•Promissory Estoppel – “a shield not a sword”
•Can normally only be raised/used as a defence and not the basis of a fresh action
•Combe v Combe [1951] 2 KB 215
–C agreed to pay Ex £100 p.a. maintenance tax free
–Ex did not give consideration for the agreement
–Ex sued for arrears 6 years later
–Ex won at first instance; trial judge saying that C’s promise was clear, intended to be binding and was acted upon by Ex
–Held: (CA) that Ex could not rely on the doctrine of promissory estoppel as the doctrine does not give rise to a cause of action; it can only be used as a defence
•Consideration and Estoppel
•Promissory Estoppel – “a shield not a sword”
•Combe v Combe
–promissory estoppel does not create new causes of action where none existed before; it only prevents a party from insisting upon his strict legal rights when it would be unjust to allow him to enforce them, having regard to the dealings which have taken place between the parties – per Denning LJ
–‘Estoppel’ can only be used as a shield and not as a sword – per Birkett LJ, adopting phrase coined by counsel
•Consideration and Estoppel
•Promissory Estoppel – “a shield not a sword”
•Idea of ‘shield not sword’ attended by controversy
–Proprietary estoppel can be used as a cause of action
–Thus Birkett LJ’s statement that ‘estoppel’ can only be used as a shield and not a sword was described as a misleading aphorism since it is not true of all types of estoppel; Baird Textile etc v Marks & Spencer plc [2001] EWCA Civ 274
•Note: even a clmt may be aple to plead promissory estoppel e.g. as an answer to a defence by a deft, The Ion [1980] 2 Lloyd’s Rep 245
•In Australia, promissory estoppel has been used effectively as a ‘sword’; Walton Stores etc v Maher (1988) 164 CLR 387
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