Promissory Estoppel in Contract
This doctrine is to the effect that when a party by his word or conduct makes a promise to another party with the intent to be acted upon by that other party, and in fact, acted upon, the promisor will not be allowed to go back on his word.
It is a defense to an assertion of contractual rights where one party has given a promise not to assert his legal right if a condition is fulfilled by the other party and that other party fulfills that condition, the promisor would not on good law and equity be allowed to go back on his word.
The attempt to rely on the doctrine failed in Jordan v Money. In that case, Jordan promised to forego Mr. Money’s debt. In reliance on the promise, money went on expending a lot on his wedding. The plaintiff reversed his promise after 5 years. Mr. Money raised a defense of promissory Estoppel but failed. Although on a farther appeal promissory estoppel was allowed to be relied upon by the defendant.
Read also: Contract in law
However, in Hughes v Metropolitan Railway Company, the court did not allow the plaintiff to renege his implied promise to forego a 2 month of Negotiation with the defendant for the sale of his (the plaintiff) house out of the 6 month ultimatum given by him for the defendant to repair the house.
The doctrine was made popular in High Trees Case. After the war broke out in 1939 and the landlord found most part of his apartment desolate, he reduced the ground rent of the house from $2,500 to $1,250, although he did not specify for how long the reduction will last. The war ended at early 1945 and the whole apartment was occupied again. The landlord then brought an action to claim for the arrears of the amount he reduced during the war time.
The court held that promising Estoppel would not avail the landlord to go back on their promise to waive half of the grand rent during the war times but can however claim the full amount from when the war ended to when the action is being instituted as the condition that brought about the promise is over.
The principle was applied in the Nigerian case of Tika Tore Press v Abina, the defendant bought some books which have stayed for some time in the store of the plaintiff for some time without being sold with the agreement that payment will be made when the defendant are able to sell the books. They were also unable to sell the books for a long time and indeed the books have began to go bad. The parties then agree that the defendant should pay approximately half of the initial agreed price. The defendant paid and the plaintiff subsequently sought to recover the forgone balance.
The Supreme Court held that the plaintiff were bound by their promise and would not be allowed to go back on it.
However, it should be mentioned that promissory Estoppel can only be used as a shield and not as a sword in the sense that it can only be used to raise a defense and not be used to raise a cause of Action.
This does not mean that a person seeking to rely on promissory Estoppel cannot himself be the plaintiff by initiating an action. However, in such a case, he may only use the plea of promissory Estoppel in support of a cause of action.
Thus, in Combe v Combe, a divorced wife whose divorced husband failed to fulfill the promise of giving her $100 per year failed in her action in court because she based her case on promissory Estoppel. She attempted to use promissory Estoppel as a sword rather than a shield.
Read also: Variation of contractual right
However, the assertion that promissory Estoppel cannot found a cause of action has seemingly come under criticism.
In Bard Textile Holdings V Mank & Spencer The court allowed promissory Estoppel to institute a course of action but dismissed the appeal of the appellant based on the fact that there was no intention to create legal relation.
In the application of the doctrine of promissory Estoppel, the following are condition precedent.
- PRE-EXISTING CONTRACT OR LEGAL OBLIGATION
There must have been an existing legal relationship between the parties pre dating the promise. The relationship is not limited to contractual obligation.
Thus, in re Wyvern, the court imposed a legal relationship by the virtue of Bankruptcy, legislation. Also, in Durham fancy goods v Michael Jackson fancy goods, a legal relationship imposed by the Companies Act of 1948 (UK) was considered sufficient and a promise not to rely upon rights arising out of that relationship was enforced.
However, in Evenden V Guildfond City AFC, there was no pre-existing legal relationship but it was held that promissory estoppel still applied. The plaintiff’s employment was transferred from the supporters club to the football club. He became redundant after some time and he claimed for redundancy fee of both the years he spent at the supporting club and the football club.
The court held that the football club had agreed when his employment was transferred that Evenden’s employment was continuous and on this basis, he could claim for the full years he spent at both appointment.
ii. Clear and unambiguous promise either expressly or impliedly
iii. Reliance on the promise by the promisee
iv. It would be inequitable to allow the promisor to go back on his promise
The party raising a defence of promissory estoppel must be able to prove that it will be inequitable to allow the promisor to go back on his promise. In deciding this, the court will look at the conduct of both parties. Thus, if the promise was given by undue influence or pressure, the court will allow the promisor go back on his promise.
It is sufficient if the party relying on promissory estoppel can prove that he has relied on the promisor’s promise. He needs not to establish that he has suffered some detriment in consequence of the promise. The promise should have altered his position in reliance on the promise.
The decision in the case of WJ Alan V EL Nasr shows that detriment is not a requirement for the plea of promissory estoppel. The plaintiff countered the defence of promissory estoppel raised by the defendant on the basis that there was no detriment on the part of the defendant. The court refused their claim.
However, in Nigeria decision in some cases would appear to suggest that detriment is a condition precedent to the plea of promissory Estoppel. Despite this, the position in Nigeria will not be considered as different to that of England. Detriment will only provide easy proof but it is not compulsory it must be present.
Generally, promissory estoppel only suspends the right of the promisor to go back or his promise for some time such that the promisee will be able to have appropriate notice and as such reposition himself to stop relying on the promisor’s promise.
However, in a situation where it is impracticable for the promisor to go back impracticable for the promisor to go back on his promise, it would then mean that promissory estoppel has extinguished his legal right.
Thus in Tool Metal Manufacturing Co. Ltd V Tungsten Electric Co., the plaintiff were estoppel from going back on their promise made in a period of war to wave a payment they were entitled to from the defendant because it was difficult for the latter at that period. But they could go back on the promise after the war ends.
Similar to the above case is the High Trees Case where promissory Estoppel only disallowed the landlord to enforce his promise during the war times alone. The promisor must give a notice whether formal or informal indicating that he is going back on his wood.
Whether promissory Estoppel will extinguish or suspend the legal right of the promisor will depend on the nature of the case.
When it is not Inequitable to repudiate the promise (Where it is equitable for the promisor to go back on his promise)
Where it is equitable for the promisor to go back on his words, he would be allowed to do so based on the fact of the case. For example, it might be that the promise had been gotten unjustly, i.e maybe the promise was not made willingly. .
In D & C Builders V Rees, the court held that it was equitable for the plaintiff to go back on their promise as it had not been freely given: the conduct of the promisee itself was adjudged unconscionable.
Composition With Creditors and Part Payment of a Debt by Third Party
In a situation where creditors owed by a common debtor agree with themselves to accept a smaller sum each in discharge of the entire debt, the creditors are bound by their promise and the debtor is free from the debt. None of the creditors can legitimately come back to claim the balance of the debt. Such an attempt will be a fraud.
Read also: Consideration in Contract
Also, the debt owed by one party to another party may be settled with a smaller sum by a third party due to the inability of the debtor to pay the debt. In such a case, the debtor is discharged from the debt and the creditor cannot come back for it again.
Thus, in Hirachand V Temple, the action of the plaintiff failed because he claimed for the balance of a debt which the part payment in satisfaction of the whole debt had been paid by the defendant’s father.
Contributed by: Adedokun Samuel
Inioluwa Olaposi is a Law student at Obafemi Awolowo Universities, Ile-Ife, Nigeria. Before LawHub NG, he started publishing law-related posts on his former multi-niche website.