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English Contract Law/Promissory estoppel

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English Contract Law
PROMISSORY  ESTOPPEL

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Promissory estoppel is a type of estoppel. It should not be confused with other estoppels such as proprietary estoppel.[1] Before we continue it is worth examining the origins and definition of estoppel. In the simplest terms, an estoppel is an impediment or "estoppe" another parties right of action arising from your own actions.

The origins of estoppel lie in the Common Law but much of its development has been as a doctrine of Equity, these latter two being parallel but intertwined legal systems. Estoppel is also linked to the concept of waiver,[2] but a modern definition of estoppel was given as:

a principle of justice and of equity. It comes to this: when a man, by his words or conduct, has led another to believe in a particular state of affairs, he will not be allowed to go back on it when it would be unjust or inequitable for him to do so.

—Lord Denning, Moorgate Mercantile Co Ltd v Twitchings [1976] QB 225 at p.242

Although there are many types of estoppel, they can be gathered into two groups:

  • Estoppel by representation, which prevents another party from going back on a statement of fact.
  • Estoppel by convention, which prevents another party from going back on a previously agreed meaning of a document.

The two most commonly used estoppels in English law are:

  • Proprietary estoppel, which prevents another party from going back on a promise related to an interest in property.
  • Promissory estoppel, which prevents another party from going back on the promise of a future action.

Promissory estoppel can be used to enforce promises that would otherwise fail because of a lack of consideration e.g.:

  • agreements to accept a lesser amount in payment of a debt (note the exception to the rule in Pinnel’s case)
  • pay more for a previously agreed obligation
  • vary a contract where obligations have been performed.
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The rule in Pinnel’s Case,[3] mentioned above, was a statement made by Sir Edward Coke:

payment of a lesser sum on the day in satisfaction of a greater cannot be any satisfaction for the whole…But the gift of a horse, hawk or robe etc. in satisfaction is good…payment before the day in satisfaction of the whole would be good satisfaction…

Pinnel resulted in some harsh decisions in later cases but by the late 19th century, opinions became more mellow, with Blackburn J commenting in Foakes v Beer that:

All men of business…do every day recognise and act on the ground that prompt payment of a part of their demand may be more beneficial to them than it would be to insist on their rights and enforce payment of the whole…

There are however some limitations to the Rule in Pinnel's Case, including:

  • if a debtor does something different;
  • cheques;
  • compositions with creditors;
  • payment made by a third party.

Examples of these limitations include the following cases:

  • Hughes v Metropolitan Railway Co Ltd (1877) AC 439
  • Hirachand Punamchand v Temple [1911] 2 KB 330
  • Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130.

Notes

  1. Mckendrick p.236-238 & 247-251.
  2. See for example Rickards v Oppenheim [1950] 1 AllER 420
  3. also known as Penny v Cole [1602] 5 Co. Rep. 117a