Promissory Estoppel Law Essay Sample
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Promissory Estoppel Law Essay Sample
* Estoppel: situation where a person is precluded from saying something – namely the denial that a promise has been made. Protects person from the injurious consequence of reliance. * For example : creditor agrees to accept lesser sum in discharge of a greater sum, cant reclaim full payment refer to D & C Builders Ltd v Rees Estoppel Generally:
* Different forms of estoppel: common law estoppel, estoppel in pais, estoppel by representation estoppel by convention…promissory estoppel, proprietary estoppel and equitable estoppel. * Above differences in estoppel not important today – grouped together as a reference to unconscionability. main differences = common law estoppels (based on representations of facts) and equitable (relying on promises or assurances) * Object of estoppel: Dixon J – prevent unjust departure by one person from an assumption adopted by another …unless the assumption be adhered to, would operate to that other’s detriment. Contrast between object of estoppel & consideration. Consideration – mark off promises as breaches and use remedies.
Estoppel aims to prevent unjust departures from justified assumption, substitute for consideration. * Protection of reliance: promises supported by consideration enforced by contracts. Estoppel goes one step further- promise and reliance! Thompson v Palmer Dixon J: departure considered unjust when other party adopting it did it at a disadvangtage – so that departure of the assumption would cause detriment. * Unconscionability and injustice are main elements to estoppel. * Promise does not have to be supported by consideration to be estoppelled. * Estoppel can arise in with (used as a defense) or without pre – existing legal relationship …without legal relationship more controversial – preclude the promisor that no rights arose from the promise. There is no consideration – therefore through estoppel can require rights that didn’t previously exist…- thus assisting to create rights and obligations where none existed before – used as offense. Estoppel in the context of pre-existing…
* Legal relationship doesn’t need to be contractual.
* From 1983 – promissory estoppel applicable in aus. Hughes v Metropolitan
railway co – lord cairns – set up the doctrine of promissory estoppel. http://www.e-lawresources.co.uk/Promissory-estoppel.php * Above cased used as precedence for result of High trees. Denning J. Result of high trees – can claim original rent after the war but not the difference from the years. * Again estoppel arised out of promised suspension of contractual rights acceptedin the house ofloards in tool metal manufacturing co ltd v tungsten electric co ltd. * Not until 1983 in high court decision in legion v hateley was promissory estoppel authorised in Australia – confirmation of the principle in the highest. Contract for sale of land need to be completed – time for completion was the essence of the contract. Originally was estoppeled from the bridging loan by then appealed to the high court – promissory estoppel was held as part of the law in Victoria – but cant read ms williams’s statement as a promise or representation – was unclear and ambiguous. Estoppel where no pre – existing legal relationship
* Waltons stores – no pre – existing contract – offensive stance for the doctrine was effectively recogfnised in the decision to award damages. * Estoppel and consideration: estoppel operates when promisor going back on promise is considered unjust, unconscionable or unequitable. Doesn’t depend on consideration. * Relief of defendant is at the discretion of the court
* Look up watsons case pg 153 – there was no previous relationship between the two parties which would’ve authorised an estoppel – Kearney J still awarded Mahers damages – holding waltons was estopped from denying that a concluded contract by way of exchange existed. Appeal to high court dismissed. There was an implied promised to complete the transaction which waltons was estopped from denying * Other judges – deane J and Gaudron J (ewliws on common law estopped- the actions in damages of breach of the contractwhich walrons was estopped from denying) thought that Waltons was bound to adhere to an assumption that a binding contract existed, waltons was bound by an assumption of fact that contracts had been exchanged. * Either way was entitled to damageds – mainly because of their reliance on the promise had generated an equity in their favour – entitled to damages in lieu of specific performance (LOOK UP SPECFIC PROFERMANce – was meant to complete the transaction under this, but it was no longer appropriate)
Promise to grant proprietary interest where terms still to be agreed: * Prior to waltons – non – contractual promiseds to grant proprietary interests in land were enforced – notwithstanding that terms were still to be agreed., it was not crucial for there to be an intentionto to enter any contractual rtelationship – only need to be clearly contrmplateed., known as proprietary estoppel . required circumstances = detrimental reliance by promisee – e.g. form of effecting improvements on promisors land. * Austotel pty v Franklins selfserve pty ltd – didn’t succeed – need an “equity” in its fabour had arisien from the combination of encouragement that a lease would be entered into, and Austtotel standing by which expenditure occurred. Franklins intentionally refrained from entering into the lease from discussing the price element which proved to be cruicial – franklins was not encouraged to proceed. Elements of promissory estoppel:
1. Other party has altered his position
2. Promisor can resile from his promise on giving reasonable notice which need not to be a formal notice – giving the promise a reasonable opportunity of resuming his position 3. The promise only becomes final and irrevocable if the promise cant resume his position. Brennan J’s (Waltons stores (Interstate) v Maher) six-point test for when the promisor cannot go back on his/her word: used in several subsequent cases – and will be used to determine if promissory estoppel is able to be executed in the given case. However it hasn’t been approved by the high court – and it may be that element 1. Places undue emphasis on the need for an assumption or expectation that a legal relationship existed or would exist • Promisee (Maher = P) assumes existence of particular legal relationship. That a relationship had existed or is expected to exist – that the defendant would not be free to withdraw from the expected legal relationship • Promisor (Waltons = D) responsible for this assumption
• Promisee acted/did not act in reliance on that assumption • Promisor knew what promisee would do or intended for promisee to act in this way • Promisee will suffer loss or some detriment or harm if the assumption/expectation is not fulfilled • Promisor did not take any steps to warn promisee s/he may not fulfil expectation. Defendant failed to act to avoid detriment whether by fulfilling the assumption or expectation
* A promise may be expressed / implied – Legione v Hateley – promise that is relied upon must be clear and unambigious – but it can be implied – treat silence as a promise e.g. Waltons Stores (interstate) where silence on the part was regarded as implying a promise to complete the transaction. * Reliance and detriment – form of consideration is the incurring of a detriment – change of position will not suffice as the consideration necessary to make promise binding. Once reliance ( definite and substantial) is established , need to protect against the retraction of promise becomes more apparent. Je Maintiendrai Pty Ltd – lessor agreed at the lessee’s requestion, but without considerataion, to accept a reduced rent for an indefinite period. Sued for full rent – judged that it would result in some detriment and therefore some injustice to the other party. Both judges came up with different results…this case may not be necessarily * Unconscionability – unconscionability is the driing force behind promissory estoppel. Legione – purchasers had sufficient funds to complete when the extense of time expired – missed change – proided element of detriment which would have made it unconscionable for the vendor to depart frmot he promise – . relief will not be granted if the promise is not actring in good conscience – D & C buildierss LTD v Rees – reduced financial payment was not accepted because taking advantage of the creditors financial situation.
Operation of the doctrine – remedies- remedy is proportionate to the detriement suffered by the promise in reliance on the representation, promise or assurance. Two perspective on relief: * Permit promisor to resile from the presentation or promise, operation of estoppel means that the promise is granted a remedy (usually money) proportionate to the actual detriment suffered by reason of its reliance * Appropriate to hold the promisor to the assumption generate by the promise – operation of estoppel means that the prmoisee is granted relief equivalent to enforcement of the promise. Suspension and termination of the promisors right – one operation of the doctrine of pe is to suspend the promisors right – central londen – and legion . termination of rights – estoppel is permanent where a permanent abrogation has been promised and when such detriment has been suffered as to make it impossible for the promisseee to resume his or her position Enforcement of an equity – the court will determine the minimum equity and such relief as it is necessary to protecxt the promise – waltons – enforce equity generated by the promise’s reliance on the implied promise.
An order for damages may be made – but only id that is necessary for giving effect to the equity. The approach suggests that a promise founding a promissory estoppel is never directly enfoced – it is the promisee’s equity which is enforced. This keeps operation of promissory estiooel distinct from the enforcement of contractual promises supported by consideration – makes law more complex. The reality is that a promise which is not supported by consideration froms the basis for the promise;s claims in damange. In calculating damaged for breach of contract is to place the promise in the position which it would have occupied had the promise been performed. Giving effect to the assumption – the object of estoppel is to give effect for the assumption – if A represents, or promises that a contractual relation exists – or will exists between a & B – and the requiremenets of estoppel are satisdied, the court must give effect to the assumption and treat A as contractually bound to B or bound to enter into the contract with B. Chapter 2 estoppel:
* No longer sufficient to consider the legal relationship between two commercial entities purely in terms of contract they have made * Contract include those that are binding, self-imposed and law – imposed obligations. * Waltons stores transformed the law of estoppel and consequently contract – impacts the negotiation of a contract. Rules of formation, the doctrine of consideration, the modification of a contractual relationship, breach, the settlement process and the conduct of litigation. * Estoppel can impose obligations in relationships of contractual and otherwise. * Estoppel aims to prevent inconsistent behaviour where it would adversely affect the other – law is prepared to provide a remedy should such an event occur. * Estoppel isn’t used in social matter
* The elements of estoppel exists when a promise, representation or conduct of one party leads another to assumt that the first party will follow a certain course of action or certain legal relationship exist and the other acts on that assum,ption in some material way – relies on the promise, representation or conduct to his or her detriement so that it would be unconscionable for the first party to go back on the promise or representation or ro undermine the assumption generated by that partty’s conduct. * Estoppel set up the scene for causes of action – it is a evidentiary tole – provides for cause of action. * Statement or conduct needs to be clear and unambigious – estoppel would not operated if the party making the statement expressly reserved his or her rights or where the statement was equivocal as in legion b hateley – bridging finance.
* Estoppel operating on the basis of understanding, assumption nor conduct – hughes v metro railway – * – waltons case – tried to establish a contract in the absence of formal execution – speel out what the alledge contract is and what the essential terms are. * Prior to waltons – lord denning high tree established or revived a principle – promissory estoppel – that a contracting party may be prevented from insisting on his or her strict contractual rights if, having redard to the dealings that have taken place between the parties, in particular assurances about how the contract will proceed , It would be inequiablt to allow such insistence. Thus a landloar who promises to accept a reduced rent, may be estopped from clainging the full rent, even though the promise by that landload is not supported by consideration and therefore as a matter of strict contract law is not a binding promise. * Waltons – used to enforce a positive forface – can be used as sword and not a shield – no longer condiened to exisitnign contractual relationships. * Types of estoppel:
Estoppel by representation (or in pais) operates to prevent departure from a represenatation by words or conduct of exisiting facts if the representee has acted in reliance on it. Proprietary estoppel – give enforceable rights over land to a person who has been assured that they have or will have an interest in the land owned by the person giving the assurance, so long as the person acts on the assurance by making improvements Promissory estoppel – reborn in high trees – prevents departure from promissory statements that have been relied on,. Basically the above types is unified – a person will be prevented from departing from an assumption, representation, promise or assurance that he or she has encouraged or made if it would be unconscionable to do so in the circumstances. * Difference between common law estoppel as a rule of evidence and equitable estoppel which creates substantive rights * Waltons case
* Estoppel and considertation – contractual promise cant be legally binding unless it is supported by consideration – made in part of a mutual exchange. Doctrine preserved – be the determining principle as to the enforceability of promises. Lose force – courts are more prepred to hold that promises are enforceable in the absence of consideration through the mechanism of estoppel – but estoppel is to be considered as exceptional rather than simply as another way to enforce promises. * A contractual obligation is created by the agreement of the parties: an equity created by estoppel may be imposed irrespective of any agreement by the party bound. Relief –
* Variable remedy – limited to eliminated the detriment – the minimum equity to do justice. Protecting the reliance rather than the expectration interest in relation to a liability that is determined by detrimental reliance. Equity calls for the enforcement of a promise only as a means of aoiding the detriment and only to the extent necessary to achiee that object. * Remedy proportional to detriment conduct – sometimes used to fulfil the expectation interest. Must keep promise . range of remedies available under the trades practice act 1974 (cth) * Key ingredient – detrimental reliance and unconscionability –relation to waltosn – simple to change one’smid or break a promise isnotitself unconscionable in eyes of law – but when reliance has been placed on the promise and gfreater the detriemtn then more need for estoppel – * (1988) 164 CLR 387 at 406 – as failure to fulfil a promise does not of itself amount to unconscionable conduct, mere reliance on as executor promise to do something, resultiging the in the promise changing his position or suffering detreiment, does not bring promissory estoppel into play, something more is require – unconscionable conduct on the part of the promisor. * Reliance – must relate to legal relations –
* Encouraged or induced reliance – would not have continued contract unless it were true. * 3. Point that nothing to foster reliance or has positively indicated that there should be no reliance – this prevents estoppel. Submitted that an obuective test should be applied – an estoppel will not arise on the basis of an unforeseen and unforeseeable detriment but nor is it necessary that the precise detriment relied upon be foreseen or foreseeable….reasonable person should realise it would be relied on. * 4. Attorney general (hong kong) v Jumphreys estate (queens gardens) ltd – has been used trive. The negotiations were subject to contract and this precluded the possibility of arguing for the formation of a contractual relationship in the absernce of formal contract. Different to watosn…because in this case they were under time pressure and therefore tup the balance the other way.
Reasonableness of the reliance is tied tothepromisor’s ecpectation or reasonable expectations – if the promisor has encouragred reliance or that thepromisee will act in reliancein a creatin way then the promise who acts in that way is generally acting reasonable and satisfies this ingredient for estoppel. If the reliance are either unreasonable because it was forewarened the other party should not reply or commonesence dictates should be unreasonable to rely – then estopel isunsucessful. * Musthave altered position – remedies differ for level of reliance: 1. Promise may merely have accepted and acquiesced in the new arrangement believing that the prmise would be kepy 2. A promise may have changed his or her position, that is, done something that he or she would not have done if the promise had not been made 3. The promise may have changed his or her position but also suffer material disadvantage or detriement if the promisor were allowed to resile. * This is justthe 6 pointtest
* Deane J – unconscionable will commonly involved the use of or insistence upon legal entitlement to take advantage of another’s special vulnerability or misadvernture in a way that is unreasonable and oppressive to an extent that affronds ordinary minimum standards of fair dealings. * Je maintiendrai pty ltd v qualia – a classic case of a landlord agreeing to accept a reduced rent, the court was concerned to analysse what detriment the tenant suffered when the landloard sured for the unpaid back rentl. No attention paid to fact that landlord had willinginly agreed to reduce the rent – thereby securing the advantage of retaining a reliable tenant. Unconscionability needs to be determined by looking botyh to the promises detrimental reliance and the conduct of the promisor. * Impact of estopple- permanent operation from the outset – or suspensory . example of substantive rtight being extinguished is the landlord and tenant case where if the estoppel operares, the right to unpaid back rent is extinguished for ever. The landlord’s right to reinstate the full contract rent for the furture by giving notice, is preserved. * An assurance to accept reduced rent could mean either that the obligation to pay full rent is suspended or it is extinguished -0 usually the latter interpretation prevails.
It cant be said, in the case of reduced rent having been paid, that the promise cannot resume his or herposition.it is not impossible for the tenant to payu the unpaid back rent. Yet the courts clearly treat the estoppel as being permanent and not merely suspensory , that is, the tenants obligation to pay the difference is extinguished rather than delayed,. Statement that estoppel is suspensory and will only become permanent if the promise cant resume their position – this is not true. * Parol evidence rule – gibe primacy to the written document and forbids attemptsd to add to, vary or contradict the written contract by adducing evidence of conersations, letters and so forth, so long as the parties intended that the document constituted their entire agreement. There has been exceptions to rule – estoppel allows evidence of pre- contractual conversations – can oral evidence be used that will affect the operation of the written contract. The parol evidence rule is often “reinforced” by the use of an entire agreement clause in the written contractthis caluse is clearly effective to ensure that only the terms in the written contract are binding on the parties and that any external alledged contractual promises (suchas in a latter) are excluded. In short the clause is effective to exclude extra terms * Irrevocal offer – estoppel could be used to prevent the offeror from withdrawing the offer before completion fo the requected act, so long as the offeree stated to perfor.
* Contract variation – estoppel may operate during the course of a contractual relationship to preent departure from a negative promise varying a term of the contract – for example, “ you need not pay the full rent…” or iy may bind the parties to a common assumption (traditionally called estoppel by convention) this assumption may be mistaken but is nevertheless bdinging if to depart from it would be unconscionable. * Parol ebvidence and rule in hoyts’ v spencer – estoppel may be used to add to, vary or even contradict the written terms of a contract, though judicial attitudes to this use or estoppell are mixed. In hoyts – rule holds that a collateral contract will not be enforced if it contradicts the main contract., may not be enforceable as a contract but is enforceable on the basis of estoppel . hoyts – say they wont included section 5 in the contract, tenant signs- but landlord breaks promise- under contract he is allowed to but under estoppel isn’t. this rules needs to be changed as it causes inconsistency.
Australian business law:
Consideration – something for something – a mutual exchange- he continued leasing for benefit – you still get a customer baser oir a rental despite economic circumstance – didn’t havae to habve empty have an empty printer. Even if it isn’t – promissory estoppel would still operate regardless of consideration Use of 5-480 – partment of a debt is not good consideration – if the creditor agrees to accept something different in kind – lower value than the debt is discharged. 5-485 promissory estoppel – overcome unfairness of the principle in foakes v beer that part payment of a debt is not good consideration. High trees – legion v hatelet waltons staores on pg 353
Use of musumeci v mindaell pty ltd 1944 – shop and rent 0 consideration for D promise to reduce rent Business Law
* Part payment pg 380
* Promissory estopped known as an equiable remedy
* Was established in 1946 in central longer – only a defence. Was originated from the two 19th contrary english case – hughes v metropolitan railway 1877 and Birmingham &7 distrcit land co London and northwestern railway. Refer to pg 383 for more information
* Williams v Roffey Bros used in Musumeci v Winadell…this in Australia may be enforceable by promissory estoppel. However promise may have difficulty establishing detrimental reliance on the promise if all that they have done is perform their existing contractual duty. * Look up case – its too blurry
* Could we discuss duress – was wonderworks under financial pressure and was walts taking advantage of his economic circumstances – cant argue this because its states when the manager of wonderowrks pty ltd learn of walts difficulty – but also can say that it went to afford other purchase – 1000 a month on framing. * 3.2 – rule in Pinnel’s case – part payment of a debt. In early 1602 in Pinnel’s case ((1602)) 77 ER 237 – court said at page 237 “ payment of a lesser sum on the day in satisfaction of a freater cannot be any satisfaction for the whole” – this is because less than the considered amount is paid – further even if the party promised not to sue for the full amount – this is not legally enforceable because there was no consideration to bind the party to the promise. * Pinnel’s case – Cole paid Pinnel £5.2 instead of £8.1 on an earlier date, which was accepted by Pinnel in full satisfaction.
Pinnel later sued for the balance. It was help that by paying the money beforeit was due, cole had done something that was not originally bound to do and that constituted sufficient consideration for Pinnel’s promise to forgo the balance. Pinnel’s case- part of contract law. * Rules that developed after the pinnel’s case – where payment was paid in a different manner, different time or different place from what was contractually agreed to, such payment may constitute sufficient consideration to successfully defend an action for the balance of moneys owning as they have done something that they weren’t contractually obligated to do. If creditor accepts that payment of lesser sum in full and final settlement in any of these circumstances they are bound not to sue for balance. * Exceptions to Pinnel’s case: subject of considerable criticism. Use of Foakes v Beer: Earl of Selbourne LC made observation: “improvement in our law, if a release or acquittance of the whole debt, on payment of any sum which the creditor might be content to receive by way of accord and satisfaction (though less than the whole), were held to be, generally, binding, though not under seal.
Further LORD BLAKCBURN stated that in business today, more beneficial to pay promptly of part of demand that to insist on their rights and enforce payments of the whole. * Reinforced in decisions about musumeci: Santow J held that the landlord was bound by promise to accept a reduced rental on the basis that, even though the tenants were doing less that contractually obliged, they provided the landloard with a pracitical benefit ( and had themselves incurred a detriment) . * Gibson Lj in the english court of appeal decision in re selectmove ltd – “when a creditor and a debtor who are at arm’s length reach agreement on the payment of the debt by instalments to accommodate the debt, the creditor will no doubt always see a practical benefit to himself in so doing.” * Anyway it doesn’t matter – because an exception based on the doctrine of promissory estoppel stops the party from resiling from a promise they have made . USE THIS CASE FIRST TO OPEN UP THEN LEAD TO PROMISSORY ESTOPPEL. * Several categories of estoppel – all do same thing. Unconscionable. Cant go back on promise. * Lord’s dennings
* Subsequent cases – promissory estoppel only applied in instances where parties were in contractual relationship – promise in question was negative. Accepted it was used as a sheld – a defence to an action by the promisor seeking to resile from the promise , not a swoed – that is a cause of action. *
Restrictions of PE removed in Australia but high court decisions in waltons stores. Set up prerequisite 6 steps `