Law of Contract

Assessed Coursework Essay

What is clear is that the doctrine derived from High Trees which has
become known as the doctrine of promissory estoppel has
developed in a way that means that it has only a limited impact on the
doctrine of consideration per Stone, Devenney & Cunningham (2011).
Discuss the extent to which you agree with this statement. Your
discussion should take account of both the origins of the doctrine and
importantly, its subsequent development through the case law.

In the law of contracts, promissory estoppel is an equitable doctrine that can,

in certain instances, prevent an individual from going back on a promise that
is not supported by consideration. (Stone, 2013) The doctrine states that if a
party changes his or her position substantially either by acting or the lack of
action of a gratuitous promise, then the party can enforce that promise despite
lacking the presence of essential elements of a contract. (Turner and Martin,
2010) In English law, a promise made without consideration is generally not
enforceable. It is also known as a gratuitous or bare promise.

Promissory estoppel is derived from equity and was developed to reduce or

balance out the unfair effects for consideration. (Stone, 2013) It is said to be
equitys answer to the strictures of the law of consideration (Kramer, 2002).
Promissory estoppel originated from the doctrine of waiver, the law of giving
up ones rights. It is basically a doctrine that allows the enforcement of

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contracts without the element of consideration if certain requirements were

satisfied. (McKendrick, 2013) It is one of the various kinds of estoppel all of
which is said to be mechanisms for enforcing consistency (Cooke, 2000).

Lord Dennings developed the doctrine from the previous doctrine of waiver in
obiter statements. (Turner, 2013). The origins of promissory estoppel did not
come from but was developed by an obiter dicta statement by Denning J (as
he then was) in the case of Central London Property Trust Ltd v High Trees
Ltd [1974]. The concept was first raised in the case of Hughes v Metropolitan
Railway, which was then breathe new life into, by Denning J (which he was
then) in an orbiter statement made by Lord Dennings in the case of High
Trees. ()This case involves a claim from Central London (landlord), which
demands High Trees (tenant) to resume payment of the original rent starting
from 1945 since the war (from 1940-1945) was over. In his Lordships
judgment, Denning J states that had Central London sued for the difference of
rent between 1940 and 1945, their claim would fail. In other words, Central
London will be estopped from such a claim. Promissory estoppel is therefore
suspensive and not extinctive. It was found that even though the promise to
accept a reduced rent was not supported by consideration, the doctrine of
promissory estoppel would have been raised, preventing the recovery of the
forgone rent. Later, this was further affirmed in the House of Lords in Tool
Metal Manufacturing v Tungsten case, where it was held that a suspended
contractual right can be resumed by the promisor if he or she gave sufficient
notice of their intention to the promisee. (McKendrick, 2013)

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To establish a case based upon the principles of equitable promissory

estoppel, specific elements must be established in order to invoke the
doctrine, as not all promises are eligible for enforcement under the doctrine.
(Stone, 2013) Firstly, the doctrine can only be used if there is a pre-existing
contractual relationship between the parties. (Monaghan, 2013) It cannot be
used where one party promises exceeds what the contract requires or to pay
more than required. In addition, one party of the contract must have made a
clear and unequivocal promise that they will not fully enforce their legal rights
under that contract. The promise needs not to be expressed, it can be implied
from circumstances such as in the Hughes case. Moreover, the promisor
intends that promise be relied upon and the promise does in fact rely upon it.
(McKendrick, 2013) The party seeking redress must have relied upon the
promise in some way in order to have an actionable claim. The reliance must
be proved detrimental meaning that the party relying must have lost money or
suffered some negative consequences as a direct result of relying on the
promise. Also, the promisee must have acted upon that promise made by the
promisor. The promisee must be unable to resume his or her original position
due to the reliance. (Turner and Martin, 2010) Reliance is essential as the
doctrine was built around the idea of fairness. It would be inequitable for the
promisor to go back on their promise and claim his strict legal rights after the
promisee had relied on it. Lastly, promissory estoppel cannot be enforced
against the promissor. Thus, it can only be used as a defense and cannot be
used as a sword, meaning it cannot be used to create a cause of action.
(McKendrick, 2013) In Combe V. Combe, a wife sought to enforce her
divorced husbands promised annual payment of 100but failed. The court

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held that promissory estoppel does not create a cause of action or extend the
scope of existing ones, only to prevent the enforcement of rights already held.
As such the requirement of consideration in formation of contract is still
relevant. This case outlines that the estoppel is a shield and not a sword.
This doctrine is used as a rule of evidence that prevents the promissor from
denying the truth of statement that the promisee had relied. However, there
are circumstances when these elements are not required to use the doctrine
of promissory estoppel, which under investigation, varies from case to case

Promissory estoppel is created to alleviate the unfair effects of the doctrine of

consideration. (Feinman, 1992) According to how it operates, promissory
estoppel appears only the cases where a rigid insistence upon consideration
causes an inequitable judgment. However, the doctrine may also act as an
alternative to consideration in certain circumstances. As said above,
promissory estoppel is a doctrine that enables contracts and agreements to
be binding without consideration being exchanged. As stated by Lord Denning
a promise is intended to be binding, intended to be acted upon, and in fact
acted on, is binding so far as its term properly apply. (Central London
Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130) This sentence
implies that all that was required to make a promise enforceable is that the
party to whom it was made (promisee) has acted upon reliance on the
promise. Basically it adopts a theory based on reliance of the enforceability of
contracts. Therefore, this makes it irrelevant to whether the promisee has
provided anything in exchange to the promisor. (Kramer, 2002) This goes
clashes with the principles of the doctrine of consideration, as it requires an

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exchange between the parties before a contract can be legally binding.

(Monaghan, 2013) Under the English common law, formal contracts have
three basic elements: an offer, an acceptance and some sort of exchange of
consideration, anything of value. Contracts enforced under the doctrine of
promissory estoppel are especially unique in the way that they are missing the
consideration element. Consideration is the idea that there must be an
exchange of something of value before you have a contract. (McKendrick,
2013) It is a mechanism that helps the court with deciding which agreements
or promises are legally enforceable (e.g. a business transaction) and which
should not (e.g. a gift or an agreement between family members).
Consideration is usually required to make a promise enforceable. If no
consideration exists, the doctrine of promissory estoppel may help the
promisee enforce the promise if he has acted upon the promise to his
detriment. (Feinman, 1992) The development of promissory estoppel is one
that has a resounding effect upon considerations impact upon the law.
Promissory estoppel usually comes into play when there is no existence of a
formal contract but nevertheless, the parties involved acted as if there was
one. The courts use this doctrine in circumstances to impose a contract on the
agreement that is usually done in the interest of fairness. The possible
conflicts between the doctrine of consideration and estoppel to overcome
courts only permit the estoppel as a shield ad not a sword, it cannot establish
a new cause of action. (McKendrick, 2013) The requirements of consideration
to support a promise have been debated. This is particularly true when the
parties modify their obligation in the light of changed circumstances. In such
cases, the courts have invoked the equitable doctrine of promissory estoppel

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to enforce a promise that is not supported by any consideration. It has been

much debated that whether the use of promissory estoppel is justified in the
light of the importance of having a promise supported by consideration.
Evidently, the courts will still rely upon consideration for evidential purposes to
determine the validity of a contract. In that sense, the doctrine of promissory
estoppel requires some element of evidence in order to make a decision in
the interest of fairness and justice. (Tuner and Martin, 2010)

A good example of principles of the doctrines of consideration and promissory

estoppel clashing is the following example. If the doctrine of promissory
estoppel is applied, if A promises B 20,000 and intends for it to be a binding
promise and in reliance on As promise, B goes out and buy a car, A would be
bound to this promise. However, the doctrine of consideration would hold that
because B has not provided any consideration to A, A is therefore not bound
to B the 20,000 as promised. Although the common law strictly adheres to
the requirement of consideration, equity in certain instances will uphold
promises that are not supported by consideration through the doctrine of
promissory estoppel. Both the doctrine of promissory estoppel and
consideration boils down to the fundamental issue of whether a given promise
should be binding. If you have consideration and certainty and intent to create
legal relations, then the promise will be binding. If the promise if broken, you
can then sue for breach of contract. However, if you do not have
consideration, then you are stuck, however you might be able to use
promissory estoppel as a defense if you are being sued. For example, if
someone promised to reduce your rent and later sought to raise it. I

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personally believe that it is fair to say that the doctrine of promissory estoppel
is a subordinate option for the court to uphold justice. The doctrine does not
really have an extinctive effect on the doctrine of consideration.

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Bibliography:

Adam Kramer, Student Law Review 2002 (Volume 37)- The Many
Doctrines of Promissory Estoppel,
17<http://www.kramer.me.uk/adam/documents/AMK%20SLR%20(2002)%2037%20(1719)%20The%20many%20doctrines%20of%20promissory%20estoppel.pdf
> accessed 30 December 2011.

Central London Property Trust Ltd v High Trees House Ltd [1947] 1 KB
130

Cooke. E, The Modern Law of Estoppel, OUP, 2000, pp.1-2

Feinman, J. M. 1992. Last Promissory Estoppel Article, The. Fordham L.

Rev., 61 p. 303.

Hughes v Metropolitan Railway Co (1877) 2 AC 439

Mckendrick, E. (2013) Contract Law Text Cases and Materials. 5th ed.
Hampshire: Oxford University Press.

Monaghan, N. and Monaghan, C. 2013. Beginning contract law. London:

Routledge.

Stone, R. 2013. The modern law of contract. London: Routledge.

Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955] 2 All

ER 657

Turner, C. and Martin, J. 2010. Unlocking Contract Law. London: Hodder

Education.

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