Promissory Estoppel and Intention to Create Legal Relations

Promissory estoppel: Equitable claim that is only available in the absence of consideration. (See Hughes v. Metropolitan railway) There are 6 criteria that are needed to establish promissory estoppel:

1. There must be a pre-existing relationshipa. Durham fancy goods v. Michael Jackson fancy goods – liability of the bill of exchange

(e.g. cheque). Donaldson LJ: It does not have to be a pre-existing contractual relationship, but it does have to be something that would give rise to penalties and liability (i.e. a legal relationship of some kind). If the pre-existing relationship arises because of a statute then that would suffice for the purposes of promissory estoppel.

b. The Henrick Sith – Shipping contract case. There is no contract arising in this case, however the parties believed that they had a contract. The belief that a contract was in place is enough to constitute estoppel. Triteil is having none of this – this case creates legal relations where previously there were none.

2. There must be a clear and unequivocal promisea. The promise must effect the legal relationship between the parties. It must be clear

that the promisor is not insisting on their full legal rights. Woodhouse v. Nigerian Produce marketing company – Woodhouse buy coco in England and Nigerian guys sell that shit. Prior to 1967 the contract prices were stated in Nigerian pounds (which had the same value as sterling at that stage). However, there was a devaluation so Woodhouse asked for a payment in sterling instead. The Nigerian guys refused to release the coco. They claimed that there was part payment of a debt due to the currency fluctuation. Is the promise to shift from Nigerian pounds to sterling enforceable in court? H of L state that the promise isn’t clear enough. From this case: It must be a promise and nothing else, the promise doesn’t need to be express (may be implied) and whether or not it is a clear and unequivocal promise is a question of fact.

3. There must by reliance (on the promise made by the promisor) by the promiseea. WJ Allen & co. v. Company – payment by letter of credit, the letter of credit should

have been opened in Kenyan currency, but was actually opened in pounds. However, the promise had still been able to draw on this money, meaning that it wasn’t exactly a detriment. Denning (in an obiter statement) does not think that detriment is a prerequisite for promissory estoppel, instead you need a change of position.

b. The post chaser – something about shipping. Gough LJ (in a ratio statement this time): Detrimental reliance is not necessary for promissory estoppel. A lost opportunity is necessary. The test for this is whether the promise has changed their position vis a vis the promisor (which wouldn’t necessarily have done had it not been for the promise made by the promisor)

4. Is it inequitable for the promisor to go back on the promise?

a. TIME (e.g. post chaser). The time between the making of the promise and then going back on it. The longer the period of time, the more likely it is to be deemed inequitable.

b. CIRCUMSTANCES SURROUNDING THE PROMISE. (D&C builders v. Reece) - Claimant has done building work for the defendant and is now owed £500. They press for the £500, but eventually take £300 in part payment (part payment of a debt is not good consideration). The defendants knew that the claimants were in financial difficulty and were going insolvent, so they offered the £300 and would give no more. The claimant then brings an action for all of the money. Denning: There is clearly a promise to not enforce the full debt here. However, promissory estoppel is not at work here because the only reason the part payment was offered is because they were taking financial advantage of the situation. Inequitable, therefore claimant awarded full price.

c. CHANGE IN EVENTS. Has there been a change in events between giving the promise and insistence upon full contractual rights? If this is the case then it is possible to go back on the promise. (High trees house case?) – It was ok to change the price of the rent because of a change in circumstances (end of the war).

5. Promissory estoppel is only suspensory, it doesn’t extinguish rights.a. Read Treital

6. Promissory estoppel is ‘a shield and not a sword’a. Coombe v Coombe – It can only be used to defend an action, not as the base for a

claim. In Coombe, the wife tries to sue the husband for maintenance payments. There is no consideration for the promise to pay maintenance so she relies upon promissory estoppel . Denning: P.E. is a shield not a sword and cannot be used for this claim, therefore the action failed.

b. However, this does not mean that P.E. is only available to the defendant. Scenario: Landlord in Hughes serves notice to quit on the tenant. Tenant goes to court to challenge validity of notice to quit (tenant is claimant). Landlord’s defence is that the tenant hasn’t carried out repairs. Tenant then uses P.E. to rebut the landlord’s claim. Here we can see the claimant using P.E., but not as a cause of action.

Random: Couple try for a child. Woman gives eggs to be frozen, they are fertilised by bloke’s sperm. Woman then has cancer and becomes infertile. Man then decides that he doesn’t wish to go ahead with having a child. Can P.E. be used? Court judgment: Technically P.E. could work, but out of principle we will not allow it.

Intention to create legal relations

The court will only enforce agreements where this intention exists. Contracts between families and contracts between husbands and wives are generally not enforceable in court (Balfour v. Balfour). However, there are exceptions. The test is whether both parties want the contract to have have a legal effect. (See Jones v. Paddasomething – on the sheet). Also see Rose v. Frank for commercial realtions.