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AMK - SLR (2002) 37 (17-19) The Many Doctrines of Promissory Estoppel
AMK - SLR (2002) 37 (17-19) The Many Doctrines of Promissory Estoppel
Estoppel in general
For our purposes, estoppel (whose name is a variation of a Norman French word) comes from the law of evidence. Various doctrines are categorised under the heading of estoppel in the law of evidence, and they have little more in common than that they stop the defendant from saying or arguing something contrary to something else to the authority of which the defendant is bound. Most interesting to us is a category of estoppels called estoppel in pais, namely the rules of estoppel by convention and estoppel by representation. Under these rules, if you lead somebody to believe one thing then you cannot later claim the opposite to be true you are estopped from doing so, even if that which you are estopped from
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contract law
the landlord had led the tenant to believe that the six month limit would not be strictly enforced, and that the landlord could not then go back and require the repairs without reasonable notice. In other words, the landlord had waived his right to strictly enforce the contractual time limit. Denning J secured the place of equitable estoppel in our law in the case of Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130. The plaintiff let a flat to the defendants at a rent of 2,500 per annum, and then the Second World War broke out. In 1940 money was tight and many flats were unlet, and the plaintiff agreed to reduce the defendants rent by half. At the end of the war, the plaintiff put the rent back up to the amount to which the parties had contracted, and the court permitted him to do so. The court did, however, make it clear that the landlord could not have claimed the amount of rent to which he was contractually entitled for the war-time period because of his agreement to a lower rent even though that agreement was not contractually binding as the tenants had not provided any consideration. This is all very well, but how can we be so sure that promissory estoppel is restricted to the law of waiver rather than being as wide-ranging a basis for the enforcement of promises as the general law of contract? In English law, this point was decided in the case of Combe v Combe [1951] 2 KB 215, in which the Court of Appeal (including Denning again, now a Lord Justice) held that the doctrine of promissory estoppel can only operate as a shield and cannot be used to create a cause of action. Thus, a husbands promise to pay his wife 100 per annum after their divorce did not give her a right to sue for that money even though she had relied upon the promise. The doctrine of promissory estoppel (by analogy with waiver) can be used to prevent a promisor from enforcing his legal rights, but it cannot be used to create new legal rights in the promisee. Promissory estoppel can be used, in effect, to reduce the obligations already owed by the promisee to the promisor, but not to increase the obligations owed by the promisor to the promisee or to create new ones. It cannot, therefore, be used to create a new cause of action. This does not mean that the promisor must always be the claimant, as opposed to the defendant, only that the estoppel will not provide a cause of action and will only help a party to prove their case under a different cause of action (such as breach of contract). The fact that promissory estoppel is primarily a doctrine of waiver a shield and not a sword makes the analogy with other forms of estoppel a little stronger: you still cant sue for estoppel (like you can sue for contractual breach or tort), you can only use it to prove your case. Nevertheless, because promissory estoppels are about future conduct, the analogy with estoppel is just that. A final important point is that it is as yet unclear whether promissory estoppel operates to permanently waive the promisors legal rights, or whether the effect is only temporary (the term usually used is suspensory). The weight of opinion appears to be with the latter view.
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contract law
In that important case, the Court of Appeal somehow sidestepped Stilk v Myrick and held that consideration can be found in such situations where the party whose obligations are increased gets some practical benefit from the variation. Note that the law of promissory estoppel does not apply to variations by increase (since promissory estoppel only operates as a shield). In cases of waiver-type variation (or at least cases of waiver-type variation of a debt), the Roffey Bros practical benefit form of consideration does not apply, per the Court of Appeal in Re Selectmove [1995] 1 WLR 474, who felt unwilling or unable to circumvent the House of Lords decision in Foakes v Beer in the way that the Roffey Bros court circumvented the Stilk decision. In all waiver-type cases, of course, the doctrine of promissory estoppel will apply. Thus, rather neatly, in no case of variation of contract does the strict doctrine of consideration apply: in half, mere practical benefit will do (consideration after the Roffey Bros case), and in the other half mere reliance (promissory estoppel) will suffice. For the sake of clarity, it should be repeated that waiver by estoppel is not a variation in law, only a variation in effect (and even that is subject to debate about its suspensory effect, mentioned above); it is a non-contractual way of getting to a similar destination. (In D & C Builders v Rees [1966] 2 QB 617 Lord Denning expressly observed that the doctrine of consideration, as exemplified by Foakes v Beer, was still good law and that equitable estoppel only operated where it would be inequitable to allow the promisor to enforce his strict legal rights.) rights. This gift should fail in law because of the formality requirements for conveying proprietary rights, but it doesnt fail because it would be unfair for it to fail. How does the law decide when it would be unfair for a gift to fail even when it does not satisfy the formality requirements? It looks to see whether the donee (the recipient) has detrimentally relied upon the gift. This explains why the proprietary estoppel gives a proprietary right, which will bind third parties who have made no promise and induced no detriment: the source of the promisees rights in such cases is not the estoppel itself, rather the property rights of the donee which the estoppel enabled to be conveyed.
Postscript: a general doctrine of promissory estoppel that is not based on waiver or land law formalities?
In Australia and the USA there is a general doctrine of promissory estoppel whereby detrimental reliance upon a promise (not only a variation by waiver but also a promise between those with no pre-existing contract) causes the promise to be enforceable. As with proprietary estoppel, the award in such cases is the minimum required to do justice. The Australian case of Waltons Stores v Maher (1988) 164 CLR 387 is a key example, in which case the courts concentrated upon the unconscionability (what we call inequitability) of the circumstances as a way of justifying enforcement of the promise. In Australia and the USA, then, promissory estoppel is a full-blown, wide-ranging way of enforcing promises that operates alongside the law of contract it can create new rights amongst those with no existing contract, and does not operate merely as a form of waiver. English law does not yet recognise a wide (sword and shield) estoppel doctrine in which promises are remedied by an award of damages measuring the detrimental reliance, but such a doctrine is much easier to justify than a wide doctrine in which expectation damages are awarded (as in many Australian and US cases) or performance is ordered (as in proprietary estoppel cases). I would suggest (although academics are split on this) that expectation damages and performance should only be awarded in contract cases cases in which the convention of promises being binding is enforced. On the other hand, the wider principles behind tort law could justify a wide doctrine of promissory estoppel giving rise to detrimental reliance damages. Just as it is an actionable wrong in many situations to cause someone to detrimentally rely upon ones statement where that statement is carelessly given (Hedley Byrne v Heller [1964] AC 465 applying the tort of negligence), one could argue that it is equally wrong to cause someone to detrimentally rely upon ones promise and then not perform it. This fits Brennan Js explanation of promissory estoppel in Waltons Stores, but not the general application of that doctrine in that case or any other significant Australian and American cases. For now, though, such a doctrine is not law in England and Wales.
Proprietary estoppel
You may think things are complicated, but theyre about to get worse. There is a second doctrine of equitable estoppel that is called proprietary estoppel. Proprietary estoppel applies to cases in which a party with rights to property leads another to believe either that the other party has rights to that property (often labelled acquiescence), or will be granted some in future. This doctrine is not merely an equitable doctrine of waiver, as the Combe v Combe shield not sword limitation does not apply to proprietary estoppel. It is also fairly clear that detrimental reliance, rather than merely reliance, is required on the part of the party gaining the rights. The remedy in such cases is whatever is required to do equity (fairness) between the parties. This will often amount to an award by the court of the full proprietary right that was promised. Thus, in Pascoe v Turner [1979] 1 WLR 431 a man told a former cohabitee woman that the house they had lived in was hers, and she later spent some money on repairs and improvements to the property. The man had led the woman to believe that she had a fee simple effectively ownership in the property, she had detrimentally relied on this, and so the court awarded her the fee simple. Spending 230 ensured that the woman got full title to a house. This apparently strange doctrine (newly formed promises being fully binding without consideration) can be explained by the proprietary context. To convey proprietary rights in land, in contrast with making other gifts, requires certain formalities to be satisfied (see ss 5253 of the Law of Property Act 1925 and s 2 of the Law Reform (Miscellaneous Provisions) Act 1989), although in many informal situations they often are not (since in informal situations people dont go to lawyers and without lawyers they dont know about formality requirements). The doctrine of proprietary estoppel is probably best explained (like part of the law of constructive trusts) as a set of situations in which the law ignores the formality requirements because of the detrimental reliance that has been incurred. Most cases of proprietary estoppel are gifts rather than promises to do things in the future one person tells the other that they have rights in property. In effect, this is an attempted gift of those proprietary
Conclusion
This has been only one interpretation of the messy law of promissory estoppel. What is certain is that no interpretation can explain all the cases, and that the various requirements of promissory estoppel are hard to state and harder to apply. Nevertheless, it is suggested that the basic ideas presented here, coupled with an understanding of the contractual variation context of promissory estoppel and the formality rules of land law that provide the context for the doctrine of proprietary estoppel, should go some way to demystifying a challenging topic.
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