File Copyright Online - File mutual Divorce in Delhi - Online Legal Advice - Lawyers in India

Does Promissory Estoppel Serve As A Series Of Legal Doctrines That Act As Both, A Shield And A Sword In Guarding Against The Unconscionable?

Law, being a social institution also evolves with time and changes in society.[1] These changes are guided by and conform to the cannons of justice, equity and good conscience.

The aim of this research paper is to explore the evolution of the doctrine of promissory estoppel with regard to English and Australian legal systems.

Further, the paper will aim to address the transition of the traditional doctrine of estoppel and its use from a shield in earlier cases to a sword in the most recent case of Walton Stores v Maher.

Introduction
The principle of promissory estoppel is an emerging concept in legal systems and is forever evolving. This principle has developed through various jurisdiction pronouncements with the roots tracing back to Lord Denning's judgement which recognised the doctrine in the High Trees Case.[2] From there, it saw many changes and was accepted as a versatile principle inculcating the various ideas of equity and good conscience in legal systems.

The element of consideration has been an important aspect in the pure and rigorous application of law of equity. The interference of the court, in this regard to uphold justice and to prevent an erosion of the element of consideration lies in the thoughtful expansion of the doctrine of estoppel. [3]

The essence of this doctrine is to protect justifiable reliance on a promise.[4] Therefore, it is a legal doctrine that may be used in a situation to stop a person from going back on a promise on which the other party relied. When a party makes a promise with the intention of creating legal relations with another party and that party acts on it, the promise should be binding for the party who is making it. Parties will not be allowed to go back on their promise as it would be against equity. [5]

Promissory Estoppel: The Traditional Doctrine

2.1 English System

Central London Property Trust v. High Trees Case

The principle laid down by Lord Denning in High Trees was on the basis of a person's promise or assurance which he intends to be binding on him and to be acted by the person to whom it is given, once acted upon, cannot go back on it and is bound by that promise. [6]

Australian System

Walton Stores (Interstate) Ltd. v. Maher[7]

The case laid down essential ingredients of promissory estoppel namely;
  • Assumption by the plaintiff of the existence of a legal relationship both, past or present therefore, the defendant is will not be allowed to go back or withdraw from the legal relationship;
  • Defendant induced the plaintiff to adopt assumption of expectation;
  • Plaintiff acted in reliance of the expectation or assumption;
  • Defendant knew and intended him to do so;
  • Failure of defendant to avoid detriment caused to plaintiff;[8]

Conceptual origin of Promissory Estoppel: English and Australian Legal Systems

English Legal System

The roots of the doctrine can be traced back to 1877 when reference was made to the broad rule of justice in Hughes v. Metropolitan case by Lord Crains.[9]
In the Hughes case, it was established that equity could not relive against forfeiture on the sole grounds of it being forfeiture. It could only intervene when there had been something in nature of negotiations or agreement between parties which made it inequitable to enforce the forfeiture. [10]

This principle was further developed by Lord Denning and his contribution to private law in the case of Central London Property Trust v. High Trees (Lord Denning stated that a representation intended to be acted on, and in fact acted on, by the representee may rise an estoppel against representor. [11]

In 1947, a new doctrine of promissory estoppel was derived from the 1877 judgement of Lord Crains wherein Lord Denning equated the previous principle to the horizon of equity jurisprudence which set a trend in motion.[12]

Australian Legal System

Inspired by the strong English authority on the doctrine of promissory estoppel, in the case of Legione v. Hateley[13], the High Court for the first time acknowledged the doctrine as an estoppel related to future intentions of parties. Previously, there was a recognition regarding the way existing facts are represented but, had not gone so far as to recognising future intention or promises in cases of estoppel.

Another important point which was stressed upon was that a promise may be implied rather than express. To find estoppel, the promise, whether express or implied, must be clear and that the reliance by the other party must be reasonable. [14]

These highlighted the use of promissory estoppel as a shield when the party who has made a promise is trying to go back on that promise which results in an unjust and unreasonable situation and causes detriment to one party. [15]

The sword bearer has arrived: The case of Walton Stores (Interstate) Ltd. v. Maher

The breakthrough of the doctrine and its use as a sword can be characterised as twofold:

  • High court broadened the doctrine by sanctioning the use as a sword;
  • Recognition of the doctrine as a general principle which operates in any circumstances of legal relations and not existing contractual relations.
These points weaken the requirement of promises being legally binding only when founded on consideration and raise fundamental questions about the kinds of promises that will be enforceable by courts. [16]

Facts of the case

Maher's were the owners of commercial premises and started negotiating with Walton Stores. The agreement was that Maher would demolish and replace the old building with a new one which would be leased by Walton Stores as their lease was due to expire soon.

The lawyers of both parties drafted transactions and amendments which were sent to both. The lawyers for the appellant wrote to the lawyers of the respondents that they would let them know if any of the amendments were not agreed to. There was no further communication from the appellants regarding the amendments and the respondents proceeded with the execution of the documents in a way of exchange. The covering letter sent by the respondents was not acknowledged by the appellants for nearly two months as they were considering as to whether or not they should proceed with the contract in lieu of the recent changes made to the business operations. Regardless, the respondents proceeded with the demolishing work which the appellant had knowledge of. Further, the construction was also in advance so as to meet the deadline of the set by the appellant. [17]

At the High Court Stage, Walton Stores [18] appeal was dismissed unanimously. The Court applied promissory estoppel in their ruling and held that Walton Stores in keeping the documents of the contracts with them and not doing anything to convey their changed position to Maher, were estopped from completely denying a concluded contract. The Court recognised the existence of an implied promise to complete the contract and that there was an assumption from the side of Maher that an exchange of contract would take place as a matter of course which had not taken place in fact. [19]

In the history of Australian cases of estoppel, it was previously held that as per common law, promissory estoppel could not apply in cases where there is a lack of representation to be a matter of fact. This was confirmed in the cases of Thompson v Palmer[20] and Grundt v Great Boundler Pty Gold Mines Ltd.,[21] where the scope of estoppel in common law did not extend to compel an adherence to representations of future intentions of parties. [22]

At the Court of Appeal stage, the arguments of Walton Stores were dismissed but on different grounds. It was stated that the application of estoppel was considered to be the omission of Walton Stores to correct the mistaken belief of Maher with regard to the existence of a contract as a way of exchange of documents. Further, the Supreme Court of New South Wales upheld previous rulings and awarded damages to Maher and dismissed Walton Stores argument of non-existent contractual relationship.

As per the aforementioned paragraphs, the common law principles of estoppel might not apply in theory to the facts of Walton Stores however, the courts expanded on the doctrine of promissory estoppel in the case before them. The expansion was heavily influenced by the developments in the English legal system. The principle of equity was brought in as a rescue to the plaintiff and to provide relief where a detriment is suffered on a basic assumption with regard to transactions and negotiations. Equity relief is available to a plaintiff on grounds that it would be unconscionable, unjust and unfair on the other party to ignore such assumption. [23]

Further, the courts relied on two major factors to determine unconscionable conduct;
  • Urgency -The lease of Walton Sores existing premises was set to end which meant that the new building as per their negotiations with Maher had to be available for fitting by 15th of January and completed by 5th of February. Due to time constraint, Walton Stores knew that Maher had to start the demolishing and construction process almost immediately. [24]
     
  • Counter Deed- Maher secured a deed on 11th of November, communicated it to Walton Stores. They did not revert back to Maher until 19th of January even when they knew about the deed and the high costs since 10th of December.[25]
The silence of the appellant was considered to be unconscionable along with the fact that Walton Stores should have either warned the respondents that they did not agree to the contract terms or were not interested in proceeding with the contract. Therefore, Walton Stores were estopped from repudiating the contract.[26]

Assumption that the contract would be exchanged was a valid one as to future rights, forming the very basis of equitable estoppel. The idea of the contracts being exchanged, even when it was a statement of future intention, was taken into consideration majorly in compelling adherence to promises of future intentions going beyond the principles of common law estoppel. [27]

Significance of the decision

The evolution of the doctrine of promissory estoppel from being influenced by a single principle of a unifying idea to one that entails various strands of equity jurisprudence, each sharing a common title, estoppel can be seen in the way Walton Stores has been addressed. Walton Stores makes it clear that unconscionability is the unifying principle that forms the very basis of different heads of equity incorporated under equitable estoppel. [28]

Moreover, the courts allowed the doctrine to be used as more than just a defence by enabling Maher to enforce a non-contractual obligation. This goes beyond the use of the doctrine as a shield as seen in previous cases, allowing it to now be used as a sword to create legal rights and basing an action on promissory estoppel. This arguably marks a significant expansion of the doctrine in the kinds of expectations and promises which would now be considered as binding by the courts as enforceable.[29]

However, the ruling may also significantly weaken or challenge the traditional doctrines of consideration and may induce greater uncertainty for the lawyers as well as judges in weighing in different equities involved in each individual case. [30]

Conclusion
In conclusion to the paper, promissory estoppel does not need consideration in return to the promisor to determine a detrimental effect. Promissory estoppel can be used as a shield to recover past damage or as a sword for future damage. Unconscionable doctrine and promissory estoppel are extensions of the traditional contract law where consideration is a prominent element. The expanded and changed doctrine of promissory estoppel is proceeding towards assuming a greater role in commercial scenarios especially involving failed expectations, misunderstandings or mistakes. As explored by the paper, the estoppel sword has arrived and it being in the hands of lawyers, will for sure witness significant usage in the years to come.

End-Notes:
  1. David N. Schiff, 'SOCIO-LEGAL THEORY: SOCIAL STRUCTURE AND LAW' (1976) 39 The Modern Law Review accessed 10 November 2018.
  2. [1947] KB 130; [1956] 1 All ER 256; 62 TLR 557; [1947] LJR 77; 175 LT 333
  3. Lalit Kumar Sharma, Doctrine Of Promissory Estoppel (Deep & Deep 1994).
  4. Michael B. Metzger, et al., Promissory Estoppel and Reliance on Illusory Promises, 44 Sw L.J. 841 (1990)
  5. Madhubala Solanki, 'Promissory Estoppel - Academike' (Academike, 2018) accessed 10 November 2018.
  6. [1947] KB 130; [1956] 1 All ER 256; 62 TLR 557; [1947] LJR 77; 175 LT 333
  7. (1988) 76 ALR 513; 164 CLR 387
  8. Mark Dorney and Peter Grimshaw, 'Walton Stores (Interstate) Ltd V Maher Case Note' (1988) 11 University of New South Wales Law Journal accessed 10 November 2018.
  9. Lalit Kumar Sharma, Doctrine Of Promissory Estoppel (Deep & Deep 1994).
  10. Madhubala Solanki, 'Promissory Estoppel - Academike' (Academike, 2018) accessed 10 November 2018.
  11. John W. Davies and Lord Denning, 'The Discipline Of Law' (1979) 128 University of Pennsylvania Law Review accessed 10 November 2018.
  12. Madhubala Solanki, 'Promissory Estoppel - Academike' (Academike, 2018)
  13. [1983] 57 ALJR 152 CLR 406, HCA
  14. Lalit Kumar Sharma, Doctrine Of Promissory Estoppel (Deep & Deep 1994).
  15. Linda Kirk, 'Confronting The Forms Of Action: The Emergence Of Substantive Estoppel' (1991) 13 Adelaide Law Riview accessed 10 November 2018.
  16. Clark Eugene, 'The Sword bearer Has Arrived: Promissory Estoppel And Walton Stores Interstate Ltd V Maher' (1987) 9 University of Tasmania Law Review accessed 10 November 2018.
  17. Ibid
  18. (1988) 76 ALR 513; 164 CLR 387
  19. 'Aus Contract Law | Case | Waltons Stores V Maher' (Australiancontractlaw.com, 2018) accessed 10 November 2018.
  20. (1933) 49 CLR507.
  21. (1937) 59 CLR 641.
  22. Clark Eugene, 'The Sword bearer Has Arrived: Promissory Estoppel And Walton Stores Interstate Ltd V Maher' (1987) 9 University of Tasmania Law Review accessed 10 November 2018.
  23. Thompson v Palmer (1933) 49 CLR507.
  24. Clark Eugene, 'The Sword bearer Has Arrived: Promissory Estoppel And Walton Stores Interstate Ltd V Maher' (1987) 9 University of Tasmania Law Review accessed 10 November 2018.
  25. Ibid
  26. Ibid
  27. Ibid
  28. Joseph Campbell, 'Waltons V. Maher: History, Unconscientiousness And Remedy - The 'Minimum Equity' (2013) 7 Journal of Equity accessed 10 November 2018.
  29. Mark Dorney and Peter Grimshaw, 'Walton Stores (Interstate) Ltd V Maher Case Note' (1988) 11 University of New South Wales Law Journal accessed 10 November 2018.
  30. Clark Eugene, 'The Sword bearer Has Arrived: Promissory Estoppel And Walton Stores Interstate Ltd V Maher' (1987) 9 University of Tasmania Law Review accessed 10 November 2018.

Law Article in India

Ask A Lawyers

You May Like

Legal Question & Answers



Lawyers in India - Search By City

Copyright Filing
Online Copyright Registration


LawArticles

How To File For Mutual Divorce In Delhi

Titile

How To File For Mutual Divorce In Delhi Mutual Consent Divorce is the Simplest Way to Obtain a D...

Section 482 CrPc - Quashing Of FIR: Guid...

Titile

The Inherent power under Section 482 in The Code Of Criminal Procedure, 1973 (37th Chapter of t...

Increased Age For Girls Marriage

Titile

It is hoped that the Prohibition of Child Marriage (Amendment) Bill, 2021, which intends to inc...

Sexually Provocative Outfit Statement In...

Titile

Wednesday, Live Law reported that a Kerala court ruled that the Indian Penal Code Section 354, ...

UP Population Control Bill

Titile

Population control is a massive problem in our country therefore in view of this problem the Ut...

Privatisation Of Government Sector

Titile

Privatization of presidency Sector Although in today's time most of the services provided in ou...

Lawyers Registration
Lawyers Membership - Get Clients Online


File caveat In Supreme Court Instantly