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Doctrine of promissory estoppel under contract law

  • Meaning of Doctrine of promissory estoppel
  • Doctrine - law established through previous judgments
  • Promissory- promise or assurance
  • Estoppel - a legal bar to alleging or denying a fact because of one's own previous actions or words to the contrary

It's also known as ‘promissory estoppel’, ‘equitable estoppel’, ‘quasi estoppel’ and ‘new estoppel.

Legal meaning of the doctrine of promissory estoppel

  • When one individual or a party by his/their words or conduct make a clear promise intending to create a lawful relationship or effect legal relationship knowing that it'll be acted upon by another individual or a party or is already acted upon by, the promise made will become binding on the promisor making him unable to revert his promise so made.
  • The promisee acting under the promise suffer any damage as even unjust doesn't need to bind the promisor.
  • It is an equitable doctrine and is discretionary in nature and lays stress on justice and equity.
  • This doctrine has been recommended by the 108th law commission report to be clearly defined after s25. (Contract law, 1872). this doctrine find traces in the Indian evidence act,1872 where estoppel is defined under section 115 as When one person has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing”1
     
  • In Indira Bai v. Nand Kishore, 1991 AIR 1055 2,
    Sahai, J., stated:
    Estoppel is a rule of equity flowing out of fairness striking on behaviour deficient in good faith. It operates as a check on spurious conducting by preventing the inducer from taking advantage and assailing forfeiture already accomplished. It is invoked and applied to aid the law in the administration of justice. But for it, a great many injustices may have been perpetrated.

Research questions
  • When the doctrine in question was first cited and from there how it evolved to its contemporary context?
  • What are the essentials and elements that make this doctrine unique as it is? What were the recommendations by the 108th law commission report regarding the doctrine of promissory estoppel?
     

History And Contemporary Evolution Of Doctrine Of Promissory Estoppel

  • Estoppel is a rule of equity and various new dimensions have been exerted into this rule since its inception. Promissory estoppel is now recognized in courts here and in England but is remains a relatively new development.
     
  • Lord Cairns stated the doctrine in its earliest form.
    In Hughes v. Metropolitan Railway Company 1877 (2 App CAS 439)3,
    It is the first principle upon which all courts of equity proceed, that if parties who have entered into a definite and distinct term involving certain legal results, certain penalties or legal forfeiture, afterwards by their own actions or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have taken place between the parties
     
  • Though the earlier court didn’t speak of estoppel as a doctrine but said it was quoted to raise equityand it continued to appear in cases but wasn’t given a definite form until 1947 where, In 1947 Lord Denning in Central London Property Trust Ltd v High Trees House Ltd 4 gave it in the form of a doctrine that is recognized by asserting that if a promise is meant to be binding if acted upon shall be binding.
     
  • This 1947 judgment was criticized on 2 bases:
    • In Jorden vs. money, 1854 5, an existing or past fact will become the base for estoppel and not concerned about future conduct.
    • The dictum of Lord denning was inconsistent with the ruling of the House of Lords in foakes vs. Beer 6 case where the special plea was never raised in the case of estoppels whereas here it was.
       
  • In the Indian context, this doctrine till now has gone through 2 main phases of development:
    • Foundation:
      The doctrine of promissory estoppel in India was first stated in the case of a collector of Bombay vs. municipal corporation of the city of Bombay,1951 AIR 469 where, Chandrasekhar Ayer j. expressed but even otherwise, that is if there was merely the holding out of a promise that no rent will be charged in the future, the government must be deemed in the circumstances of this case to have bound themselves to fulfill it. Courts must do justice by the promotion of honest and good faith as it lies in the power.
       
    • Post Union Of India & Ors vs. M/S. Indo-Afghan Agencies Ltd , 1967 8
      Here Supreme Court stated that the government was estoppel by its promise and therefore the courts have applied the doctrine of promissory estoppel even against the government making the doctrine applicable even against the government in India.

Doctrine Of Promissory Estoppel- Essentials And Elements Explained And Recommendations Of Law Commission

Elements for the applicability of this doctrine:
  • Anticipation or expectations of a legal relationship
  • Promise by one party
  • Reliance of the other party on that promise
  • relying party must face some detriment or some form of unjust
  • As discussed earlier this doctrine applies to government here are the essentials to make it binding upon the government:
    • The promise must be made by the state within the ambit of the law.
    • intention to enter into a legal relationship is there
    • an act in furtherance of that promise or is forbidden to do anything is done by the party


This doctrine as it also has some cons and might get used to further annoyance of the government so to protect it following guidelines are provided by the law-
no estoppel against statute or law:
In Jit Ram Shiv Kumar v. State of Haryana, 1980 9,
it was stated that if the law requires certain taxes to be collected, it cannot be given up and any assurance against it won’t be binding thus this doctrine can’t be used to prevent govt in the discharge of it duties or compel a govt or private party to do a prohibited act and this remains non-applicable against the exercise of legislative powers

Following conditions have been given as necessary to invoke the maxim of 'No estoppel against a statute' in State Of Punjab V. Nestle Ltd 2004, By The Apex Court ( AIR 2004 SC 4559)10,

  • there must be a bilateral agreement irrespective of statutory provisions
  • the agreement must be prohibited by the act
  • provision of law must pertain to public interest not a class of persons
  • The agreement of the parties should not have been merged into an order of the court which by the conduct of the parties had been dissuaded from performing its statutory obligation
  • No estoppel against a minor
  • A minor as the infant isn’t stopped from setting a defence of infancy and there is no estoppel against a statue, as explained before, remains no estoppel against a minor.
  • In a case before the Bombay High Court, Beaumont CJ reviewed the earlier authorities and concluded by saying:
    • The Court is of the opinion that where an infant represents fraudulently or otherwise that he is of age and thereby induces another into a contract with him then in an action founded on the contract the infant is not stopped from setting up infancy.


Recommendations by 108th Law commission report suggested:

  • It was suggested that this equity-based beneficial doctrine may be allowed to exclude its operations only when necessary. The proper course would be to hold the government bound by its promise which has been acted upon by the other party (promisee) subject to certain narrowly drawn exceptions.
     
  • They didn’t recommend the test of ‘sovereign’ and ‘non-sovereign functions because it is not easy to apply. Instead they recommended a new section may be inserted in the Indian Contract Act after S 25 as suggested below.

Conclusion
This progressive doctrine has been developing long before but in the Indian context it has developed as to safeguard interests of many individuals as Supreme Court has made this doctrine binding on the government but in process has also safeguarded the interest of the countrymen concerning the constitution. Adding unjust with detriment to the element now protects integrity of people and promises making the horizon of this doctrine even larger than before.

Some more proper defiance of the law remains a regular criticism but as time progresses, the doctrine will become more clear and also if the recommendations of 108th law commission is applied { to have a new section after s25 in the contract act} the doctrine will be better understood. Sure there is still long way to go and there isn’t any end to the reach of this doctrine but interpreted well for public interest this doctrine will continue to assure the interests of people likewise it has till now and with reasonable limitations will also work for the greater good but what yet remains to be seen is in which sphere the ever-expanding doctrine of promissory estoppel will expand into.

Citations

  • The Indian Evidence Act, 1872 & Section 115 (India) 1
  • Indira Bai Vs. Nand Kishore, 1991 Air 1055, 1990 Scr Supl. (1) 349 2
  • Hughes Vs. Metropolitan Railway Company [1877] 2 App Cas 439, [1877] 46 Ljqb 583, [1877] Ukhl 13
  • Central London Property Trust Ltd Vs. High Trees House Ltd [1947] K.B. 130: (1956) 1 Aii Er 2564
  • Jorden V. Money (1854) 5 H. L. C. 185{Uk} 5
  • Foakes V Beer (1883) Lr 9 App Cas 605{Uk} 6
  • Collector Of Bombay Vs. Municipal Corporation Of The City Of Bombay, 1951 Air 469, 1952 Scr 43 7
     
  • Union Of India & Ors Vs. M/S. Indo-Afghan Agencies Ltd On 22 November, 1967 {1968 Air 718, 1968 Scr (2) 366}8
  • In Jit Ram Shiv Kumar V. State Of Haryana 1980, 1980 Air 1285, 1980 Scr (3) 689 9
  • State Of Punjab V. Nestle Ltd 2004, (Air 2004 Sc 4559) 10
  • Avtar Singh, Contract And Specific Relief Act 150 (11 Th Ed. 2013)) 11

Book referred:

  • Avtar Singh, Contract and Specific Relief Act, 10th ed., 2008, Eastern Book Company, Lucknow

Statutes Referred:

  • The Constitution of India
  • The Indian Evidence Act, 1872 The Indian Contracts Act, 1872
  • 108th Report of Law Commission of India

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