promissory estoppel

Definition of promissory estoppel

Further reading

The doctrine of promissory estoppel prevents one party from withdrawing a promise made to a second party if the latter has reasonably relied on that promise. There is no need for the reliance to be to the detriment of the promisee.

English law

In English law, a promise made without consideration is generally not enforceable. It is known as a bare or gratuitous promise. Thus, if a car salesman promises not to sell a car over the weekend, but does so, the promise cannot be enforced. But should the car salesman accept even one penny in consideration for the promise, the promise will be binding and enforceable in court. Estoppel is not an exception to this rule.

The doctrine of promissory estoppel was first developed in Hughes v. Metropolitan Railway Co [1877] but was lost for some time until it was resurrected by Lord Denning in the controversial case of Central London Property Trust Ltd v. High Trees House Ltd [1947] K.B. 130.

In this case, the plaintiffs leased a block of flats to the defendants at an annual rent of £2500 - but, because the defendants were unable to find enough tenants while London was being bombed during WWII, they agreed to accept a reduction in rent to £1250. There was no consideration for this promise to accept a lower rent. At the end of the war the flats were again fully let, and the plaintiffs claimed the full rent for the remainder of the contract beginning the final half of that year, 1945. Denning J held that, in good conscience, they were entitled to the full rent from the end of the war, but noted that they were estopped from going back on their promise had they claimed rents from the wartime period as well.

Promissory estoppel requires

1. an unequivocal promise by words or conduct
2. evidence that there is a change in position of the promisee as a result of the promise (reliance but not necessarily to their detriment)
3. inequity if the promisor were to go back on the promise

In general, estoppel is 'a shield not a sword' - it cannot be used as the basis of an action on its own. It also does not extinguish rights. In High Trees the plaintiff company was able to restore payment of full rent from early 1945, and could have restored the full rent at any time after the initial promise was made provided a suitable period of notice had been given. In this case, the estoppel was applied to a 'negative promise', that is, one where a party promises not to enforce full rights.

Estoppel is an equitable (as opposed to common law) construct and its application is therefore discretionary. In the case of D & C Builders v. Rees the courts refused to recognise a promise to accept a part payment of £300 on a debt of £482 on the basis that it was extracted by duress. In Combe v. Combe Denning elaborated on the equitable nature of estoppel by refusing to allow its use as a "sword" by an ex-wife to extract funds from the destitute husband.

The general rule is that when one party agrees to accept a lesser sum in full payment of a debt, the debtor has given no consideration, and so the creditor is still entitled to claim the debt in its entirety. This is not the case if the debtor offers payment at an earlier date than was previously agreed, because the benefit to the creditor of receiving payment early can be thought of as consideration for the promise to waive the rest of the debt. This is the rule formulated in Pinnel's Case (1602) 5 Co Rep 117a, and affirmed in Foakes v. Beer (1884) 9 App Cas 605.