Estoppel in the Contract Law Case Study Example | Topics and Well Written Essays - 2000 words

Estoppel in the Contract Law - Case Study Example The principle of promissory estoppel is that if someone makes a promise, which another person acts on, the promisor is estopped from going back on the promise, even though the promise does not provide consideration. This modern doctrine of promissory estoppel is based on the dicta of Denning J. In Central London Property Trust Ltd V. High Trees House Ltd ( 1949) 1 KB 130 and also on the decision of the House of Lords in Tool Metal Manufacturing Co Ltd V. Tungsten Electric Co Ltd (1955) 1 WLR 761. This doctrine can be traced to Hughes V. Metropolitan Railway (1877) 2 APP CAS 437. The requirements of promissory estoppel are: 1. Contractual/Legal Relationship. There should be a contractual or legal relationship. 2. Promise. In addition, there should be a clear and unambiguous statement by the promisor that his strict legal rights will not be enforced, i.e. one party must make a promise which is to be binding. The Scaptrade [1983] QB 529. However, it can be implied or made by conduct as in the Hughes Case (1877). 3. Reliance. Further, there should be reliance on the part of the promisee, i.e. he should have acted on the reliance of the promise. Lord J Denning ruled that it was sufficient if the debtor acted on the promise by paying a lower sum. In this connection he also said, â€Å"he must have been led to act differently from what he otherwise would have done.† (Lord Denning, Alan Co Ltd V. El Nasr Export & Import Co (1972) 2 QB 189). 4. Inequitable to Revert. It is deemed unfair if the promisor goes back on his promise and reverts to his strict legal rights. A promise obtained by improper pressure can be broken. The sequel serves to illustrate the foregoing, D&C Builders, a small building company, had completed some work for Mrs Rees amounting to482. D&C Builders being in severe financial difficulties was continually, pressing for payment. Finally, Mrs Rees told the company that she would pay them only 300 as full settlement or else nothing. She took this stance after coming to know of the financial difficulties being envisaged by the company. The company reluctantly accepted this amount and subsequently sued Mrs Rees for the balance amount. The Court of Appeal held that the company was entitled to succeed. In his judgment, Lord Denning was of the view that it was not inequitable for the creditors to go back on their word and claim the balance as the debtor had acted inequitably by exerting improper pressure. (D & C Builders v Rees (1965) 2 QB 617). 5. Shield or Sword. In Coombe V. Coombe (1931) 2 KB 250, it was observed that this doctrine may raised for defence purposes and not as the basis of a case, in other words it can be used "as a shield and not as a sword." 6. Extinctive or Suspensive of Rights. Another question raised by this doctrine is whether; it extinguishes rights or suspends them. The concerned authorities are in favour of suspending the rights, which can be revived by giving reasonable notice or by changing conditions. In Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955] 1 WLR 761 - Patent owners promised to suspend periodic payments of compensation due to them from manufacturers from the outbreak of war. It was held by the House of Lords that the promise was binding during the period of