SUBMITTED TO

THE TAMILNADU NATIONAL LAW SCHOOL, TIRUCHIRAPPALLI

In Fulfilment of the Requirements for Internal Component in

LAW OF CONTRACT

By

BARAN.A (BC0140017)

ESTOPPEL OF CONTRACT LAW

INDEX

DECLARATION
ACKNOWLEDGMENT
INTRODUCTON
ESTOPEL-ITS ORGIN AND VARIOUS FORMS
PROPRIETORY ESTOPPEL
PROMISSORY ESTOPPEL
DENNING-THE JUDGE
EXPRESS LIMITATION OF RIGHTS
NATURE OF THE CLAIM
DEVELOPMENT OF ESTOPPEL
SCUTIATE SAVINGS BANK(1884)
NOVATION
THE FIVE ELEMENTS OF PROMISSORY ESTOPPEL
CONCLUSION

DECLARATION

I, BARAN.A Student of Tamil Nadu National Law School, hereby declare

that the work entitled ESTOPPEL OF CONTRACT LAWis my original
work. I have not copied from any other students work or from any other
sources except where due reference or acknowledgment is made explicitly
in the text, nor has any part been written for me by another person.
 ACKNOWLEDGMENT

I am using this opportunity to express my gratitude to everyone who supported me

throughout the course of this ESTOPPEL OF CONTRACT LAWproject on the
topic Indian Democracy. I am thankful for their aspiring guidance, invaluably
constructive criticism and friendly advice during the project work. I am sincerely
grateful to them for sharing their truthful and illuminating views on a number of
issues related to the project.

I express my warm thanks to PROF.DR.CHANDRA SUNDRAM for his support

and guidance at every juncture.

I would also like to thank Mr.N.Murugavel Vice Chancellor of the Tamil Nadu
National Law School and all the people who provided me with the facilities
being required and conductive conditions for my LAW OF CONTRACT project.
 INTRODUCTION

Estoppel - its origins and various forms

The standard bargain theory of contract as expressed in consideration says that

promises are not binding unless some price has been paid for it. The price may be a
promise, or an act as well as the giving of money. However there are some
circumstances where a non-contractual promise in this sense can give rise to binding
obligations, although it may not give rise to a right to sue for damages if it proves to
be false.

Under promissory estoppel, we will be looking at the way in which the promisee
provides a way of making promises binding on the basis of reliance. The doctrine of
PE is an equitable doctrine like specific performance. Like all equitable remedies, it
is discretionary - in contrast to the common law absolute right to damages for breach
of contract, for example.

People like Atiyah, who emphasise reliance, see this as an important part of their
argument. Promissory estoppel is a relatively new development. We will look first at
how the standard view has developed - through cases such as Hughes (1877) - High
Trees (1947) - Legione (1983). We will then look at Walton's Stores, which departs
from this standard view.

The essence of estoppel is that where you have caused the other party to act on an
assumption as part of the relationship, you will not be allowed to depart from it, or
act as if it were not so. You will be estopped from denying that the assumption is true.
If you lead the other party to believe that you will not enforce certain rights against
them, and they act on that information, assuming it to be true - you may not later go
back and put those rights into effect.

Estoppel by record - some tribunal has determined some issue between the parties.
Estoppel by deed - if you execute a deed, you will be estopped from asserting that the
facts stated in the deed are not true. This applies only to actions in which the deed is
involved.
Estoppel by conduct - where the parties have acted on the basis of a shared
understanding, which proves not to be true or where one has induced the other to act
on some such assumption. We will not confuse things to much by going into these in
any detail here, as promissory estoppel will be the major focus for our purposes.
 Proprietary Estoppel

Now seen as part of a more general equitable estoppel. This involves doing
something which a person believes will give him rights in or over land. Putting up a
building or making improvements to the land. The actual owner may be estopped
from denying the right or title which the other has assumed to exist.

Promissory Estoppel.

This invariably involves a promise, given by one party during the performance of a
contract, not to hold the other party to the terms of the original contract. As
in Foakes where the landlord says to the tenant that payment of the full rent will not
be insisted upon, and a lesser amount will be accepted instead. Why should a
landlord wish to do such a thing? Well, there may be problems letting shops in that
area, or at that time. Of course, if the lease still has a period left to run, then the
tenant is legally obliged to pay the full rent. But if the landlord fears that because the
shop is not doing so well, the tenant may not be able to pay the full rent, then it may
be better to accept say two thirds of the normal rent, rather than have the problem of
letting the shop again. But where is the consideration for the reduction of one third?
Some have said that there is none, and that if the landlord were to subsequently ask
for the balance of the rent which is due, the tenant would be required to pay up.

It has been thought that this might involve an element of unfairness. That the tenant
continued in occupancy of the premises, in reliance on the statements which were
made, and that it should not be open to the landlord to try and get "the best of both
worlds". This is where estoppel comes in - the party who makes the representation
is estopped from denying the truth of the statements which were made - the
statements constituting a representation with regard to a certain state of affairs, An
estoppel can arise in different areas of the law - if it is in connection with property
law, it is called a proprietary estoppel.

In essence an estoppel arises where one party to a contract makes a representation

concerning a matter of fact, and the other party acts on that representation to their
detriment. The party who has made the representation is estopped from denying the
truth of that statement.

Implied undertaking may vary contractual rights

Hughes v Metropolitan Railway Co (1877) House of Lords

A tenant of property was given notice to repair certain defects within a 6 month
period. During this time, the tenant thought it might be better to sell the remainder of
their interest back to the landlord, rather than incur the expense of repairs. The parties
did not successfully conclude an agreement to sell the interest, and it was held that
whilst negotiations were taking place, there was an implied understanding that the
notice period would not continue to run. The landlords action for ejectment for
failing to repair within the stipulated period failed. It can be seen that this case did
not involve a "promise" as such, but merely an "understanding" - an implied
understanding is one which the court will infer from the circumstances - one which
they take to be a reasonable inference.

It had been suggested that Hughes could be restricted to "relief against forfeiture"
cases, but this was specifically rejected in the following cases.

Birmingham & District Land Co v London & NW Railway (1888)

A period of time laid down in a contract was held not to apply, because there was a
tacit understanding that the period would not run whilst building operations were
held up. The court took the view that if persons who have contractual rights against
others induce by their conduct those against whom they have such rights, to believe
either that such rights will not be enforced, or will be kept in suspense or abeyance
for some particular time, those persons will not be allowed to enforce the rights until
such time has elapsed.

One can see how this reliance based doctrine could curtail rights supposedly
established on the basis of consideration. The modern doctrine of estoppel in contract
law was really given an impetus by Denning J (note he was then a High Court judge)
in the case which became known as High Trees. We should perhaps note here, that
looking at the cases in the way in which we have done, may give a misleading
impression. The earlier cases of Hughes and Birmingham were not really much
talked about, until after the decision in High Trees. Because this case was particularly
influential, we should understand some of the background to it.

Denning - the judge

Although Denning was only a High Court judge at the time - he subsequently became
the Head of the Court of Appeal in the UK - (the Master of the Rolls). He had
previously been the editor of a book called Smith's Leading Cases - the equivalent of
a casebook on the earlier common law decisions. He thus knew more about some of
the earlier, but not much talked about cases, than any of the other judges or barristers
around at the time. Thus he could always dig out a case to support a point, more
readily than the others. This could always give the impression that he was "following
earlier cases" like we are told good judges should be doing. However, I have a video
interview with Denning where he says that he always saw his job as being to "pick
out those precedents that are rightest and to discard the rest". When the interviewer
says that he didn't think that was what people thought judges should be doing,
Denning said he didn't care - that was his view of it. If you want to see another case
where he dug up some old stuff to support his argument which went against the
contemporary view of things, look at Gallie v Lee - where Denning argued that the
Court of Appeal in the UK was NOT bound by its own previous decisions.

In another interview he was asked if he didn't think that some of his decisions
undermined the doctrine of consideration. At first he says, not really, in a rather
halfhearted sort of way. When the interviewer presses the point, he says that perhaps
they did but that he never did like the doctrine of consideration anyway. By
understanding these attitudes of this important judge, we can see that the decisions
in High Trees and in Ward v Byham, whilst being inconsistent at the time with the
views of other judges, do amount to a consistent position on Denning's part - the
move away from technicalities and artificialities of consideration to reliance and its
underlying aspects of fairness. One might think that this is a position which is now
being pursued more vigorously by the Australian High Court - see Walton's Stores.

If we can see that there is some basis in the earlier cases for saying that contractual
rights can be limited by implied undertakings, then it is not surprising that the court
will find that the contractual rights can be limited by an express undertaking - which
is the position in the following case:

Express limitation of rights

Central London Property Trust v High Trees House Ltd [1947] Kings Bench

During the war the landlord of a block of flats reduced the rent for the period of the
war. After the War the landlord gave notice that he would be reinstating the normal
rent for the future. There was in fact no claim for back rent here, so what was said
about it was strictly obiter. It is worth noting, however, it must be said that this has
not diminished the significance and importance of those statements, which are often
thought to be the most important aspects of the case. It goes to show that the formal
status of a statement, in some of these cases, does not always affect their ultimate
significance.

Denning pointed out that the doctrine of estoppel as it existed at that time required
the representation which was being made, to be with regard to an existing fact. In an
earlier case, it was said that a representation as to the future must either be a contract,
or it is nothing. In other words, the promise that in the future, you will only have to
pay half-rent, must be a promise which conforms with all those aspects which would
make it a contractual promise (offer acceptance consideration, etc) or else it doesn't
count at all.

But said Denning, the law has not stood still over the last 50 years. There have been
cases where promises have been made which were intended to be binding, and which
have been acted upon. The court has found the promise to be binding even though it
may be difficult to find a consideration for it. [I emphasised those words because if it
was true that at the time, the promise was intended to be binding, and only
afterwards, the person who made it tries to get out of it because of the technicalities
of consideration, then many would take the view that this is the sort of craftiness
which leads to unfairness].

Denning went on to say that the courts have not gone so far as to give a cause of
action in such circumstances, although they have refused to allow the promisor to act
inconsistently with it. Hughes and Birmingham give a sufficient basis for saying that
such a promise should be recognised. And then, as if to add that Pinnel's case is
finally a dead duck, he said that if his view has the logical consequence that a
promise to accept a smaller sum in discharge of a larger is binding, notwithstanding
the absence of consideration, then so much the better.

Undertaking may be used as shield but not a sword

Combe v Combe [1951] 2 KB 215 Court of Appeal

This involved a promise by a husband to pay maintenance to his wife of 100 p.a.
after the decree nisi became absolute. The wife pressed for payment, although she
had obtained no formal order from the Divorce Court. The trial judge held that the
promise was enforceable on the basis of High Trees [1947] because it was an
unequivocal acceptance of liability intended to be binding and which was acted upon.

Denning LJ said that much as he favoured the principle of High Trees (hardly
surprising given what we have just discussed), it was important that it should not be
stretched too far,lest it should be endangered A clear indication, I think, that Denning
wanted to consolidate the position, rather than push things too far, too quickly, and
then risk losing everything by having it swept away in a backlash. The principle does
not create new causes of action where none existed before.

It only prevents a party from insisting on strict legal rights where it would be unjust
to enforce them having regard to the dealings which have taken place between the
parties. As the principle cannot give rise to a cause of action in itself, it cannot do
away with consideration when that is a necessary part of an action - it is too firmly
entrenched to be overthrown by a side-wind - this presumably minimised the
appearance of any threats to what were seen to be basic principles of law. . It still
remains a cardinal necessity of theformation of a contract, although not of
its discharge.

Denning said that it is possible that unilateral contract analysis could have been used
here - the wife did an act in return for a promise - she did in fact forbear from
applying to the court for maintenance [a forbearance from acting is an act? - when
seen as Forbearance and Compromise] So when the judge found there was a promise
intended to be acted upon and which was so acted upon, it could amount to
consideration in this well-accepted sense. But difficult to say the promise
was "intended to be acted upon". Sometimes consideration works injustice, but none
here - the wife had larger income than the husband.

Here we clearly see Denning's view of the rights and wrongs of things influencing his
legal analysis. The suggestion seems to be that the promise could not have been
intended to be acted upon because the wife had a larger income than the husband.
What if I attempt to use this argument to cease my car loan repayments to the bank or
finance company? Well their income is certainly a good deal bigger than mine.

This case stands clearly for the proposition that estoppel may only be used as a
defence - a shield but not a sword. The normal scenario is that the promisor will sue
and the promisee will raise the promise which is the basis of the estoppel, as a
defence. In other words, PE allows a promise (which would appear to be without
consideration) to act as alimitation upon legal rights. But such a promise, it is said
cannot be used as the basis upon which to establish legal rights. It can be used as the
basis for a defence, but not as a basis for an action in its own right.

Walton's Stores has thrown a good deal of doubt on that.

Indicates the equitable nature of the claim

D & C Builders Ltd v Rees [1966] Court of Appeal

The builders, after completing building work sent an account which was left
outstanding for some time. Eventually, D's wife agreed to pay a smaller amount
provided it was accepted in full satisfaction of the debt. As the builders were in a
difficult financial position, they rather reluctantly agreed to accept the money - D's
wife knew that they needed the money to avoid being made bankrupt. They accepted
a cheque in return for a receipt which stated "in completion of the account" which
was written at the insistence of the wife. Later, they sued for the balance.
Denning MR pointed out how the recent cases had mitigated the harshness of the
common law. So now a creditor can be precluded from insisting upon the legal right
to the wholewhere it would be inequitable for the party to do so. The creditor is not
bound, unless there has truly been an accord. Here there was no true accord. She used
pressure - a threat to break the contract unless the other party did as she insisted -
there was no equity in the D to enable her to take advantage of the equitable rule.

We should ask whether there might be an element of sexism here. Feminists might
argue that it is typical of the judicial attitude to portray women who strike a good
deal as being manipulative, scheming, unfair etc. See the recent case of Diprose v
Louth. Was the woman here doing anything other than engaging in the sort of
economic negotiations which occur every day. If we buy something in a fire sale, or
because the shop is going out of business, can the shop later sue us for the full price
because otherwise we would be taking advantage of them?

This is clearly the sort of case which can raise all the issues of consideration,
estoppel, economic duress - if you are faced with a problem of this sort, do not just
pick on one aspect of it, but be mindful of the alternatives.

When we come to Waltons Stores we are faced with a High Court case which
appears to have swept aside the sword / shield distinction. It appears to suggest that
all estoppels in different areas of the law should be assimilated. The basic problem is
what if the promise is made before there is a contract? If, for example, someone is
about to sign an agreement with a landlord, and points to the wording of the
agreement which states that pets would not be allowed. If the landlord then says, "Oh
don't worry about that - I will not enforce that in your case", then should it make a
difference if the promise, as here, is made before the contract comes into being rather
than afterwards?

It was not until Maintiendrai in 1980, that the Australian courts clearly took up the
doctrine. Most of the other common law jurisdictions took it up much earlier. The
AustralianCheshire and Fifoot said that it was unnecessary, and that "consideration"
could always be manufactured to do the job instead. That was not, however, the
approach which was taken here.

The Australian Development of Estoppel

Legione v Hateley - - awkward facts [1983] 57 ALJR 292 High Court Aust

The first case in Australia where the doctrine of estoppel was accepted by the High
Court, although the facts of the case were not very satisfactory, for they found that
there was not an estoppel here. A buyer of property wanted an extension of time in
order to come up with the money. They asked for but were refused an extension of
time. Whilst trying to set up a bridging loan the buyer spoke to the solicitor for the
seller and offered to settle on 17 August. - this would be 7 days late. The secretary at
the solicitors office said "I think that will be alright, but I'll have to get further
instructions." A few days later, vendors solicitors said that the contract had been
rescinded.

The court said that a representation, to found an estoppel must be clear - this is not
the same as saying that it must be express - it could be "clearly implied" from
conduct. The secretary here did not make any such clear representation. Certainly no
promise had been given for a further extension - there had been no statement or
conduct to indicate that an indulgence would be allowed. It was not regarded as
sensible or reasonable to rely on the statement by the secretary. No assurance had
been given that the legal rights would not be insisted upon - the minority thought that
the statement by the secretary was sufficient.

Part of the difficulty of this case was that the person who was attempting to buy the
property had already built a house on it without the knowledge of the owner of the
land. This might seem to be a very strange thing to do - it does not mean that the
house builder had to sneek over the wall at night to do it - he could, for example,
have been in previous occupation of the land under a leasing arrangement. It does
mean, however, that the case also involved "relief against forfeiture" - an equitable
doctrine which would prevent an injustice arising from the fact that a house had been
built on the property. This part of the case was successful - again by a majority.

Doctrine accepted - good facts - what is detriment?

Je Maintiendrai Pty Ltd v Quaglia (1980) Sup Ct SA Full CT

For period of 18 months the rent on a property had been reduced. When P found out
that D was about to vacate the premises, a claim was made for the full arrears. It was
then a good case to test the doctrine of estoppel.

The court took the view that an estoppel could not operate unless the promisee had
altered their position on the faith of the promise. A person who makes a promise
which is intended to be acted upon is not prevented from resiling from that position
unless in doing so, it would result in some detriment or injustice. Would entitlement
to the full rent for the period elapsed work any injustice? [The argument here could
easily go both ways - one could say that the tenant has had the use of the extra money
and earned interest on it, so how could there be any detriment, compared - that is - to
what otherwise would have been the case. On the other hand it could be argued that if
the tenant thought that the difference was no longer due, then the money would be
spent on other things, and to come back and ask for it now would mean that a debt
had been building up without the tenant's knowledge and which could well be very
difficult to pay off now.]

The court took the view that evidence re detriment was sparse - but would accept the
judge's finding that accumulation of debt can be a problem. There was no doubt,
however, that the promisor could revert to the original position re future payments
upon giving due notice.

One of the judges took the view that detriment must not be speculative or conjectural
but substantive. The evidence here failed to establish detriment. It is not established
merely by the court speculating about possible alternatives and then attributing them
to the party here.

By a majority, then, it was accepted that to ask now for the lump sum which was due,
instead of periodic payments would give rise to undue hardship. The majority
accepted that the doctrine of promissory estoppel was good, and part of the law of
Australia .

Walton's Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 High Court
Aust.

Mr Maher had a chance to lease his land, with a new purpose built building on it to
Walton's Stores. The only snag was that before he could do this, he had to demolish
the existing building on the site and actually build the new purpose built store. It was
very important to Walton's that the new building be ready for opening in about 6
months time. The negotiations were overshadowed by this element of urgency.

The sequence of events was that Walton's sent a draft of the lease agreement to
Maher. Walton's, at that stage, were informed that Maher had begun to demolish the
old building on the site. Walton's says that the agreement must be completed within
the next day or two. Their solicitor sends fresh documents incorporating agreed
amendments to Maher saying that "we believe approval will be forthcoming". Maher
sends the documents, executed (properly signed) by Maher, "by way of exchange".
Maher then proceeds to demolish the new part of the old building in his site. Walton's
were also told of this.

Walton's then decides that because of a new retailing policy, which they are in the
process of formulating, not to commit itself, and to "go slow". After all, if Maher is
busy getting on with things, why shouldn't Walton's keep their options open? Maher
then begins the construction of the new building. It was 40% complete when Walton's
tells Maher that they will not be in a position to proceed with the contract.
Obviously, Mr Maher was far from thrilled to hear this. Here he was, having
demolished his own buildings, and with a new building, half completed, all to
Walton's specifications. What was he to do now? A half built store is completely
useless. Even if he finishes it off, would he be throwing good money after bad? He
brought a case against Walton's Stores, arguing that they were estopped from denying
that a contract existed. In the earlier stages of the case, it was argued on more
technical aspects of common law estoppel. But as the case went up through the
courts, it became clear that the High Court was willing to reconsider some of the
earlier opinions about swords and shields and the like. So the basis of the argument
shifted - this is one of the unusual aspects of the case. Even so, given the originality
of the case, Maher met with remarkable success at all levels.

The Supreme Ct of NSW held that Walton's were estopped from denying that a
contract existed.

The Court of Appeal found likewise.

The High Court - it was pointed out that the trial court judge spoke of a
representation constituted by silence in circumstances where the party should have
spoken. This idea of arepresentation by silence will come up again in later lectures.

The court of appeal spoke of knowledge of a mistake which the other labours under
and does nothing to correct.

Our conclusion was that M assumed that the exchange of contracts would
be concluded - not that the exchange had taken place, undermines these conclusions
based on our earlier observation that an estoppel by representation must be as to an
existing fact - not future conduct.

This is a shift in the argument from that presented in the earlier hearings - previously
based on CL estoppel - now based on Promissory Estoppel. PE certainly extends to
reps re future conduct. So far limited to situations where there is a pre-existing
contractual relationship. In principle, no reason why this should not extend to a
promise re enforcement of a "non-contractual" right.

This is important, for the judges are acknowledging the limitations of the earlier
cases, but asking if there is any reason why they should not now push on to the next
stage of development. But we should at least pause to consider the effect of such a
view - if the court is now willing to enforce non-contractual rights, might it not have
a longer term effect of undermining the whole distinct identity of contractual rights -
might it not become difficult to see the distinction between tort and contract law for
example? The High Court appears to be willing to contemplate that this is a
possibility. In other words, we are not any longer making marginal changes, but basic
and structural changes.

In Combe, "estoppel may be part of an action, but not the whole cause of it" Now we
are asked to go one step further. Holmes J [a famous American judge writing in the
earlier part of this century] said that to enforce such a promise would be to cut up
consideration by its roots. Yet here, the judges were willing to argue that perhaps
there is no difference in principle between changing legal rights and establishing a
new one. [We might also want to say that the idea that contractual rights were clear
before this is more a matter of wishful thinking - most of the issues we have looked
at so far are far from clear].

Looked to American position they said that the proposition was based on the fact that
(a) there was a reasonable expectation of the promisor that the promise will induce an
action or forbearance and (b) the promise will be enforced where to depart from it
would be unconscionable, and there is no way to enforce it by other means.

Equitable estoppel is based in unconscionable conduct - mere reliance will not bring
it into play - [very important to remember this - the factor here is an INDUCED
reliance - you have been warned - forget this at your peril] - it must involve the
creation or encouragement of the understanding by the party estopped. In this case,
the judges asked, were Walton's entitled to stand by in silence when they knew that
Maher must have been proceeding on the basis that an agreement had been concluded
and that completion of the documentation was a mere formality?.

Walton's were responsible for stressing the element of urgency

Walton's retained the counterpart lease without expressing any reservations, knowing
that costly work was being undertaken. Their inaction here constituted a clear
inducement to carry on. This was unconscionable.

Probably the clearest statement of what the case stands for can be found in the
judgment of Brennan J:

A non-contractual promise can give rise to an equitable estoppel only when the
promisor induces the promisee to assume or expect that the promise is intended to
affect their legal relations and he knows or intends that the promisee will act or
abstain from acting in reliance on the promise, and when the promisee does so act or
abstain from acting and the promisee would suffer detriment by his action or inaction
if the promisor were not to fulfil the promise. When these elements are present,
equitable estoppel almost wears the appearance of contract, for the action or
inaction of the promisee looks like consideration for the promise.
This indicates that when we are talking about this form of actionable estoppel, we
have really gone beyond the boundaries of more formal views of contract. As the
judge said,

Differences between a contract and such an equity - these relate to estoppel may
apply irrespective of whether the party bound agrees. The equity does not need
consideration. The contract depends on terms, and the equity on what is necessary to
avoid that which is unconscionable.

Equitable estoppel does not make non-contractual promises contractual, and is closer
to the tortious remedy of damages for negligent mis-statement or fraud.

This case is probably a clear indication that the view so loved of lawyers in the
soapies and films - of the smart lawyer, who comes up with the clever technicality at
the end of the day - is likely to become even more a matter of fiction than it ever was.

This case was not applied in Austotel v Franklins (1989) 16 NSWLR 582 where there
were commercial bodies with equal bargaining power and access to advice.

The contract depends on terms, and the equity on what is necessary to avoid that
which is unconscionable.

Equitable estoppel does not make non-contractual promises contractual, and is closer
to the tortious remedy of damages for negligent mis-statement or fraud.

Commonwealth v Verwayen (1990) 170 CLR 394 High Court (HH 242)

Appeal from Supreme Court Victoria

In 1964 the ship Melbourne collided with and sank the ship Voyager whilst they were
engaged in combat exercises. The general view was that the Commonwealth did not
owe a duty of care in such circumstances and thus would not be liable (the Groves
defence). By 1984, there was some doubt about this, and Verwayen, a member of the
RAN sued for damages. The Commonwealth admitted liability, did not plead Groves
or Statute of Limitations, saying that it was not its policy to take advantage of either.
In 1986, this policy changed and the Commonwealth sought to take advantage of
both. V said that they had waived their right to these defences. The issue before the
High Court was dealt with on the basis of estoppel.

Promissory estoppel, recognised by this court in Legione v Hateley (1983)

undermined the idea that voluntary promises cannot be enforced in the absence of
consideration. PE has extensive operation, now that it is recognised that it is not
restricted to pre existing contractual relationships Waltons (1988). It recognises
that the distinction between present and future fact is unsatisfactory and produces
arbitrary results. These developments have brought greater underlying unity to
estoppels. The trend of modern decisions points inexorably to one doctrine of
estoppel, rather than a series of them.

Estoppel by conduct was seen as an evidentiary principle, and prevented a person

from departing from an assumption of fact - but equitable estoppel has expanded and
recognises that an assumption with regard to future fact may ground an estoppel and
has taken the principle from being evidentiary to being a substantive doctrine.

The result is that it should be accepted that there is but one doctrine of estoppel,
which provides that a court may do what is required to prevent a person who has
relied upon an assumption (present, past or future) after being induced to do so by the
other from suffering detriment in reliance upon it. There must be proportionality
between remedy and detriment. The assumption may be with regard to legal as well
as factual matters.

In this case, was the assumption induced by the Govt? Pleadings alone would not be
sufficient. Here, there was more than that, so that Commonwealth did induce the
belief that the limitation and Groves defence would not be pleaded and the decision
with regard to that would not be changed.

Here, to hold the Commonwealth to representations which would deprive it of

defences which were available to it by statute or general law, would be a
disproportionate response. An order for costs may be sufficient to meet prejudice in
terms of expense and inconvenience occasioned by the need for pleading new
defences.

Estoppel. Waltons held that equitable estoppel yields a remedy in order to prevent
unconscionable conduct on the part of the party who, having made a promise to
another who acts on it to his detriment, seeks to resile from it. To effect "the
minimum equity to do justice".

Scutiate Savings Bank (1884)

Holmes J It would cut up the doctrine of consideration by the roots, if a promisee

could make a promise binding by subsequently acting in reliance on it. Quoted
in Walton's.
 Novation

A transaction by which with the consent of all the parties, a new contract is
substituted for one that has already been made.

Mistake and withdrawal of undertaking

William A Drennan v Star Paving Co (1958) 333 P 2d 757 Supreme Court of

California, Full Court.

P was preparing a tender for the construction of a school. Intending sub-contractors

telephoned P giving their tenders for their specific parts of the work. On the basis of
those figures, P prepared their tender, and were awarded the contract. D had tendered
for his part at $7131, but later refused to do it for less than $15,000. P got another
firm to do it for $10, 948. P sued and recovered the difference. D appealed.

HELD A promise which the promisor should reasonably expect to induce action or
forbearance of a definite and substantial character on the part of the promisee and
which does induce such action or forbearance is binding if injustice cannot be
avoided in any other way. The purpose of the relevant legislation here, is to make a
promise binding even where there is no consideration. P committed itself in reliance
on Ds figures. D's mistake should not relieve, because it seriously misled P.

Here, damages were granted in lieu of specific performance, and it may be thought
that what we have here is an equitable route to damages. It may be then that Walton's
v Mahersees the beginning of the end for consideration, although the judges in the
case said that this was not their intention.

Perhaps the wider principle is the issue of unconscionability - this has to be weighed
in balance with the need for formalities for a contract involving an interest in land. It
could be said that everyone knows the rule in land deals. Both parties had solicitors
and if they want to get going early, they know the risks and they do so at their own
risk.

It is clear that Waltons v Maher goes well beyond the English cases in this matter.

5 Elements of Promissory Estoppel in Contract Law and Legal Agreements

Date: July 3, 2014 Author: Steven Brown
Dont Make Promises in Business You Cant Keep
The court may decide you must uphold your promises even though you dont believe
you have entered into a contract or legal agreement. Promissory Estoppel is one of the
elements of contract law that must be considered when drafting or entering into a
contract or agreement.

Promissory Estoppel
A promise must normally be in a deed (legal agreement or contract) or supported by
consideration to be enforced. The principle of estoppel however may allow a promise
to be enforced even though these requirements are not satisfied.

The development of the concept of promissory estoppel in contract law has led to
the proposition that a court may decide that a contract has come into being even
though the traditional rules for contract formation have not been satisfied.

The 5 elements of Promissory Estoppel are:

1. Some form of legal relationship either exists or is anticipated between the parties.

A contractual relationship is the most common type of legal relationship.

Parties to pre-contractual negotiations also fall within this principle.

2. A representation or promise by one party.

Traditionally, estoppel could only be used with respect to a representation

about an existing fact. The High Court decision in Waltons Stores
(Interstate) Ltd v Maher (1988) 164 CLR 387, however, extended the
doctrine to representations about future conduct. This type of promissory
estoppel arises where the promise is given in circumstances that lead the
other party to assume the promise will be performed.

3. Reliance by the other party on the promise or representation.

The party relying on the promise must suffer a detriment

4. Detriment

The party relying on the promise must have suffered some sort of detriment.
In other words, the party must be in a worse position for having relied on the
promise.
5. Unconscionability

There is no general restriction, which prohibits a person from breaking his or

her promise. Accordingly, before an action for estoppel will succeed, it must
be shown that, in the circumstances, it would be unfair or inequitable to allow
them to do so.

Remedies
The remedies available to someone who has relied on a promise to their detriment are
equitable. This means that the court has a discretion in deciding what to do and it will
do what it can to relieve the detriment suffered. The courts will not necessarily force
the party to honor its promise, unless this is the only way to do justice.

When and How to Use Estoppel

A party seeking to raise estoppel must make out a clear case and show that it would be
unconscionable for the promisor to go back on their promise. Unconscionability is
really the backbone of estoppel.

It is important to realise that failing to fulfil a promise does not of itself amount to
unconscionable conduct, nor does mere reliance on a promise to a persons detriment.
Something more is really needed such as encouragement by the party that the promise
will actually be performed.

The principles outlined above should always be the starting point if estoppel is to be
used. The nature of estoppel, however, is such that it cannot be defined into simple
elements. At best, the principles are a guide as to what the court will look for.

Promissory Estoppel

In the law of contracts, the doctrine that provides that if a party changes his or he
r position substantially either by acting or forbearing fromacting in reliance upon
a gratuitous promise, then that party can enforce the promise although the essenti
al elements of a contract are notpresent.

Certain elements must be established to invoke promissory estoppel. A promisor

one who makes a promisemakes a gratuitous promisethat he should reasonabl
y have expected to induce action or forbearance of a definite and substantial chara
cter on the part of the promiseeone to whom a promise has been made. The pro
misee justifiably relies on the promise. A substantial detrimentthat is, an econo
mic lossensues to the promisee from action or forbearance. Injustice can be avoi
ded only by enforcing the promise.

A majority of courts apply the doctrine to any situation in which all of these eleme
nts are present. A minority, however, still restrict itsapplicability to one or more sp
ecific situations from which the doctrine emanated, such aswhen a donor promises
to transfer real property asa gift and the donee spends money on the property in rel
iance on the promise.

With respect to the measure of recovery, it would be unfair to award the plaintiff t
he benefit of the bargain, as in the case of an expresscontract, since there is no bar
gain. In a majority of cases, however, injustice is avoided by awarding the plaintiff
an amount consistent withthe value of the promise. Other cases avoid injustice by
awarding the plaintiff only an amount necessary to compensate her for the econom
icdetriment actually suffered.

West's Encyclopedia of American Law, edition 2. Copyright 2008

The Gale Group, Inc. All rights reserved.

CONCLUSION

when a person makes a false statement to another and the listener relies on what
was told to him/her in good faith and to his/herdisadvantage. In order to see that ju
stice is done a court will treat the statement as a promise, and in a trial the judge w
ill preclude the makerof the statement from denying it. Thus, the legal inability of
the person who made the false statement to deny it makes it an enforceablepromis
e called "promissory estoppel," or an "equitable estoppel." Example: Bernie Blow
hard tells Arthur Artist that Blowhard has a contract tomake a movie and wants Ar
tist to paint the background scenery in return for a percentage of the profits. Artist
paints, and Blowhard thenadmits he needed the scenery to try to get a movie deal
which fell through and there are no profits to share. Artist sues and the judge finds
that Blowhard cannot deny a contract with Artist and gives Artist judgment for the
value of his work.