Promissory estoppel

Promissory estoppel is the doctrine that prevents a party from acting in a certain way because the first party promised not to, and the second party relied on that promise and acted upon it.

In English law, a promise made without consideration and is known as a is generally not enforceable as gratuitous promise.

For example, a car salesman promises not to sell a car over the weekend, but does so, the promise cannot be enforced. If however, the car salesman accepts one penny in consideration for the promise, the promise is binding and enforceable in court. Estoppel is one of the exceptions to this rule.

The doctrine of Promissory Estoppel was first developed in Hughes v Metropolitan Railway Co but was lost for some time until it was resurrected by Lord Denning in the leading case of Central London Property Trust Ltd v High Trees House Ltd.

In this case, the claimants let a block of flats to the defendants at an annual rent of £2500. However, they agreed to accept a reduction in rent to £1250, because the defendants were unable to find enough tenants due to the evacuation of London during World War II. This promise to accept a lesser rent was unsupported by consideration. At the end of the war the flats became fully let, and the claimants demanded the return to payment of full rent. Denning J held that they were entitled to this from the last two quarters of 1945. Denning mentioned in an obiter dictum that had the plaintiffs tried to be reimbursed for the full amount they would have been estopped from doing so even though no consideration was present. This is because the plaintiff represented that he would accept half the rent and the defendant acted upon this.

Promissory estoppel requires

(1) an unequivocal promise by words or conduct,

(2) a change in position of the promisee as a result of the promise (not necessarily to their detriment),

(3) inequity if the promisor were to go back on the promise.

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 (although estopped back rent was lost) from early 1945, but would have been able to restore full rent at any time after the initial promise provided a suitable period of notice had been given.

Estoppel is an equitable (as opposed to common law) construct and 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.

Promissory estoppel is not available when one party promises to accept a lesser sum in full payment of a debt, unless the debtor offers payment at an earlier date than was previously agreed. This is the rule formulated in Pinnel's Case,^[9] and affirmed in Foakes v Beer.^[10] This rule has, however, been thrown into doubt by the recent decision of Collier v Wright Ltd.^[11]