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 LA201E

 Law of Contract 1 - COURSE NOTES

TOPIC 5:  PROMISSORY ESTOPPEL

UNIT 2
Limits on Promissory Estoppel

5.2.1   Objectives

At the end of this unit you should be able to:

·        Explain the traditional limitations that have existed on promissory estoppel; and

·        Understand the changes some jurisdictions have made to these traditional limitations.

5.2.2   Reading

Prescribed Reading:

Corrin Care pp 87-88

Poole pp139-161

Prescribed Cases:

Woodhouse A.C Israel Cocoa Ltd SA v Nigerian Produce Marketing Co. Ltd [1972] AC 741 (HL) Poole 142.

W.J. Alan & Co. Ltd v El Nasr Export and Import Co. [1972] 2 QB 189 (CA) Poole 146.

Combe v Combe [1951] 2 KB 215, Poole, p143.

E.A. Ajayi v R.T. Briscoe (Nigeria) Ltd [1964] 3 All ER 556 (PC) Poole 145.

D & C Builders Ltd v Rees [1966] 2 QB 617 (CA), Poole 150.

Attorney-General of Fiji v Pacoil Fiji Limited, unreported, Court of Appeal, Fiji, cc496/1992, 29 November 1996 (PLM).

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 (High Court of Australia) Poole 158.

Further Reading:

Furmston, Law of Contract pp98 - 109

                        Tillotson pp90-96

5.2.3   Introduction

Obviously, the doctrine of promissory estoppel as restated and developed by Lord Denning, threatens the contractual requirement of consideration.  Therefore, to keep promissory estoppel in check and to protect the doctrine of consideration, the broad statements about promissory estoppel made in the High Trees and Hughes v Metropolitan Railway Co Ltd have been limited by subsequent decisions.

Traditionally, these limitations have been strict in order to keep the application of the doctrine of promissory estoppel quite narrow.  However, more recently the courts in various jurisdictions have introduced a more flexible approach to the doctrine that has broadened the potential for its application. 

Thus, in this unit we will look at the traditional limits on promissory estoppel, then at how some courts have eroded these limits.

5.2.3   Traditional Limits on Promissory Estoppel

The traditional limits on promissory estoppel are best described by outlining the traditional requirements necessary to found a promissory estoppel claim.  These traditional requirements being:

(a)       There must have been a promise that is clear, unequivocal, precise and unambiguous;

 This was illustrated by the case of Woodhouse A.C Israel Cocoa Ltd SA v Nigerian Produce Marketing Co. Ltd [1972] AC 741 (HL) Poole 142.  Pause now to read this case.

However, note that it is enough to imply such a promise.  This occurred in Hughes v Metropolitan Railway (1877) 2 App Cas 439.

(b)       The promise must have been given voluntarily;

(c)       The promise must have been made with the knowledge and intention that it would be acted on by the promisee altering his or her position in reliance upon it;

(d)       The promisee must have actually acted in reliance upon the promise;

 That is, the promisee must have had no other reason for completing the alleged act of reliance.  The case of E.A. Ajayi v R.T. Briscoe (Nigeria) Ltd [1964] 3 All ER 556 (PC) Poole 145 provides a good example of a case where there had not been sufficient reliance.

 This reliance need not be detrimental to the promisee.  This was established by Lord Denning in W.J. Alan & Co. Ltd v El Nasr Export and Import Co. [1972] 2 QB 189 (CA) Poole 146.  Pause now to read this case. 

(e)       It must be inequitable for the promisor to go back on the promise

 This point was stressed by Lord Denning in D & C Builders Ltd v Rees [1966] 2 QB 617 (CA), Poole 150.  Pause now to read this case.

(f)                 There must have been a prior existing legal relationship between the parties.

That is, promissory estoppel cannot occur in a vacuum.  It can only arise when there is an existing relationship between the parties.  Normally this will be a contract.

(g)       The doctrine cannot be used as a “sword”

 The doctrine cannot be used to found a cause of action.  Instead, it can only be used as a defence.  This is explained well in the case of Combe v Combe [1951] 2 KB 215 (CA) Poole 143.  Pause now to read this extract.

(h)       Suspensory Only?

One of the most uncertain requirements relates to whether the doctrine has permanent or only suspensory effect.  There is no doubt that in some circumstances the doctrine will only have suspensory effect, this occurred in Hughes v Metropolitan Railway Co.  It is also clear that promissory estoppel can in some situations both extinguish some rights and suspend others.  This is what happened in High Trees, for, the promise was interpreted as having only been intended to be applicable during the war, once that was over, the terms of the contract automatically revived.

What is not clear is whether the doctrine of promissory estoppel could be used to extinguish, rather than suspend, an obligation which is not a continuing obligation.  For example, it is unclear whether promissory estoppel would have wiped out, or simply postponed, the payment of the balance in D & C Builders v Rees if the issue of inequitability had not arisen in that case.

5.2.4   Extension of the scope of Promissory Estoppel

Despite the traditional limits that can be cited on promissory estoppel the exact scope of the doctrine is unclear.  This is because the doctrine is still evolving as the courts continue to stretch the doctrine to cover new situations placed before them.  Such a judicial attitude is appropriate when one considers that promissory estoppel is an equitable doctrine and should be concerned with equitable results not with adherence to strict legal rules. 

The most revolutionary change to the doctrine, which has been accepted in the English Court of Appeal, the Australian High Court and the Court of Appeal in the Fiji Islands, is that the doctrine is now sometimes able to be used to create rights. That is, the doctrine is beginning to be used as a sword. It is not yet clear which approach the other countries of the USP region will take on this point.

 The Fijian case that accepted this change is Attorney-General of Fiji v Pacoil Fiji Limited, unreported, Court of Appeal, Fiji, cc496/1992, 29 November 1996.  Pause now to read this case.  You will note that Pacoil refers to Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 (High Court of Australia) Poole 158.  Make sure that you also read this case.

Another alteration made to the requirements of promissory estoppel in Australia, illustrated by Waltons Stores, is that the parties were not required to be in an existing legal relationship.  In Waltons Stores the court found that it was enough that the parties simply had previously been undertaking negotiations. 

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