PROMISSORY ESTOPPEL: CONSIDERATION
Prof Roger Halson
Mini Lecture Video Transcript
This is the second lecture on promissory estoppel. You'll recall in the previous mini-lecture we
looked at the requirements of promissory estoppel. There were three requirements for the
establishment of a promissory estoppel, an unequivocal promise by one party that they will not
insist on their strict contractual rights, reliance of a particular type upon that promise by the
promisee, and the person relying upon the estoppel must finally have acted equitably. If all three of
those requirements are established, we then go on to ask what is the effect, what is the legal effect
of the promissory estoppel, and it is that which we are focusing on in this miniature.
Our aim, the learning objective, is to understand the legal effects of a promissory estoppel. To do
this, there are two issues that we will look at. The first is to ask whether promissory estoppel is
suspensory or extincted. What we mean by this is that when someone says it will not insist on their
strict contractual rights, are they forever bound by that? If they are, then that modification of their
previous contract to say they won't insist on their strict contractual rights is extinctive because it is
made a permanent change to their rights. Whereas, if the effect of a promissory estoppel was
suspensory, it would mean that someone could revive the right, that the promise that they won't
insist on their strict contractual rights is a temporary thing, I believe, which can later be changed.
Now, the answer to the question is a promissory estoppel suspensory of extinct is both. What do I
mean by that? A promissory estoppel is extractive as to past obligations but is a suspensory as to
future obligations. That proposition arose from litigation in a case called Tool Metal Manufacturing
Co Ltd v Tungsten Electric Co Ltd. The facts of that case are quite complicated and there were two
strands to the litigation. One ended in the Court of Appeal and the other in the House of Lords.
One of those cases established a proposition that promissory estoppel is extinctive as to past
obligations and the other, that it is suspensory as to future obligations. Rather than look at the facts
of Tool Metal Manufacturing, which as I say are complex, I want to use a hypothetical. This is a
variation, this example, a variation of the facts of High Trees. If you recall, the actual facts of High
Trees were that a lease was entered before the war. There was an undertaking, the outbreak of
war, the landlord would accept half rent. Then after the wartime conditions had finished, the
landlord asked for full rent and was allowed it because the concession had ceased to operate. The
hypothetical, the change I'm making to illustrate the present point is to say, let's suppose that the
landlord had asked to go back to full rent, not in 1945 after the wartime conditions had finished, but
instead, in 1942.
On the basis of what I've said of Tool Metal, the effect of the landlord in 1942 saying, "Can I go
back to full rent?" Would be to lose the right to claim the balance of the underpayments from 1939
to 1942. He would be entitled to restore his right to full payment going forward from 1942 because
promissory estoppel is extinctive as to the past, but suspensory as to the future. It is almost as if,
what it is as if, as each payment of half rent was made, at that moment the landlord lost the right to
claim the balance of that payment, but could restore upon giving reasonable notice his right to full
payment going forward.
The second issue that arises when we ask, what is the effect of a promissory estoppel, is
sometimes put in this interesting way of asking, "Does promisary estoppel operate as a shield or
does it operate as a sword?"
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What we mean is, can a promisary estoppel only be used defensively or can it be used
offensively? In High Trees, of course, it's being used defensively because what is happening is the
landlord is saying, "I want full rent," and the tenant is saying, "Oh no, you can't, you are a stopped
prevented." The answer to this question is that it can only be used defensively. It is a shield but not
a sword. In England and Wales, the promissory estoppel does not create a right in one party to be
able to sue another. Rather, it creates a defense in a party when they are sued by the other.
In Combe v Combe, the case which establishes this, a promise was made by a man to his
estranged wife that he would pay a sum of money regularly. The wife sued to enforce that promise,
not on the basis that it was contractually binding, but simply on the basis of promissory estoppel.
As you can see from the date of the case, it follows not long after the High Trees case and the
Court of Appeal said, "No. If you want to sue to enforce a promise, you have to show the
requirements of a full contract. Promissory estoppel is not an alternative way of enforcing a
promise in the sense of creating a right to sue somebody, rather, it operates defensively to allow
you to resist someone enforcing a contract".
Now, just in passing, we should note that the law has developed differently in Australia. According
to the case of Walton Stores v Maher in Australia, a promissory estoppel can be used offensively.
It does create a cause of action. If you make a promise to me in Australia, I may be able to enforce
that promise on the basis that a full contract has come into existence but alternatively, I may be
able to enforce that promise on the basis of a promissory estoppel, but that is not the law here
where promissory estoppel operates as a shield, but not as a sword.
There's some further reading on the use of promissory estoppel, the effects of promissory estoppel
in McKendrick, and they're indicated on this slide. That now completes our account of promissory
estoppel. Thank you.
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