Waiver and Promissory Estoppel PDF

CONSIDERATION – PART 2  waiver and promissory estoppel A waiver refers to the giving up of contract rights by one party. This can be done by a positive act in deliberately not exercising one’s right to take action. Hickman v Haynes (1875) – B asked S to deliver goods lat...

CONSIDERATION – PART 2  waiver and promissory estoppel A waiver refers to the giving up of contract rights by one party. This can be done by a positive act in deliberately not exercising one’s right to take action. Hickman v Haynes (1875) – B asked S to deliver goods later than originally agreed, when delivery made, B refused. Court held that the buyer had waived his right to demand delivery on time and that he could not subsequently reassert it without the giving of reasonable notice. The doctrine of waiver developed in Charles Rickards Ltd v Oppenheim promissory estoppel What is estoppel ? It is a legal principle that prevents someone from arguing something or asserting a right that contradicts what they have previously said or agreed to buy by law It is meant to prevent people from being unjustly wronged by the inconsistencies of another person’s actions or advice There is very close relationship between the doctrines of waiver and promissory estoppel Under the rules of consideration, the modification of a contract requires consideration in return for it to be binding. Promissory estoppel however provides that in certain circumstances, a promise may be binding even though it is not supported by consideration This equitable doctrine has developed to supplement the common law rules of contract. Promissory estoppel is said to have developed from the doctrine of waiver. The leading case from where this doctrine was found was Hughes v Metropolitan Railway Co (1877) - Issue between landlord and tenant – - Under the tenancy agreement, tenant were to have kept with the repairs of the premises. - Landlord gave tenants 6 months notice to do some repairs – stating that if they were not done in time, the lease would be forfeited. - A month later, there was a discussion as to the possibility of tenants buying the lease - Tenants states – will not do any repairs in mean time - By end of the year, the negotiations were unfruitful- six months notice was also up - Landlord claimed lease was forfeited – tenants did not do repairs - HOL held tenant was entitled to equitable relief against forfeiture – as the 6 month period was suspended during the negotiations process This doctrine was obscured of 70 year until it was brought to life again by Lord Denning in the case of Central London Property Trust Ltd v High Trees House Ltd (1947) - C let a block of flats in London to the D on a 99 year lease at annual rent of £ 2,500. - In 1940, D discovered that as a result of the war, flats became empty as people left London - C agreed to reduce the rent to £ 1, 250. - There was no consideration supported by D for this promise - After the war ended, property markets returned normal and flats were full again - C stated agreement meant to last until war ended or until flats were full - C demanded D pay the full rent as payment for the last two quarters of 1945 was due - D refused to pay - Courts held C were entitled to demand the entire rent from when flats became full  It is still rather unclear as to the precise extent of the doctrine of promissory estoppel However before invoking this doctrine, there are a few conditions that ought to be fulfilled 1) There must be a pre-existing contractual relationship 2) There must be a promise or representation which is intended to affect the legal relations between the parties 3) The promise must have been relied on 4) It must be inequitable to enforce the strict legal rights 5) Effect of P.E is suspensory cannot destroy future rights 6) No new rights can be created Pre- Existing Contractual Relationship There must be an already existing contractual relationship between the parties before PE can be raised PE operates to modify existing relationship and not create a new one There must be a promise or representation which is intended to affect the legal relations between the parties There must be an obvious promise not to enforce a person’s full legal rights If the words or statement made were to be ambiguous , then you cannot claim estoppel unless representee seeks clarification from representor Can be implied from conduct – silence and failure to act is insufficient Reliance This is the most important part when raising PE Promisee must have relied on the promise made by the promisor which had influenced their conduct Reliance provides justification for enforcing the promise The lessees of the property in High Trees House had paid reduced rent in reliance on the promise from the owners that this would be acceptable They had went about organizing their daily business in reliance of this promise. There are some cases where the dicta said promise must have relied to his detriment But Lord Denning said reliance need not be ‘detrimental’ so long as there is proof of reliance However, if relying on the promise does not put the promise at a disadvantage – might be difficult to prove the inequitable right to enforce strict legal right It must be inequitable to enforce the strict legal rights PE is an equitable doctrine – so a judge is not obliged to apply this automatically as soon as it is proved that there was a promise modifying an existing contract which has been relied on. The judge has a discretion to decide if it is fair to allow the promise to be enforced. What does inequitable means? It will be where the promise has extracted the promise by taking advantage of the promisor In the case of D & C Builders v Rees (1966) where the promise of firm of builders to accept part-payment as fully discharging the debt owed for work done was held not to give rise to promissory estoppel. Debtor had taken advantage of builders because she knew they were in financial difficulty. In Re Selectmove Ltd (1995), Selectmove tried to rely on equitable estoppel to prevent the Inland Revenue from enforcing on alleged agreement for unpaid income taxes Effect of P.E is suspensory cannot destroy future rights Modification on contract rights can only be temporary and not permanent. It cannot destroy them forever. In High Trees House it was accepted that the promise to take the reduced rent was only to be applicable while the 2nd World War lasted. Once it ended – original terms of contract revived In Tool Metal Manufacturing Co Ltd v Tungsten Electric (1955), the court held that the patent owner’s promise is binding during the specified period, so they could not get back any money that would have been due if the agreement had not been made As long as the promisor may be able to withdraw the promise by giving reasonable notice, he could revive his rights No new rights can be created PE cannot be used to create new rights or extend the scope of existing rights It can be used only to prevent the enforcement of rights already held It is ‘shield and not a sword’ In Combe v Combe (1951), there was no contract between the two of them Mrs. Combe did not have legal rights to the payments the husband promised eventhough she had relied on his promise in not applying for a maintenance order.