LLB Contract Law

Lecture 4
Part payment and ‘promissory estoppel’
Aims

By the end of this lecture, students should be able to:

• Understand the common law rules relating to part payment of a debt;

• Identify the elements of the equitable doctrine of ‘promissory estoppel’;
• Understand how the common law doctrine of consideration and the equitable doctrine of promissory
estoppel relate to each other.

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Promises to accept less

General rule
At common law, payment of a lesser sum does not discharge the obligation to pay the full amount.

• Foakes v Beer (1884)

• Re Selectmove (1995)

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Exceptions to the general rule

The common law

Pinnel’s Case (1602)
1. Different ‘thing’;
2. Different ‘place’;
3. Different ‘time’.

Welby v Drake (1825)

• Payment by a third party

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Exceptions to the common law

Equity
Promissory estoppel
“Estoppel … is a principle of justice and equity. It comes to this: when a man, by his words or conduct, has
led another to believe in a particular state of affairs, he will not be allowed to go back on it when it would
be unjust or inequitable for him to do so.”
per Lord Denning

• Hughes v Metropolitan Railway (1877)

• Central London Property Trust v High Trees House (1947)
“A promise intended to be binding, intended to be acted on and in fact acted on is binding so far as its
terms properly apply.”
per Lord Denning

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Promissory estoppel

The requirements

• Clear and unequivocal promise to suspend existing contractual rights;

• Change of position by promisee in reliance on the promise;
• Reliance need not be detrimental;
• Inequitable for the promisor to go back on the promise;
• Can only be used as a shield, not as a sword.

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Promissory estoppel

‘Clear, unequivocal promise’

The promise it to waive existing contractual rights

Either by express statement or by conduct which implies that promise

The promise must be clear

• Woodhouse v Nigerian Produce (1972)

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Promissory estoppel

Alteration of promise in reliance

The change of position must be in reliance on the promise

• Ajayi v Briscoe (1964)

Reliance need not be detrimental

“It is not necessary to show detriment; indeed, the representee may have benefitted from the
representation, and yet it may be inequitable … for the representor to enforce his legal rights.”
per Goff LJ, The Post Chaser (1982)

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Promissory estoppel

Inequitable to go back on the promise

“It does not follow that in every case in which the representee has acted, or failed to act, in reliance on the
representation, it will be inequitable for the representor to enforce his rights.”
per Goff LJ, The Post Chaser (1982)
• D & C Builders v Rees (1965)

Shield not a sword

Acts as a defence to a claim, not as a cause of action
• Combe v Combe (1951)

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Promissory estoppel

Advancement?

The High Court of Australia has been flexible

• Waltons Stores (Interstate) v Maher (1988)

The English Court of Appeal has not

• Baird Textile Holdings Ltd. v Marks & Spencer (2001)

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Promissory estoppel

Effects

Suspends or extinguishes rights?

Generally suspensory – rights resume on ‘reasonable notice’

• Ajayi v Briscoe (1964)
• Tool Metal v Tungsten Electric (1955)

Past periodic payments (e.g. rent)?

• Central London Property Trust v High Trees House (1947)
• D & C Builders v Rees (1965)

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Conclusions

• All promises must be supported by consideration in order to be enforceable;

• ‘Past’ consideration is not good consideration (but consider Pao On exception);
• Variation promises – to pay more or accept less;
• Promissory estoppel elements must be met for the exception to operate.

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Next lecture
Lecture 5
Duress