Promissory Estoppel and Intention to Create Legal Relations

Promissory estoppel: Equitable claim that is only available in the absence of consideration. (See
Hughes v. Metropolitan railway) There are 6 criteria that are needed to establish promissory
estoppel:

1. There must be a pre-existing relationship

a. Durham fancy goods v. Michael Jackson fancy goods – liability of the bill of exchange
(e.g. cheque). Donaldson LJ: It does not have to be a pre-existing contractual
relationship, but it does have to be something that would give rise to penalties and
liability (i.e. a legal relationship of some kind). If the pre-existing relationship arises
because of a statute then that would suffice for the purposes of promissory
estoppel.
b. The Henrick Sith – Shipping contract case. There is no contract arising in this case,
however the parties believed that they had a contract. The belief that a contract was
in place is enough to constitute estoppel. Triteil is having none of this – this case
creates legal relations where previously there were none.
2. There must be a clear and unequivocal promise
a. The promise must effect the legal relationship between the parties. It must be clear
that the promisor is not insisting on their full legal rights. Woodhouse v. Nigerian
Produce marketing company – Woodhouse buy coco in England and Nigerian guys
sell that shit. Prior to 1967 the contract prices were stated in Nigerian pounds
(which had the same value as sterling at that stage). However, there was a
devaluation so Woodhouse asked for a payment in sterling instead. The Nigerian
guys refused to release the coco. They claimed that there was part payment of a
debt due to the currency fluctuation. Is the promise to shift from Nigerian pounds to
sterling enforceable in court? H of L state that the promise isn’t clear enough. From
this case: It must be a promise and nothing else, the promise doesn’t need to be
express (may be implied) and whether or not it is a clear and unequivocal promise is
a question of fact.
3. There must by reliance (on the promise made by the promisor) by the promisee
a. WJ Allen & co. v. Company – payment by letter of credit, the letter of credit should
have been opened in Kenyan currency, but was actually opened in pounds.
However, the promise had still been able to draw on this money, meaning that it
wasn’t exactly a detriment. Denning (in an obiter statement) does not think that
detriment is a prerequisite for promissory estoppel, instead you need a change of
position.
b. The post chaser – something about shipping. Gough LJ (in a ratio statement this
time): Detrimental reliance is not necessary for promissory estoppel. A lost
opportunity is necessary. The test for this is whether the promise has changed their
position vis a vis the promisor (which wouldn’t necessarily have done had it not
been for the promise made by the promisor)
4. Is it inequitable for the promisor to go back on the promise?
 a. TIME (e.g. post chaser). The time between the making of the promise and then going
back on it. The longer the period of time, the more likely it is to be deemed
inequitable.
b. CIRCUMSTANCES SURROUNDING THE PROMISE. (D&C builders v. Reece) - Claimant
has done building work for the defendant and is now owed £500. They press for the
£500, but eventually take £300 in part payment (part payment of a debt is not good
consideration). The defendants knew that the claimants were in financial difficulty
and were going insolvent, so they offered the £300 and would give no more. The
claimant then brings an action for all of the money. Denning: There is clearly a
promise to not enforce the full debt here. However, promissory estoppel is not at
work here because the only reason the part payment was offered is because they
were taking financial advantage of the situation. Inequitable, therefore claimant
awarded full price.
c. CHANGE IN EVENTS. Has there been a change in events between giving the promise
and insistence upon full contractual rights? If this is the case then it is possible to go
back on the promise. (High trees house case?) – It was ok to change the price of the
rent because of a change in circumstances (end of the war).
5. Promissory estoppel is only suspensory, it doesn’t extinguish rights.
a. Read Treital
6. Promissory estoppel is ‘a shield and not a sword’
a. Coombe v Coombe – It can only be used to defend an action, not as the base for a
claim. In Coombe, the wife tries to sue the husband for maintenance payments.
There is no consideration for the promise to pay maintenance so she relies upon
promissory estoppel . Denning: P.E. is a shield not a sword and cannot be used for
this claim, therefore the action failed.
b. However, this does not mean that P.E. is only available to the defendant. Scenario:
Landlord in Hughes serves notice to quit on the tenant. Tenant goes to court to
challenge validity of notice to quit (tenant is claimant). Landlord’s defence is that the
tenant hasn’t carried out repairs. Tenant then uses P.E. to rebut the landlord’s claim.
Here we can see the claimant using P.E., but not as a cause of action.

Random: Couple try for a child. Woman gives eggs to be frozen, they are fertilised by bloke’s sperm.
Woman then has cancer and becomes infertile. Man then decides that he doesn’t wish to go ahead
with having a child. Can P.E. be used? Court judgment: Technically P.E. could work, but out of
principle we will not allow it.

Intention to create legal relations

The court will only enforce agreements where this intention exists. Contracts between families and
contracts between husbands and wives are generally not enforceable in court (Balfour v. Balfour).
However, there are exceptions. The test is whether both parties want the contract to have have a
legal effect. (See Jones v. Paddasomething – on the sheet). Also see Rose v. Frank for commercial
realtions.