You are on page 1of 13

Dr.

RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY, LUCKNOW


ACADEMIC SESSION: 2014 2015

Contracts-1

Final Draft: Estoppel And Contract Law In India And England

SUBMITTED TO:
Dr. Visalakshi Vegesna
Associate Professor (Law)

SUBMITTED BY:
Ayush Chaturvedi (Roll No. 49)
Avnit Arya (Roll No. 48)

ACKNOWLEDGEMENT

With due respect, I would like to thank my teacher, Dr. Visalakshi Vegesna , under whose
guidance and support, I had been able to make the final draft of this project.
I must also thank Dr.MadhuLimaye Library at Dr. Ram ManoharLohiya National Law
University, Lucknow for providing me with enough books and study materials, for the
making of this project.
I must thank my parents for their valuable support and for making me stand of
what I am, and the values I had inherited from them, are the prized possession of my life.
I had given my cent per cent work, in making this project.
Ayush Chaturvedi
Avnit Arya

INDEX
1.
2.
3.
4.
5.
6.

List Of Cases Referred.....................................................4


Estoppel Principle.............................................................5
Application Of Estoppel...................................................6
Exceptions To The Doctrine Of Estoppel.....................................7
Promissory Estoppel..........................................................8
Development Of The Doctrine Of Promissory

Estoppel...............................................................................9
7. Difference Between India And England On The Doctrine Of Promissory
Estoppels...........................................................................................10
8. Exceptions To Promissory Estoppel................................................11
9. Differnce Between Estoppel And Promissory
Estoppel.........................................................................11
10. Conclusion...................................................................12
11. Bibliography................................................................13

List Of Cases Referred


1. Depuru Veeraraghava Reddi V. Depuru Kamalamma, A.I.R. 1951 Mad. 403
2. R.N. Gosain V. Yashpal Dhir, AIR 1993 SC 352
3. Supdt. Of Taxes, Dhubri &Ors vs Onkarmal Nathmal Trust,(1976) 1 SCC 766
4. Pratima Chowdhury V Kalpana Mukherjee, (2014) 4 SCC 196
5. Kalidas Dhanjibhai V. State Of Bombay, A.I.R 1965 SC 62
6. Gadigeppa Bhimappa Meti V. Balangauda Bhimangauda, AIR 1931 Bom 561
7. Mohari Bibee V. Dharmodas Ghose, I.L.R 30 Cal 539
8. Hughes V. Metropolitan Rly. Company (1877) 2 A.C. 439
9. Central London Property Trust V. High Trees House Limited (1956) 1 All E.R. 256
10. Malhotra And Sons V. Union Of India, A.I.R. 1976 J & K 41
11. India V. Anglo Afghan Agencies, AIR 1968 SC 718
12. Combe V. Combe,(1951) 1 All ER 767

Estoppel Principle
"Estoppel may be defined as disability whereby a party is precluded from alleging or proving in
legal proceedings, that a fact is otherwise than it has been made to appear by the matter giving
rise to that disability."1
Estoppel is a part of law of evidence whereby a person making a statement, concerning existing
or past facts, is barred from resiling from those assertions, where the statements made has caused
some detriment or a change in the position of the person to whom the statements were made. The
term "Estoppel," comes from an old-French word- "Estoupail" (or variation), which means
"stopper plug", referring to placing a brake on the imbalance of the situation. The rationale
behind estoppel is to prevent injustice owing to fraud or inconsistency.
In its simplest sense, doctrine of Estoppels, precludes a person from denying or to negate
anything to the contrary of that which has been constituted as truth, either by his own actions, by
his deeds or by his representations or by the acts of judicial or legislative officers. Though
estoppels is described as a mere rule of evidence, it may have the effect of creating substantive
rights as against the person stopped. Thus where rights are involved estoppels may be described
both as a rule of evidence and as a rule creating or defeating rights.2
In a case Supreme Court, on estoppel, stated thus:
"Law does not permit a person to both approbate and reprobate. This principle is based on the
doctrine of election which postulates that no party can accept and reject the same instrument and
that "a person cannot say at one time that a transaction is valid and thereby obtain some
advantage, to which he could only be entitled on the footing that it is valid, and then turn round
and say it is void for the purpose of securing some other advantage."3
1Halsbury (4th Ed, Vol. 16, para 1501, page1008).
2Depuru Veeraraghava Reddi V. Depuru Kamalamma, A.I.R. 1951 Mad. 403
3R.N. Gosain V. Yashpal Dhir, AIR 1993 SC 352
5

Application Of Estoppel
The fundamental principle governing applicability of estoppel is that only if there was
representation, promise or an assurance on the part of the party litigant and his opponenets acted
upon the same to their detriment believing it to be true. In a case 4, a 5 judge bench stated thus on
the applicability of estoppel, the fundamental requirement as to estoppel is that the estoppel
must concern an existing state of facts. There is no common law estoppel based on statement of
future intention. The second requirement of estoppel is that it should be unambiguous. Finally an
estoppel cannot be relied on if the result of giving effect to it would be something prohibited by
law. Estoppel is only a rule of evidence. One cannot found a cause of action based on estoppel.
Section 115 of the evidence act 1872 describes the ingredients for the application of estoppel. To
invoke the doctrine of estoppels, there are three conditions which must be satisfied;
1. Representation by a person to another
2. The other should have acted upon the said representation and
3. Such action should have been detrimental to the interests of the person to whom the
representation has been made.
For application of this doctrine Supreme Court has laid down following guidelines It needs to
be understood, that the rule of estoppel is a doctrine based on fairness. It postulates, the
exclusion of, the truth of the matter. All, for the sake of fairness. A perusal of the above provision
reveals four salient pre conditions before invoking the rule of estoppel. Firstly, one party should
make a factual representation to the other party. Secondly, the other party should accept and rely
upon the aforesaid factual representation. Thirdly, having relied on the aforesaid factual
representation, the second party should alter his position. Fourthly, the instant altering of
position, should be such, that it would be iniquitous to require him to revert back to the original
position. Therefore, the doctrine of estoppel would apply only when, based on a representation
4Supdt. Of Taxes, Dhubri &Ors vs Onkarmal Nathmal Trust,(1976) 1 SCC 766
6

by the first party, the second party alters his position, in such manner, that it would be unfair to
restore the initial position.5
From the judicial pronouncements it can be inferred that the doctrine of estoppel is a rule of
equity and good conscience to avoid injustice that would be caused had the part estoppel had
otherwise not been estopped from doing so.

In the words of Dixon, J.:The principle upon which estoppel in pais is founded is that the law should not permit an unjust
departure by a party from an assumption of fact which he has caused another party to adopt or
accept for the purpose of their legal relations.
It may be said that even in absence of actual promise, if a person by his words or conduct, so
behaves as to lead another to believe that he will not insist on his strict legal rights, knowing or
intending that the other will act on that belief and he does so act, that again will raise an equity in
favour of the other, and it is for a court to equity to say in what way the equity may be satisfied.
Estoppel deals with the questions of fact and not questions of right, in other words there is no
general rule of law that a man is estopped from asserting a right which he has said that he will
not assert .
Exceptions To The Doctrine Of Estoppel
Besides broad principles which guide the application of this principle, several nitty-gritties are
involved with this principle.
It is a settled principle of law that whenthe facts are fully set out and admitted, a partys opinion
about the legal effect of those facts is of no consequence in construing it. That is no estoppel can
arise by reason of admission of the party as to such opinion.
Similarly an admission in ignorance of the legal rights of the parties creates no estoppel.There is
no estoppel against illegality or legal unenforceability.. 6 In a case7 Bombay high court was of the
opinion that where the minor, who was party to the contract misrepresent the fact and thereby
5Pratima Chowdhury V Kalpana Mukherjee, (2014) 4 SCC 196
7

induces another into a contract with him, then in an action against the contract the minor cannot
be estopped from taking infancy as a bar to action since contracts with minor is void ab initio.
Estoppel does not apply where the statement relied upon is made to a person who knows the real
facts and is not misled by the untrue statement and there can be no estoppel where the truth of
the matter is known to both the parties.8 There can be no estoppel where the truth is accessible
Promissory Estoppel
Estoppel is a rule of equity. The rule has gained new dimensions in recent years. A new class of
estoppel i.e promissory estoppel has come to be recognized in India as well as in England. Where
the rule of estoppel was only limited to only existing and past representations promissory
estoppel is when a representation made about future course of event and which in turn causes
detriment to the litigating parties. This enlarges the scope of the doctrine of estoppel and
subsumes within its ambit not merely statements of facts but promises as well.
Unlike promissory estoppel, which is only a rule of evidence and procedure promissory estoppel
has the effect of creating legally enforceable substantive rights. Promissory estoppel is also
important owing to the fact that it overcomes the classic doctrine of consideration in contracts.
Another difference lies in the fact that while estoppel could only be used as a defence promissory
estoppel could be basis for a new action.
The doctrine of promissory estoppel was devised in the case of Hughes V. Metropolitan Rly.
Company9 , But this was revived by lord Denning in the case of Central London Property Trust

6Kalidas Dhanjibhai V. State Of Bombay, A.I.R 1965 SC 62


7Gadigeppa Bhimappa Meti V. Balangauda Bhimangauda, AIR 1931 Bom 561
8Mohari Bibee V. Dharmodas Ghose, I.L.R 30 Cal 539
9 (1877) 2 A.C. 439
8

V. High Trees House Limited10.it has been variedly called quasi-estoppel, new estoppel. It is
a principle evolved by equity it is neither in realm of contract nor estoppel11.
The doctrine of promissory estoppel has no application to the State when state is acting in its
public, governmental or sovereign function, except when it is necessary to apply doctrine to
prevent fraud or prevent manifest injustice12. If it can be shown that owing to the circumstances
that have transpired it would be iniquitous hold government, in the public interest r that public
interest will be prejudiced promissory estoppel has to yield in balance of interest. But on the
other hand it is well settled that promissory estoppel can be applied against the government or
the government agency where the interest of justice and fairness dictate such a course.
Development of the Doctrine Of Promissory Estoppel
The doctrine of estoppel had lost its value for some time after Hughes case, it was resurrected by
Lord Denning in the case Central London Property Trust Ltd v High Trees House Ltd.13
In 1937, High Trees House Ltd leased a block of flats in Clapham, London, for a rate 2500/year
from Central London Property Trust Ltd. Due to the prevailing conditions during the beginning
of the World War II occupancy rates were drastically lower than normal. In January 1940, to
ameliorate the situation the parties made an agreement in writing to reduce rent by half.
However, neither party stipulated the period for which this reduced rental was to apply. Over the
next five years, High Trees paid the reduced rate while the flats began to fill, and by 1945, the
flats were back at full occupancy. Central London sued for payment of the full rental costs from
June 1945 onwards.
Based on previous judgments as Hughes v Metropolitan Railway Co, Denning J held that the full
rent was payable from the time that the flats became fully occupied in mid-1945. However, he
10 (1956) 1 All E.R. 256
11 Fields Commentary On Law Of Evidence,12thEdn, Vol 5,Pg.4241
12Malhotra And Sons V. Union Of India, A.I.R. 1976 J & K 41
13 (1947) 1 K.B. 130
9

continued in an obiter statement that if Central London had tried to claim for the full rent from
1940 onwards, they would not have been able to. This was reasoned on the basis that if a party
leads another party to believe that he will not enforce his strict legal rights, then the Courts will
prevent him from doing so at a later stage. This obiter remark was not actually a binding
precedent, yet it essentially created the doctrine of promissory estoppel.

The Indian Development of Estoppel


The doctrine of promissory estoppel has been stated in India thus:
Where one party has by his words or conduct made to the other a clear and unequivocal promise
which is intended to create legal relations or affect a legal relationship to arise in the future ,
knowing or intending that it would be acted upon by the other party to whom the promise is
made and it is in fact so acted upon by the other party the promise would be binding on the party
making it and he would not be entitled to go back upon it if it would be inequitable to allow him
to do so having regard to the dealings which have taken place between the parties and this would
be so irrespective of whether there is any pre existing relationship between the parties or not.14
Long before the doctrine of promissory estoppel was formulated, the Calcutta High Court
recognised that the doctrine of estoppel was not confined only to law of evidence but that a
person may be estopped from doing acts or relying on particular arguments or contention. In
union of India V. Anglo Afghan Agencies 15 the doctrine of promissory estoppels found most
eloquent exposition. Finally in the M.P. Sugar Mills Case Supreme Court dealt with doctrine of
promissory estoppels at great lengths and held that it can afford a new cause of action.
Difference Between India And England On The Doctrine Of Promissory Estoppels

14 Motilal Padampat Sugarmills Co Ltd V State Of Uttar Pradesh AIR 1979 SC 621
15 AIR 1968 SC 718
10

Under the English law promissory estoppel does not create new cause of action; it is a shield
not a sword.16 the justification was that the application of doctrine in such a manner would
overlap doctrine of consideration in common law which is a founding stone of any contract. In
the word of Roskill LJ is that it would be wrong to extend the doctrine of promissory
estoppels , whatever its precise limits at the present day to the extent of abolishing in this back
hand way the doctrine of consideration
The supreme court of India took note of this aspect in M.P. Sugarmills Case, however, the court
emphasised that to allow promissory estoppels to base a cause of action would seriously dilute
the principle which requires consideration to support a contractual obligation and yet it should
not hinder the doctrine to become a cause of action17

Exceptions to Promissory Estoppel


The following limits have been recognised to the doctrine in M.P. Sugar Mills Case:
1. the doctrine must yield to equity when required. If it could be shown that enforcing the
promise against the government would cause prejudice to public interest or public interest
would suffer by enforcement. The burden would lie on government to show that
enforcement of contractual rights against it would impediment public policy.
2. No representation made by an officer can preclude the government from enforcing
statutory obligations. And neither can the government or government bodies can be
enforced to carry out representation which is contrary to law
3. The promisor can be excused in certain cases from performing the promise in exceptional
cases where subsequent events make it impossible or iniquitous for the promisor to
perform his obligations.
Difference Between Estoppels And Promissory Estoppel

16 Combe V. Combe,(1951) 1 All ER 767


17 Pollock And Mulla Indian Contract And Specific Relief Act On Pg 324,13th Edition, Lexis Nexis
11

Estoppels involves representation of pre existing facts and not as to the future facts. Promissory
estoppels is a wider doctrine which includes in its ambit promissors future intentions, conduct or
a promise.18promissory estoppels may operate even when there is no such detriment as is
required in the adjective law of estoppel19.it is enough if the promissor has only altered his
position relying on the promise so that it becomes inequitable to allow the promissor to act
inconsistently with it.
Conclusion
the doctrine of estoppel mentioned in sec115 of the Indian evidence act is limited in its scope. It
was a common law doctrine which found its way into legislation through codification of laws.
The doctrine of promissory estoppels arose due to the shortcomings of the doctrine of estoppels
which was only applicable to representation of pre-existing and past facts only. The new doctrine
of promissory estoppels as developed in India is much larger in its ambit and more often used as
it can constitute basis for a new cause of action.

18 Pollock And Mulla Indian Contract And Specific Relief Act On Pg 333,13th Edition, Lexis Nexis
19 Ibid
12

BIBLIOGRAPHY
Pollock And Mulla Indian Contract And Specific Relief Act
Fields Commentary On Law Of Evidence,12thEdn, Vol 5
www.scconline.com

13