Estoppel in English law

Estoppel forms part of the rules of equity, which were originally administered in the Chancery courts.

Estoppel in English law is a doctrine that may be used in certain situations to prevent a person from relying upon certain rights, or upon a set of facts (e.g. words said or actions performed) which is different from an earlier set of facts.

Estoppel could arise in a situation where a creditor informs a debtor that a debt is forgiven, but then later insists upon repayment. In a case such as this, the creditor may be estopped from relying on their legal right to repayment, as the creditor has represented that he no longer treats the debt as extant. A landlord may tell his tenant that he is not required to pay rent for a period of time ("you don't need to pay rent until the war is over"). After the war is over, the landlord would be "estopped" from claiming rents during the war period. Estoppel is often important in insurance law, where some actions by the insurer or the agent estop the insurer from denying a claim.

There are a huge array of different types of estoppel which can arise under English law. It has been judicially noted on more than one occasions that the link between them is often tenuous. Treitel on Contracts notes that "unconscionability ... provides the link between them." But they nevertheless have "separate requirements and different terrains of application."[1] The courts have generally abandoned any attempt to create a single general underlying rationale or principle; in First National Bank plc v Thompson [1996] Ch 231 Lord Millett said: "the attempt... to demonstrate that all estoppels... are now subsumed in the single and all-embracing estoppel by representation and that they are all governed by the same principle [has] never won general acceptance."[2]

Reliance-based estoppels

Under English law, estoppel by, promissory estoppel and proprietary estoppel are regarded as 'reliance-based estoppels' by Halsbury's Laws of England, Vol 16(2), 2003. Both Halsbury's and Spencer Bower (see below) describe all three estoppels collectively as estoppels by representation. These estoppels can be invoked when a promisee/representee wishes to enforce a promise/representation when no consideration was provided by him. The court will only enforce this lack-of-consideration promise if and only if it would be "unconscionable" for the promisor/representor to rescind from his promise/representation ("it's not fair!"). Estoppel when invoked in such a manner is often considered a rival or alternative to the doctrine of consideration under contract law. Only proprietary estoppel can create a cause of action in English law, though the other two can act in support of a cause of action or a reply to a defence. Under American jurisprudence, equitable estoppel is available only as a defense, while promissory estoppel can be used as the basis of a cause of action.

The requirement of inducement and reliance are broadly the same for all reliance-based estoppels:

Estoppel by representation of fact and promissory estoppel are mutually exclusive: the former is based on representation of existing fact (or of mixed fact and law), while the latter is based on a promise not to enforce some pre-existing right (i.e., an intention as to the future). Proprietary estoppel can operate only between parties who, at the time of representation, were in a pre-existing relationship, while this is not a pre-requisite under estoppel by representation of fact.

English courts will consider unconscionability taking into account many factors, including the behaviour, state of mind, and circumstances of the parties. Generally, the following eight factors are determinative (Michael Spence, Protecting Reliance: The Emergent Doctrine of Equitable Estoppel, Oxford: 1999, pp60–66):

Estoppel by representation

Estoppel by representation of fact is a term coined by Spencer Bower. This species of estoppel is also referred to as "common law estoppel by representation" in Halsbury's Laws of England, vol 16(2), 2003 reissue.

In The Law relating to Estoppel Representation, 4th edition, 2004 at para I.2.2, Spencer Bower defines estoppel by representation of fact as follows:

A second definition can be found at Wilken and Villiers, The Law of Waiver, Variation and Estoppel, 2nd ed, Oxford: 2003, at para 9.02:

A representation can be made by statement or conduct. Although the representation must be clear and unambiguous, a representation can be inferred from silence where there is a duty to speak or from negligence where a duty of care arises. Under English law, estoppel by representation of fact is not a cause of action, though it may be a defence or acts in support of a cause of action. There is some debate whether under English law courts will take into account unconscionability under estoppel by representation of fact, although Australian courts clearly do.[3]

Equitable estoppel

As noted above, under English law, promissory and proprietary estoppel are both species of equitable estoppel.

Proprietary estoppel

Proprietary estoppel arises when A purports to give but fails to effectively convey, or promises to give property or an interest in property, to B, while being generally aware (Crabb v Arun District Council[4]) that B will expend money or otherwise act to his detriment in reliance of the supposed or promised gift, so much so that it would be "unconscionable" not to enforce the expectation (Taylor Fashions v Liverpool Victoria Trustees).[5]

For example, in Dillwyn v Llwellyn[6] in Chancery a father promised a property to his son, who took possession, expended a large sum of money on the house and otherwise improved the property. The father never actually gifted the property to the son. After his death the son, claiming to be the equitable owner, obtained a court judgment forcing the trustees to convey the land to him.

Similarly in Inwards v Baker [1965] 2 QB 29, a father encouraged his son to build a house on his own land, promising to leave that land to the son in his will. Subsequently, the son built a house and lived there for some 30 years. No transfer of land was made in the father's will when he died. It was held that despite this the personal representatives of the father were estopped from evicting the son.

While the courts will generally uphold the expectations of parties, if the parties are themselves not clear about their expectations the court's starting point will be the detriment incurred by the parties (per Robert Walker LJ Jennings v Rice[7]). Proprietary estoppel claims, therefore do not necessarily result in the transfer of the property to the claimant; in Jennings v Rice itself, there was a monetary award.

In June 2008 the House of Lords re-visited the doctrine of proprietary estoppel, and in the process was quite fierce in describing its limits. In that light, it must be very doubtful that Mr Jennings would have got the result he did: properly understood, Jennings v Rice is a bit of a muddle, probably concerning promissory estoppel, with a bit of quantum meruit thrown in for good measure.

In Yeomans Row Management Ltd v Cobbe[8] the House overturned the decision of a fairly heavy-weight Court of Appeal on the very issue of estoppel, thereby illustrating the level of confusion about the meaning of the doctrine. Lord Scott of Foscote, with whom the other Lords agreed, described at length that someone who seeks to rely on proprietary estoppel must establish an actual or certain interest in the property to which he claimed a right. Without that, he is not off the starting blocks.

In particular he remarked that the following rationes of Deane J in Muschinski v Dodds[9] "repay careful reading" (his Lordship said they applied to proprietary estoppel as they do to constructive trusts):

Lord Scott added,

He then found that that was exactly what the Court of Appeal, no less, had done. Once the proprietary right is established, then and only then will the court consider the conduct of the party seeking to deny the right and if that conduct is wanting, will estop him from denying the right. The court should not begin with an examination of a party's behaviour.

Promissory estoppel (contract law)

Promissory estoppel is the doctrine that prevents a party from acting in a certain way because the first party promised not to, and the second party relied on that promise and acted upon it. In English law, a promise made without consideration is generally not enforceable, and is known as a gratuitous promise. For example, a car salesman promises not to sell a car over the weekend, but does so, the promise cannot be enforced. If however, the car salesman accepts one penny in consideration for the promise, the promise is binding and enforceable in court. Estoppel is one of the exceptions to this rule.

The doctrine of Promissory Estoppel was first developed in Hughes v Metropolitan Railway Co but was lost for some time until it was resurrected by Lord Denning in the leading case of Central London Property Trust Ltd v High Trees House Ltd.[10]

In this case, the claimants let a block of flats to the defendants at an annual rent of £2500. However, they agreed to accept a reduction in rent to £1250, because the defendants were unable to find enough tenants due to the evacuation of London during World War II. This promise to accept a lesser rent was unsupported by consideration. At the end of the war the flats became fully let, and the claimants demanded the return to payment of full rent. Denning J held that they were entitled to this from the last two quarters of 1945. Denning mentioned in an obiter dictum that had the plaintiffs tried to be reimbursed for the full amount they would have been estopped from doing so even though no consideration was present. This is because the plaintiff represented that he would accept half the rent and the defendant acted upon this.

Promissory estoppel requires (1) an unequivocal promise by words or conduct, (2) a change in position of the promisee as a result of the promise (not necessarily to their detriment), (3) inequity if the promisor were to go back on the promise. Estoppel is "a shield not a sword" – it cannot be used as the basis of an action on its own. It also does not extinguish rights. In High Trees the plaintiff company was able to restore payment of full rent (although estopped back rent was lost) from early 1945, but would have been able to restore full rent at any time after the initial promise provided a suitable period of notice had been given.

Estoppel is an equitable (as opposed to common law) construct and is therefore discretionary. In the case of D & C Builders v Rees the courts refused to recognise a promise to accept a part payment of £300 on a debt of £482 on the basis that it was extracted by duress. In Combe v Combe Denning elaborated on the equitable nature of estoppel by refusing to allow its use as a "sword" by an ex-wife to extract funds from the destitute husband.

Promissory estoppel is not available when one party promises to accept a lesser sum in full payment of a debt, unless the debtor offers payment at an earlier date than was previously agreed. This is the rule formulated in Pinnel's Case,[11] and affirmed in Foakes v Beer.[12] This rule has, however, been thrown into doubt by the recent decision of Collier v Wright Ltd.[13]

Note that Promissory Estoppel should not be confused with Estoppel for Non-disclosure of Knowledge, colloquially known as 'Nolissory Estoppel'. This arises when a party to a contract indicates that they have some knowledge about the value or the potential success/failure of a contract to the other party, but refuses to share this knowledge or 'nol'. The party with the 'nol' is estopped from their non-disclosure, and is forced to impart it equitably.


Yet proprietary estoppel has also arisen by acquiescence. The leading case in this area is Ramadan v Dyson (1866) LR 1 HL 129.

Estoppel by acquiescence

A legally binding contract occurs when one party makes an offer and receives an acceptance from the other party. A contract must consist of an offer and acceptance, the intention to create legal relations and consideration all must be present to make the contract legally enforceable. In contract law consideration is concerned with the bargain of the contract, each party to a contract must be both a promisor and a promisee. They must each receive a benefit and each suffers a detriment. The classic definition of consideration was given by the court in the case of Currie v Misa (1875) LR 10 Ex 153, referred to consideration as consisting of a detriment to the promisee or a benefit to the promisor, Lush J: “A valuable consideration, in the sense of the law, may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other".

The doctrine of consideration can therefore be seen as a set of rules, which play the principal role in the decision by the courts as to which agreements or promises are found to be legally binding.

Promissory estoppel is a term used in contract law that applies where there may not otherwise be an enforceable contract. The importance of promissory estoppel in contract law is that it has enabled legal obligations, which fall into the category of contract law but fail to show any consideration, to be argued for. Promissory estoppel provides a way in which promises can be legally binding even if no consideration has been given. Promissory estoppel relates to a form of future conduct. The doctrine of promissory estoppel may not make the total contract fully enforceable. The specific facts in the case must actually establish the elements of promissory estoppel before the contract becomes enforceable in law.

The promises within a contract will be enforced under the promissory estoppel doctrine, when enforcing the contract promises avoids injustice.

Lord Justice Denning is a leading figure in the field of promissory estoppel in the case of Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 (the High Trees case), was concerned with the modification of the rent payable on a block of flats during the Second World War. The importance of the case, however, lies in an obiter statement of principle which Denning LJ set out, “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”. Applying this principle, Denning held that a promise to accept a lower rent during the war years was binding on the landlord, regardless of the fact that the tenant had supplied no consideration for it. There are limitations which must be satisfied to this doctrine which derived from both Lord Cairns in the case Hughes v Metropolitan Railway Co. (1877) 2 AC 439 and Denning LJ in the High Trees case. They are:

  1. There must be a promise
  2. There must be a clear promise intended to alter the contracted obligation. The court assesses intention objectively rather than taking evidence on the party's state of mind.

Woodhouse Israel Cocoa Ltd v Nigerian Produce Marketing Board [1972] AC 741 held that a contract for the sale of some coffee beans was agreed to be payable in pound sterling. The sellers mistakenly sent an invoice stating price was payable in Nigerian pounds. At the time the value of sterling and Nigerian pounds was equal. The buyers accepted the delivery and invoice without objection. Subsequently the value of the pound fell quite dramatically in relation to Nigerian pounds. The buyers then sought to revert to pound sterling as stated in the contract. The buyers conduct in accepting the invoice unquestionably amounted to an implied clear and unambiguous promise to accept on those terms.

The doctrine can only be used as a ‘shield not a sword’

The full force application of the equitable maxim estoppel only allows a litigant to “use it as a shield and not as a sword” restricts the application of this doctrine to as far as only to provide a defence to a party and not to be used as a cause of action against another. In Combe v Combe [1951] 2 KB 215, CA a husband promised to make maintenance payments to his separated wife but failed to do so. The wife brought an action to enforce the promise invoking promissory estoppel. The court held that promissory estoppel does not create a cause of action and as such the requirement of consideration in formation of contract is still relevant. Promissory estoppel is a rule of evidence that prevents the promisor from denying the truth of statement which the promisee had relied. Denning LJ said: "The principle does not create new causes of action where none existed before. It only prevents a party from insisting on his strict legal rights when it would be unjust to allow him to enforce them". However, this requirement seemed changed in light of the decisions in Evenden v Guildford City AFC [1975] QB 917, here the courts held "that promissory estoppel can be a cause of action." Early cases indicated that there had to be a clear and unequivocal undertaking. However this was overruled by Secretary of State for Employment v Globe Elastic Thread Co Ltd [1980] AC 506. The promise or representation must be “precise” and “unambiguous” although it does not mean that such promise or representation must be expressly made. The concept of ‘waiver’ has been recognised by both the common law and equity as a means by which certain rights can be suspended, but then revived by appropriate notice. In Hughes v Metropolitan Railway Co. (1877) 2 App. 439 HL, It can be seen that this case did not involve a "promise" as such, but merely an "understanding". It had been suggested that Hughes could be restricted to "relief against forfeiture" cases, but this was specifically rejected in the later cases. This case was the one on which Denning placed considerable reliance in the High Trees case. It never applied to situations of part payment of debts, however, under the modern law the concept of waiver has been effectively considered within "promissory estoppel".

It remains unsettled whether promissory estoppel may arise in pre-contractual relationships. In the case Brikom Investments Ltd v Carr [1979] 2 All ER 753 CA, a landlord made an oral promise to his tenants that if they bought a 99 year lease to their flats he would repair the roofs of the flats at his own expense. After the leases had been signed by the tenants, the landlord repaired the roof at a cost of £15,000. The landlord then claimed a contribution from the tenants towards the cost of the repairs. The tenants refused to pay because of the promise made. The landlord claimed that Carr could not rely on her promise since she had not acted on his promise because she would have entered into the lease without any such promise having been made. However, Lord Denning was of the view that promissory estoppel may arise from promise made by parties negotiating contracts. Similar views was expressed in Durham Fancy Goods v Michael Jackson [1969] 2 QB 839, where Donaldson J. held that contractual relationship is irrelevant provided that there is “a pre-existing legal relationship which could, in certain circumstances, give rise to liabilities and penalties”.

Detrimental reliance on the representation

The proof of possible detriment or prejudice, which will appear if the promisor is allowed to revert to his original promise, is required. In Ajayi V. Briscoe (1964) 1 WLR 1326 or where he alters his position as a result of relying on that promise when though he suffers no detriment. In Alan Co. Ltd V El Nasr & Import Co. (1972) 2 QB 18, Denning detained that detriment is not an essential element of promissory estoppel. Therefore, for a plea of promissory estoppel to succeed, there must be a change in circumstances of the promisee. This elementary composition of promissory estoppel has been the core and central topic of discussion in the evolution of the doctrine.

Temporary suspension of contractual obligations and rights

This doctrine does not operate to completely extinguish the original rights of the parties accruing from the contract. It only provides for the suspension of such right, which can subsequently be revived after certain event or time. In Tool Metal Manufacturing v Tungsten [1955] 1 WLR 761 HL, The courts held that generally promissory estoppel will merely suspend legal rights rather than extinguish them. However, where periodic payments are involved and a promise has been made to reduce the payments because of pressing circumstances which are not likely to persist, promissory estoppel can be used to extinguish legal rights. This final limitation to the scope of estoppel operates in the sense that the doctrine applies to representations relating to past and present events only by excluding the future events executory promise. However, promissory estoppel may permanently extinguish the rights of the promisor to claim lump sum after part-payment. In D & C Builders v Rees [1965] 2 QB 617, Lord Denning expressed that the:

To conclude, the above limitations help to clearly outline its parameters. This essay has defined with the use of cases to demonstrate the successful attempts to depart from the traditional approach set by the Hughes and the High Trees cases. The parameters of this doctrine seem presently not to be clearly defined. These consequences have caused the parameters of promissory estoppel to be no longer an established and well-settled area, which may interpret a huge problem to the development of contract law. The threats to the limitations of promissory estoppel, manifested from the continuing evolution of promissory estoppel, may pose turbulence in contract law and open the flood gate to litigation. Therefore, the application of the modern promissory estoppel replaces the traditionally limitations set in the landmark cases. This equitable doctrine which originally acts as an exception to the doctrine of accord and satisfaction with subject to limitations now appears as an open and unlimited doctrine.

Other estoppels

Contractual estoppel

The law relating to contractual estoppel was summarised in Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd [2006] EWCA Civ 386:

Issue estoppel

The civil law use of issue estoppel or res judicata (literally translated as "the fact has been decided") is relatively uncontroversial. It expresses a general public interest that the same issue should not be litigated more than once even when the parties are different. The criminal law application, called double jeopardy provides that a person should not be tried twice for the same offence. A notable case occurred as a result of the Birmingham Six case where the House of Lords ruled in Hunter v Chief Constable of the West Midlands Police[15] that issue estoppel applied. Lord Diplock said:

Other estoppels

See also

Notes

  1. ↑ Treitel on Contracts, 14th ed. (2015) at 3-090.
  2. ↑ at 236
  3. ↑ see Wilken and Villiers, para 9-03; The Commonwealth v Verwayen (1990) 170 CLR 394 at 444 per Deane J.
  4. ↑ [1976] Ch 179
  5. ↑ (1982) QB 133
  6. ↑ (1862) 4 De G.F.& J. 517
  7. ↑ [2002] EWCA Civ 159
  8. ↑ [2008] UKHL 55
  9. ↑ (1985) 160 CLR 583
  10. ↑ [1947] KB 130
  11. ↑ (1602) 5 Co Rep 117a
  12. ↑ (1884) 9 App Cas 605
  13. ↑ [2007] EWCA Civ 1329
  14. ↑ Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd, at paragraph 56.
  15. ↑ (1982)
  16. ↑ Polanski v Conde Nast Publications Limited para 86

Further reading

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