Consideration and promissory estoppel relationship tips

Doctrine of Consideration and Promissory Estoppel

The doctrine is popularly called as Promissory Estoppel, Equitable Estoppel, Quasi Estoppel and New Estoppel But, unless the agreement is supported by 'consideration' the agreement would be void is intended to create legal relations or effect, a legal relationship to arise in the. future, knowing or Kindly guide. I do not understand the concepts of consideration, promissory estoppel and why If you have consideration (and certainty and intent to create legal relations). Consideration or Promissory Estoppel Legally speaking, a contract is a legally binding agreement in law between at least two parties which.

A promise without consideration cannot be binding. PC Agreement made for sale of building in return for shares. So as to not upset the market it was agreed that P should not be able to sell some shares for a period. P threatened not to carry out main contract unless indemnified against potential loss. Sub-contract made to keep P happy. Issue as to whether there was consideration for the indemnity contract.

All three features are present in this case. A promise to perform, or the performance of a pre-existing contractual obligation can be valid consideration. Court refused to adopt a rule to the effect that here there is a threat to repudiate there cannot be consideration as it would render the law too uncertain.

Commercial pressure is not enough for a finding of duress. In determining whether there was coercion of the will such that there was no true consent it is material to enquire whether the person alleged to have been coerced protested; whether he had an alternative course of action open to him such as an adequate legal remedy; whether he was independently advised; whether he took steps to avoid it.

A contract may be void on the basis of economic duress only where it satisfies the above conditions. Manager of colliery applied for police protection for his mine during a strike. Police said that it would only do so if it were paid at a special rate by M for doing so. Father offered mother money towards the maintenance of child so long as the child was well looked after and happy. Denning says has always thought that a promise to perform an existing duty, or performance of it, should be regarded as good consideration because it is a benefit to the person to whom it is given.

In this case thinks the fathers promise should be regarded as a unilateral contract. The ascertainment of a specified sum in lieu of the unascertained has always been held to be good consideration. A promise to perform a pre-existing duty can be good consideration so long as there is nothing in the transaction which is contrary to the public interest.

Promissory Estoppel

In this case he gave her money to avoid the trouble and expense of coming to court notwithstanding that he would have had a defence. Also important is that she could have returned to the husband and if he had rejected her she would have been entitled to money from him. Thus her right to maintenance had only ever been suspended rather than forfeited. Uncle agrees to pay in consideration of marriage for so long as their wage stayed below a certain amount.

Williams v Williams [] 1 WLR Husband agreed to pay deserted wife maintenance so for long as she was single and indemnified him against all debts incurred by her and not to use his name to obtain credit. However, the police may lend constables for special services at the request of a member of public. Two dissents on the basis that they thought that on the facts these actions were part of the ordinary duty; police stated that the mine would have been protected anyway, although they would have done so in a different way.

Majority thought that the letter could be construed as a request for marriage, being of personal satisfaction for the Uncle. Byles LJ dissent as he thought that a promise based on what one is already bound to do cannot be enforced.

The reason why this is the rule is not only because the promise has no value in the judgment of the law, but because a man can hardly say that the prior legal obligation was not his determining motive. Agreement for carriage of goods contained a clause that liability would extinguish within a year for 'the carrier, servants and independent contractors'. Stevedore was negligent, C claimed that could not rely on the exemption because no consideration had moved from him.

Consideration and Promissory Estoppel - The Student Room

Could be analysed as a unilateral contract which was complete when A performed services by discharging the goods. The performance was consideration for the benefit of exemptions and limitations. An agreement to do an act which the promisor is under an existing obligation to a third party to do may well amount to valid consideration and does so in this case: Two dissents on the basis that the clause was not intended as an offer but as an agreement; thought that amounted to rewriting of it.

In the course of a voyage seamen deserted the captain. He offered to divide wages which would have become due among the remainder of the crew so long as they did not desert him. Where a person performs beyond the scope of the original obligation it will be otherwise. Williams v Roffey [] 1 All ER P entered into sub-contract with D for carpentry work. P got into financial difficulty because the agreed price was too low. D wanted to avoid time penalty clause in main contract and so offered P extra to get it done in time.

P had substantially completed when D decided to stop making the payments. Notwithstanding the attempts of Lord Denning to say that Stilk is not good law, other judges in those cases seem to have put the matter differently, always finding something extra beyond the pre-existing obligation.

The dictum of Denning does not provide a sound basis for avoiding the usual approach. The present state of the law can be expressed as follows:?? If A has entered into a contract with B in return for payment by B, and; At some stage before obligations are complete B has reason to doubt whether A will be able to complete his side of the bargain; B thereupon promises additional payment; As a result B obtains a practical benefit or obviates a disbenefit; 2?

Russell LJ warns against applying Stilk rigidly thinking that the court should be ready to find consideration so as to reflect the intention of the parties where the relative bargaining powers of the parties are not unequal. Relevant factors taken into account in this case:?? Liquidated damages clause; More formalized method of payment would be beneficial; Interest in the continued performance by the same party; Avoiding having to conclude another contract to get the work completed.

The rule in Jordan v. Money, however is not an absolute one, and it is qualified by a number of exceptions. One of this exception is that the principle expressed in Hughes v. To this situation the rule in Jorden v. Money has no application. Secondly, it was that the dictum of Denning J. But the principle upon which he relied in the High Trees was that of estoppels, which must be specially pleaded. A plea of estoppel was never raised in Foakes v.

The law relating to estoppel, as stated above, appears to be too widely stated in the following observation of the Supreme Court: But assuming that the law as stated by the Calcutta High Court, is correct, the point to be noted is that it was a case between private parties. In India, there are two stages in the evolution of the application of this doctrine; pre-Anglo Afghan case and post- Anglo Afghan case.

Prior to this case, the position was that promissory estoppel did not apply against the Government. But the position altered with this case.

In Union of India v. Anglo Afghan Agencies, the Government of India announced certain concessions with regard to the import of certain raw materials in order to encourage export of woolen garments to Afghanistan. Subsequently, only partial concessions and not full concessions were extended as announced. The Supreme Court held that the Government was estopped by its promise.

Thereafter the courts have applied the doctrine of promissory estoppel even against the Government. In this case the Government of India promulgated an Export Promotion Scheme for providing incentives to exporters of woollen goods.

The respondent exported goods of a certain value and claimed import entitlement, equal to the full value of exports as notified in the scheme, but the Textile Commissioner reduced the import entitlement.

The Supreme Court held in favour of the respondent on the ground that the Textile Commissioner and the Union of India did not act in exercise of the power under cl.

The Court also observed: We hold that the claim of the respondent is appropriately founded upon the equity which arises in their favour as a result of the representation made on behalf of the Union of India in the Export Promotion Scheme, and the action taken by the respondent acting upon that representation under the belief that the Government would carry out the representation made by it.

Having held in favour of the respondent on the ground that the provisions of the Scheme had not been followed by the appellants, any reference to promissory estoppel for using against the Government was totally uncalled for and the observation must be treated as obiter pure and simple.

Jurisprudence Behind The Doctrine The doctrine of promissory estoppel is an equitable doctrine. Like all equitable remedies, it is discretionary, in contrast to the common law absolute right like right to damages for breach of contract. The true principle of promissory estoppel is 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 effect 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.

It is not necessary, in order to attract the applicability of the doctrine of promissory estoppel that the promisee acting in reliance of the promise, should suffer any detriment. The only thing necessary is that the promisee should have altered his position in reliance of the promise. This rule is applied by the Courts of Equity in England, as estoppel is a rule of equity.

In India, however, as the rule of estoppel is a rule of evidence, the ingredients of section of the Indian Evidence Act,must be satisfied for the application of the doctrine.

The doctrine of promissory estoppel does not fall within the scope of section as the section talks about representations made as to existing facts whereas promissory estoppel deals with future promises. The application of the doctrine would negate the constitutional provision, as under Articlewhich affords exemption from personal liability of the person making the promise or assurance.

Hence, as the doctrine is a principle of equity, the courts have taken a prerogative to lay emphasis on equity and justice and have explained the doctrine of promissory estoppel in India.

The ingredients for the application of the doctrine are: All that is required is that the party asserting the estoppel must have acted upon the assurance given by him. The alteration of position by the party Is the only indispensable requirement of the doctrine.

First, in that the representation may be one of intention and not one of fact; which raises the question whether it is inconsistent with the House of Lords decision in Jordan v. But the doctrine is now well established. Secondly, the requirement of detriment to the representee is less stringent in the case of promissory estoppel. Financial loss or other detriment is of course sufficient; but it seems that it is not necessary to show more than that the representee committed himself to a particular course of action as a result of the representation.

Thirdly, the effect of the estoppel may not be permanent. The representator may escape from the burden of the equity if he can ensure that the representee will not be prejudiced. But, consistently with estoppel by representation, promissory estoppel does not create a cause of action; it operates to give a negative protection. It is a shield and not a sword. Generally State is not subject to an estoppel to the same extent as is an individual, or a private corporation.

Otherwise it might be rendered helpless to assert its powers in. An exception, however, arises in the application of estoppel to the State when it is necessary to prevent fraud or manifest injustice.

Usually, but not invariably, these acts consist of erecting buildings on, or making other improvements to, the land in question. Where the requirements of proprietary estoppel are satisfied, the landowner is precluded from denying the existence of the rights in question, and may indeed be compelled to grant them.

It is distinct from promissory estoppel both in the conditions which must be satisfied before it comes into operation and in its effects. Both can arise from promises; consideration is not, while action in reliance is a necessary condition for their operation; and both are within limits revocable. The scope of proprietary estoppel is in two aspects narrower than that of promissory estoppel. First, proprietary estoppel is restricted promises relating to property generally the land of another.

Promissory estoppel may on the other hand arise if other necessary conditions are satisfied out of any promise that strict legal rights will not be enforced: Secondly, proprietary estoppel requires the promisee to have acted to his detriment, while promissory estoppel may operate even though the promisee merely performs a pre-existing duty and so suffers no detriment in the sense of doing something that he was not previously bound to do.

This difference between the two doctrines follows from the fact that promissory estoppel is unlike proprietary estoppel concerned only with the variation or abandonment of rights out of a pre-existing legal relationship between promisor and promisee. On the other hand, the scope of proprietary estoppel is in two respects wider than that of promissory estoppel.

Proprietary estoppel on the other hand can arise where there is no actual promise: Secondly, and more significantlywhile promissory estoppel is extremely defensive in nature, proprietary estoppel can give rise to a cause of action. The promisee is not merely entitled to raise the estoppel as a defense to an action of trespass or to a claim for possession: Although the authorities support this second distinction between these two kinds of estoppel, they do not make any attempt to explain or justify it.

It is submitted that the explanation is in part historical and terminological. Proprietary estoppel was originally explained in terms of acquiescenceor encouragement. Hence, no requirement that promises must be supported by consideration was perceived; or whether it was perceived the facts were said to give rise to a contract. Promissory estoppel on the other hand, dealt principally with the renegotiation of contracts; it obviously depended on giving binding effect to promises, and it did so in the context of releases and variations, in which the common law requirement of consideration had long been established.

The rule that promissory estoppel gives rise to no cause of action was evolved to prevent what would otherwise be an obvious conflict between the doctrines of promissory estoppel and consideration. There are, moreover, two aspects of proprietary estoppel which help to justify the distinction.

These are that the acts done by the promisee are not ones which he was under any previous legal obligation to perform, and that generally their effect would be unjustly to enrich the promisor if he were allowed to go back on his promise.

In these respects, the facts on which proprietary estoppel is based provide more compelling grounds for relief than those commonly found in cases of promissory estoppel. Nevertheless, it is submitted that the doctrines are distinct in the respects stated above.

Unilateral Promises And Their Revocation A unilateral promise is a promise from one side and is intended to induce some action by the other party. The promisee is not bound to act, for he gives no promise from his side. But if he carries out the act desired by the promisor, he can hold the promisor to his promise. His act is at the same time an acceptance of and a consideration for the promise.

The Doctrine of Promissory Estoppel

It follows, therefore, that where the promisee has done nothing, there is no consideration. The subscriber was, therefore held not liable. Similarly, it has been pointed out in other cases that a mere promise to subscribe to a charitable institution cannot be sued upon.

Thus, where the defendant had agreed to pay from time to time, out of his own pocket certain sums proportionate to the value of the goods imported by him, to a charitable society, the promise was held to be not enforceable, being without consideration. There is yet another problem concerning unilateral promises.

It is beyond doubt true that a promise which is given in return for an act is revocable before the promisee begins to alter his position by acting upon the promise. But may it be revoked after the promisee has commenced the performance?

The decision in Kedar Nath v Gorie Mohammad suggests though not in so many words, that such a revocation is impossible. The defendant, in that case was held liable as soon as the contract for the construction of the hall was entered into. The owner of a house had mortgaged it. The house was in the occupation of his son and daughter-in-law. He told them that the house would become their property if they paid off the mortgage debt in installments and they commenced payments.

In these circumstances, the court felt that it would be unjust if the promisor would revoke this promise at his pleasure. It could not be revoked by him once the couple entered on performance of the act, but it would cease to bind him if they left it incomplete or unperformed. On the other hand, if he has no liberty, he will be found even though the promisee may stop performances at his sweet will.

The section reads as follows: The State makes the promise within the ambit of law. There is an intention to enter into a legal relationship.

The other party must do an act in furtherance of that promise or is forbidden to do anything. In other words, a person who makes a statement as to the existence of the provisions of a statute is not estopped, subsequently, from contending that the statutory provision is different from what he has previously stated.

  • Doctrine of Consideration and Promissory Estoppel

A person may not represent the true status of a statute or law, but the other person who relies on such a representation is at liberty to find out the position of law on the matter and as the maxim says, ignorance of law is no excuse. So a person cannot take recourse to the defence of estoppel to plead that a false representation has been made regarding the provisions of a statute or law.

The principles of estoppel can not override the provisions of a statute. Where a statute imposes a duty by positive action, estoppel cannot prevent it. The doctrine cannot also be invoked to prevent the legislative and executive organs of the Government from performing their duties. In Jit Ram Shiv Kumar v. State of Haryana, a municipality granted exemption from octroi for developing a mandi, but subsequently is revoked the exemption.

Later it again granted the exemption in keeping with the terms of the original sale of plots, but levied taxes again. Even so, a claim of estoppel against its legislative power was not allowed. So is the case with the tax laws.

If the law requires that a certain tax be collected, it cannot be given up, and any assurances by the Government that the taxes would not be collected would not bind the Government, when it chooses to collect the taxes.

Thus it was held that when there was a clear and unambiguous provision of law that entitles the plaintiff to a relief, no question of estoppel arises. The doctrine of promissory estoppel has also been applied against the Government and the defence based on executive necessity has been categorically negated. The Government is not exempted from liability to carry out the representation made by it to its future conduct and it cannot on some undefined and undisclosed grounds of necessity or expediency fail to carry out the promise made, solemnly by it.

The Supreme Court has refused to make any distinction between a private individual and public body so far as the doctrine of promissory estoppel is concerned. But if the promise is on behalf of the Government is unconstitutional, against any statute or against public policy the question of promissory estoppel against Government does not apply.

Thus, the Government through its officers is bound by the doctrine and cannot invoke any defence for their inaction, unless backed by statutory authority.

Statute imposes a public duty while the duties imposed by a promise are owed by the Government not to the public but to private individuals. Thus estoppel does not apply to contravention of a statute but applies to the breach of a promise by the Government.

Where the Government makes a promise knowing or intending that it would be acted upon by the promisee and, in fact, the promisee acting in reliance of it, alters his position, the Government will be held bound by the promise and the promise would be enforceable against the Government at the instance of the promisee, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article of The Constitution of India.

It is elementary in a republic, governed by a rule of law, no one howsoever high or low, is above the law. Everyone is subjected to the law as fully and completely as any other and the Government is no exception. It is indeed the pride of constitutional democracy and the rule of law that the Government stands on the same footing as a private individual so far as obligation under the law is concerned.

The Government cannot claim immunity from the applicability of the rule of promissory estoppel and repudiate a promise made by it on the ground that such promise may fetter its future executive action. Since the doctrine of promissory estoppel is an equitable doctrine it must yield when the equity so requires. If it can be shown by the Government that having regard to the facts as they have subsequently transpired, it would be inequitable to the Government to abide by the promise made by it, the court would not raise an equity in favor of the promise and enforce the it against the Government.

The doctrine of promissory estoppel will be displaced is such a case because equity would not require the Government to be bound by the promise. When the Government is able to show that due to the facts which have transpired subsequent to the promise being made, public interest would be prejudiced if the Government were required to carry out the promise made, the court would have to balance the public interest in the Government carrying out the promise made to a citizen which has induced the citizen to alter his position to his prejudice and the public interest likely to suffer if the Government were to carry out the promise, and determine which way the equity lies.

The doctrine of estoppel cannot be invoked for preventing the Government from acting in discharge of its duties under the law. The doctrine of cannot be applied in teeth of an obligation or liability imposed by the law. It cannot be used to compel the Government or even a private party to do an act prohibited by law.