UNIT 1: ESTOPPEL
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main content
3.1 Promissory estoppel
3.2 Scope of promissory estoppel
3.3 Effect of promissory estoppel
4.0 Conclusion
5.0 Summary
6.0 Tutor-Marked Assignments
7.0 References / Further Reading
1.0 INTRODUCTION
In the last module, we considered equitable remedies. In this module, we will examine equitable de- fences starting with estoppel. Estoppel as an enforceable right may be validly resisted by a defence based on an earlier representation made by the claimant of the right to the person against whom the right is otherwise enforceable. Similarly a valid defence to an action may cease to be so, on the ground of an earlier representation made by the person entitled to the defence to the person against whom the defence is otherwise available.
In other words, where in an action between two parties, one of the parties had, either by words or conduct, made some representation (in connection with the transaction that gives rise to the cause of action) to the other party, the maker of such representation would be precluded from denying making the representation. The insistence of the court that such representation shall not be denied by the maker may be decisive in the determination of, or fixing the rights of the parties: thus a plaintiff who had made such representation, may fail in an action in which he would have otherwise succeeded; likewise a defendant may not be able to plead a defence that would have otherwise turned the case in his favour.
2.0 OBJECTIVES
By the end of this unit you should be able to:
(i) Define the scope of promissory estoppel; and
(ii) Describe the effect of promissory estoppel.
3.0 MAIN CONTENT
3.1 Promissory estoppel
Whenever such representation is pleaded and sustained by the court, it constitutes a bar to the claim of the maker. This is the basis of the doctrine of estoppel by representation, the principle of which was aptly stated in West v. Jones (1851), 1 Sim. (N.S.) 205; 61 E.R. 79 at 207. In that case, Lord Cranworth said 'Where a party has, by words or by conduct, made a representation to another lead- ing him to believe in the existence of a particular fact or state of facts, and that other person has acted on the faith of such representation, then the party who made the representation shall not af- terwards be heard to say that the facts were not as he represented them to be.'
The doctrine is common to both law and equity though there is evidence that it was earlier recog- nised in equity. See the following cases: Montefiori v. Montefiori (1762) 1 Black W. 363; 96 E.R. 203; Pickard v. Sears (1837) 6 Ad. & E. 469; 112 E.R. 179; Freeman v. Cooke (1848) 2 Ex. 654; 154 E.R. 652; Dyer v. Dyer (1682) 2 Ch. Cas. 108, 22 E.R. 869; and Hobbs v. Norton (1683) 1 Vern. 136; 23 E.R. 370. It is, however, certain that there was no distinction between the application of the principle at law and in equity until the High Trees Case (1947) K.B. 130. (See also Citizens' Bank of Louisiana v. First National Bank of New Orleans (1873) L.R. 6 H.L. 352 at 360; and Canadian Pacific Railway v. R. (1931) A.C. 414 at 429).
Before the decision in the High Trees Case (supra), it was believed that the application of the doc- trine was limited to representation as to existing fact. In Jorden v. Money (1854) 5 H.L.C. 185; 10 E.R. 868, the House of Lords laid it down that the doctrine only applies to representation of existing fact and does not apply to mere declaration of intention or future conduct. But in Central London Property Trust Ltd. v. High Trees House Ltd. (1947) K.B. 130 at 134, Denning J. (as he then was) made use of the equitable jurisdiction of the Court to extend the application of the doctrine so as to include representation other than one as to existing fact.
In that case, the plaintiff company leased a block of flats to the defendants at a rent of £2,500 per annum. Later because of the war conditions, many of the flats remained unoccupied and the plain- tiff thereby agreed in writing to reduce the rent. The defendants paid the reduced rent up to the end of the war when the plaintiff claimed his full rent both retrospectively and for the future. He brought this action claiming rent at the original rate for the last two quarters of 1945 when the war ended and also to resume his full right to claim rent at the original rate.
It was clear that the defendants could not have sued on the plaintiffs' promise to reduce the rent be- cause the promise was not supported by consideration; as far back as 1884, the House of Lords has decided that payment of lesser sum is not sufficient for the discharge of greater sum unless there is fresh consideration. (See Foakes v. Beer (1184) 9 App. Cas. 605). Thus, there could be no estoppel by way of defence in contract, because the promise to accept rent at a reduced rate was not a con- tract since consideration, an essential element of contract, was lacking; and an ordinary estoppel by way of defence was not available because of the decision in Jorden v. Money (supra) which con- fined the defence of estoppel to representation of existing fact and thereby excluding representation of intention. But Denning J., thought that the doctrine of estoppel had become more elastic than it used to be, he therefore, sustained the defence of estoppel as a bar to the claim for arrears of rent calculated at the original rate. Though the representation was based on a promise as to the future, the promisor was held bound on the ground that he intended to be legally bound because he in- tended to create a legal relation which to his knowledge would be acted upon and was in fact so acted upon.
In the course of his judgment, Denning J., said –
'But what is the position in view of developments in the law in recent years? The law has not been standing still since Jorden v. Money. There has been a series of decisions over the last fifty years which, although they are said to be cases of estoppels, but are not really such.
They are cases in which a promise was made which was intended to create legal relations and which, to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made, and which was in fact so acted on. In such cases the courts have said that the promise must be honoured.'
This formulation of a new equitable estoppel termed promissory estoppel or estoppel by waiver was contained in obiter dicta, nevertheless, the proposition has been consistently followed though various judges who have applied it have not treated it as a case of estoppel because it was not founded on representation of existing fact. See J.F. Wilson; Recent Developments in Estoppel (1951) 67 L.Q.R. 330; Ajayi v. R.T. Briscoe (Nig.) Ltd. (1964) 3 ALL ER 556 at 559; and Tika- Tore Press Ltd. v. Abina (1973) 1 All N.L.R. (part II) 244. Even Denning J. admitted that it was not a case of estoppel in the strict sense though the result of its application is the same as that of strict estoppel. Indeed, the cases which Denning J. relied upon for his proposition were decided without reference to estoppel.
In Hughes v. Metropolitan Railway Co. (1877) 2 App. Cas. 439 at 448, the lessor gave the lessee six months' notice to repair and the lessor would be entitled to an ejectment order if the lessee failed to comply with the notice. Before the expiry of the notice, the lessor entered into negotiation with the lessee for the sale of the reversion but the negotiations subsequently terminated. The lessee did not effect any repair; and on the expiry of the notice, the lessor brought an action seeking an eject- ment order against the lessee, claiming that the lease had been forfeited for non-compliance with the notice to repair.
The House of Lords upheld the lessee's contention that the opening of the negotiations amounted to a representation of intention by the lessor that he would not enforce the notice, at least during the currency of the negotiation and that it was that representation that induced the lessee not to comply with the notice to repair. The court held that the representation precluded the lessor from enforcing the notice which would start to run only from the termination of the negotiations. As to the prin- ciple upon which the court relied: Lord Cairns L.C. said:
' ... It is the first principle upon which all courts of equity proceed, that if parties who have entered into definite and distinct terms involving certain legal results - certain penalties or le- gal forfeiture - afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in ab- eyance, the person who otherwise might have enforced those rights will not be allowed to en- force them where it would be inequitable having regard to the dealings which have thus tak- en place between the parties.'
The principle could not be explained on the general law of estoppel, nor could it be said to be con- fined to the equitable jurisdiction of the court to grant relief against forfeiture, what the court relied upon was that it would be inequitable to allow a person who had made such representation as to in- tention, to retract his position. The principle was further clarified by the Court of Appeal in Bir- mingham and District Land Co. v. London and North Western Railway Co. (1888) 40 Ch.D. 268 at 286. In that case Bowen L.J. said:
'The principle has nothing to do with forfeiture, and everything connected with forfeiture . .... The truth is that the proposition is wider than cases of forfeiture. It seems to me to amount to this, that if persons who have contractual rights against others induce by their conduct those against whom they have such rights to believe that such rights will either not be enforced or will be kept in suspense or abeyance for some particular time, those persons will not be al- lowed by a Court of Equity to enforce the rights until such time has elapsed, without at all events placing the parties in the same position as they were before.'
The principle in Hughes Case (supra) has been consistently followed though in cases of lesser au- thorities. In Buttery v. Pickard (1945) 174 L.T. 144; 146, Humphreys J., held that a landlord was precluded from recovering arrears of rent after he had agreed with the tenant to reduce the rent and that the tenancy should continue on the basis of the reduced rent; the agreement was a representa- tion to the tenant that he, the landlord would not claim the balance. In Salisbury (Marquess) v. Gil- more (1942) 2 K.B. 38, the defendant was the tenant of the plaintiff; when his tenancy had two years 'to run he asked his landlord for a renewal which was refused and was informed by his lan- dlord that the premises were to be demolished at the expiration of the term. The defendant left the premises unrepaired and the plaintiff brought an action claiming damages for breach of covenant to repair.
The trial court awarded damages to the plaintiff but the decision was reversed by the Court of Ap- peal. Mackinnon L.J., invoked the principle in Hughes Case (supra) as enunciated by Bowen L.J. in Birmingham and District Land Co. case (supra). The representation made by the plaintiff to the defen- dant that the premises would be demolished at the expiration of the term had induced the defendant to leave the premises unrepaired and it would be inequitable to allow the plaintiff to claim damages having regard to the representation which the plaintiff had made to the defendant. See Salisbury v. Gilmore (supra) at 51-52.
While the High Trees case (supra) can be justifiably explained on the basis of the principle in Hughes case, it is an extension of the narrow application of the doctrine of estoppel as stated in Jorden v. Money. The High Trees case has, in the name of promissory estoppel, given new life to the doctrine of estoppel by representation. It is, indeed, a rewarding new life, at least, in the interest of justice for, it is not.difficult to imagine the inevitable and inequitable result if the doctrine of estoppel were to be confined to its traditional and narrow area of operation.
Nigerian courts have approved of and applied the principle in High Trees case. In Ajayi v. R.T. Briscoe (Nigeria) Ltd. (1962) 1 All N.L.R. 673 at 679, though the defence, based on promissory estoppel, was rejected, on the ground that the defendant had not altered his position on the promise made to him by the plaintiff, the Federal Supreme Court did not doubt that the principle laid down in the High Trees case created a new estoppel. The court held that a promise, made without further consid- eration, to withhold the enforcement of rights already accrued under a contract, is not enforceable, unless it was intended to create legal relations between the parties, and, to the knowledge of the per- son making it, was going to be acted upon by the person to whom it was made, and was, in fact, acted upon by him; thereby altering his position under the contract, so as to make it unjust for the promissor to enforce the rights accured.'
On the appeal to the Privy Council, Lord Hodson without expressly referring to the High Trees case, gave the most recent formulation of the doctrine of promissory estoppel. He said: 'The principle which has been described as quasi-estoppel and perhaps more aptly as promissory estoppel, is that when one party to a contract in the absence of fresh consideration agrees not to enforce his rights an equity will be raised in favour of the other party. See Ajayi v. R.T. Briscoe (Nigeria) Ltd. (1964) 3 All E.R 556, 559.
Thus, in Offiong v. African Development Corporation Ltd. (1964) 2 All N.L.R. 75 at 79, the appel- lant who was the Secretary of the respondent-company was indebted to the company in respect of the car given to him by the company when he took up employment with them. The appellant re- signed his appointment and requested that the company waived the payment of the balance due on the car. The company granted the request but later brought an action to recover the balance claiming, inter alia, that the release was not binding on the company because the appellant gave no considera- tion for it. De Lestang C.J. said 'It is contended that the release is not legally binding because the ap- pellant gave no consideration for it. In my view this case falls squarely within the principles estab- lished by Central London Property Trust Ltd. v. High Trees House Ltd., as explained in Combe v. Combe. That principle is that where a promise is given without consideration but is intended by the promisor to affect an existing contract between him and the promisee, and is intended to be acted upon by the promisee, and is in fact so acted upon, such a promise may be set up as a defence by the promisee in an action by the promisor to enforce the original contract.
In Esin v. Matzen & Timm (Nigeria) Ltd. (1966) 1 All N.L.R. 233 and in Tika-Tore Press Limited v. Abina (1973) 1 All N.L.R. (part II) 244, the Supreme Court respectively considered and applied promissory estoppel as a defence. In the former case, the court approved the application of the prin- ciples as stated by the Privy Council in Ajayi v. R. T. Briscoe (Nigeria) Ltd. In the latter case of Ti- ka-Tore Press Ltd. v. Abina (supra) at 252-253, where the representation consist of a promise by the promisor to the promisee that the promisee should pay a lesser sum before certain date, in full and final settlement of a greater sum, in response to the arguments of the plaintiff, the court said,
'All the arguments about whether the evidence was indicative of the defence, either of 'accord and satisfaction' or of 'waiver', or whether there was consideration for the 'waiver' or not merely begged the issue and appear to have been put forward in an abortive effort to sidetract the defence of estoppel, put forward by the defendants/appellants, and accepted by the learned trial judge who rightly held that it would be inequitable to enforce the claim. As a matter of fact, it may be said, with commendable justification, that the former theoretical view that the fact that there is no consideration or nothing in writing to support the variation of (the) contract no longer nullifies the effect of the defence of estoppel. ... In effect, this de- fence of estoppel by waiver (if it may be so conveniently described) is always pleaded by way of defence. '
The Supreme Court approved of the decision in Hughes case as expanded in the High Trees case; it however, implicitly doubted the continuing validity of Foakes v. Beer (1884) 9 App. Cas. 605, the equitable defence of promissory estoppel was extolled in a manner that is flexible - so it should be in the interest of justice. A person who modifies his legal relations within the rules of promissory es- toppel, must accept the legal relations as modified by himself, even though such modification is not supported in point of law by any consideration, but only by his word or conduct. Per Denning L.J. in Combe v. Combe (1951) All E.R. 767 at 770 cited with approval by the Supreme Court in Tika-Tore Press Ltd. v. Abina (supra).
3.2 Scope of Promissory Estoppel
(i) Is it Limited to Cases Arising out of Existing Contracts:
It is not certain whether the doctrine of promissory estoppel applies only to obligations arising strictly out of an existing contract. The principle as expanded in the High Trees case is wide enough to cover some other cases where the parties are not already contrac- tually bound inter se; for, the emphasis of the learned judge was on the fact that one par- ty had made a promise, intended to be acted upon and was in fact acted upon and was, therefore, precluded from retracting his promise. However, the authorities cited in sup- port of this proposition limited the principle to cases where there had been re-existing contracts between the parties.
In Hughes case (supra) at 448, the parties were already contractually bound and Lord Cairns, L.C. envisaged that the principle could only apply where there was a pre- existing contractual relationship. 'If parties who have entered into definite and distinct terms involving certain legal results ... afterwards by their own act or with their own consent enter upon a course of negotiations which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced.' In Birmingham and District Land Co. v. London and North Western Railway Company (supra) at 286, Bowen L.J. expressly confined the principle in Hughes case to cases where there were contractual relationships. 'If persons who have contractual rights against others induce by their conduct those against whom they have such rights .... Ex- cept in Robertson v. Minister of Pensions (1949) 1 K.B. 227, where the principle was ap- plied without a pre-existing contractual relationship between the parties, the cases in which the principle has been said to operate involve pre-contractual relationships be- tween the parties.
The recent formulation of the doctrine by Lord Hodson in Ajayi v. R. T. Briscoe (1964) 3 All E.R 556 at 559, envisages that the doctrine can only operate in respect of obligation arising out of con- tract. 'The principle, which has been described as quasi-estopel and perhaps more aptly as promissory estoppel, is that when one party to a contract in the absence of fresh consideration agrees not to enforce his rights an equity will be raised in favour of the other party.' The Supreme Court took a similar view in Tika-Tore Press Limited v. Abina (supra) at 253. In that case, Fatayi-Williams J.S.C. said 'It is set up, not as the foundation of an action for breach of contract, but as an answer to the contention of a creditor that the letter of the original contract must be observed.'
But the judgment of Denning L.J. in Combe v. Combe (1951) 1 All E.R. 767, which the Supreme Court quoted in support of its proposition, did not limit the application of the doctrine to cases arising ex contractu. Nevertheless, it is reasonably clear that established authorities in support of the doctrine conceive the doctrine as applicable only to obligations arising out of contract. This narrow conception of the application of the doctrine may be due to the fact that the cases in which the doctrine has been invoked and considered, largely involved persons who were contractually bound. Should the mere fact that the doctrine has been applied mostly in cases involving contrac- tual relations be sufficient to exclude its application to obligations arising otherwise than out of contract? What is, however, clear, is that whenever the doctrine applies, it modifies the existing obligations of persons; such obligations need not arise strictly out of contract.
(ii) The Doctrine cannot be used to Create a cause of Action:
The doctrine is limited to matters of defence, it can only be used as a shield and not as a sword. The doctrine may be set up as a defence by the promisee in an ac- tion by the promisor to enforce the original right: but it cannot be sued on as a separate cause of action by the promise. See Offiong v. African Development Corporation Ltd. (1964) 2 All N.L.R. 75, 79. 'The courts have not gone so far as to give a cause of action in damages for the breach of such a promise, but they have refused to al- low the party making it to act inconsistently with it. It is in that sense, and that sense only, that such a promise gives rise to an estoppel.' Central London Property Trust Ltd. v. High Trees House Ltd. (supra) at 134; Combe v. Combe (supra) at 219.
But in Robertson v. Minister of Pensions (1949) 1 K.B. 277, it would appear that the doctrine was used to found a cause of action. In that case, the plaintiff had applied to the Minister of Pensions claiming a military pension. The application was rejected by the Pensions Tribunal on the ground that the plaintiff failed to establish that his disability resulted from military service. On appeal, the plaintiff relied on a letter which he had received from an official of the Ministry and claimed that on the strength of that letter the Ministry was precluded from military service. Denning J. upheld the plaintiff's contention and the appeal was allowed. The letter which generated the estoppel was also the foundation of the cause of action.
Similarly, in Combe v. Combe (1950) 2 All E.R. 1115. Byrne J. upheld an action predicated on a promise that was not supported by consideration. The decision was reversed on appeal. The Court of Appeal was unanimous in rejecting the view that promissory estoppel could operate as the basis of the cause of action. 'That principle' observed Denning L.J., 'does not create new causes of action where none existed before.'
Promissory estoppel, as clarified, has since been consistently followed. In Beesly v. Hallwood Es- tates Ltd. (1960) 2 All E.R. 314 at 324. Buckley J. stated that the doctrine may afford a defence against the enforcement or otherwise of enforceable rights; it cannot create a cause of action. The House of Lords in Tool Metal Manufacturing Co. Ltd. v. Tungsten Electric Co. Ltd. (1955) 2 All E.R. 657, and the Privy Council in Ajayi v. R.T Briscoe (Nigeria) Ltd. (supra) at 559 emphasised that no encouragement was to be given to the view that the principle was capable of extension so as to create rights in the promisee for which he had given no consideration.
Though the principle is limited to matters of defence, it may be invoked by either the defendant or the plaintiff. What is essential to the application of the principle is that there must be an inde- pendent cause of action. See Combe v. Combe (1951) 2 K.B. 215, 220. Thus, a plaintiff having an independent cause of action may invoke promissory estoppel to preclude a defence otherwise available to the defendant. In Fenner v. Blake (1900) 1 Q.B. 426, the defendant, a tenant of the plaintiff was desirous of surrendering his tenancy three months earlier than that for which he could give a valid notice to vacate the premises. He approached his landlord, the plaintiff and en- tered into an informal agreement with the plaintiff in December to give up possession the follow- ing summer.
On the strength of this informal agreement, the plaintiff, with defendant's knowledge and con- sent, entered into an agreement for the sale of the premises to a third party, with a right to pos- session at Mid-summer. When the defendant refused to give up possession at midsummer, the landlord/plaintiff sued in ejectment; the Divisional Court held that the tenant/defendant was es- topped from saying that his tenancy did not terminate in June. There was a promise made with the intention of being acted upon, and was in fact acted upon.
(iii) Consequent to the Promise, the Promisee must have Altered his posi- tion:
In order to establish the defence of promissory estoppel the promisee must have altered his position. This requirement was clearly stated in the leading cases of Tool Metal Manufacturing Co. Ltd. v. Tungsten Electric Co. Ltd. (1955) 2 All E.R. 657 and Ajayi v. R.T. Briscoe (Nigeria) Ltd. (supra) at 559. In the latter case, the defence of promissory estoppel was dismissed by the Federal Supreme Court and on appeal, by the Privy Council, on the ground that the de- fendant had not altered his position. Lord Hodson, delivering the judgement ofthe Board said –
'The principle which has been described as quasi estoppel and perhaps more aptly as promissory estoppel, is that when one party to a contract in the absence of fresh consideration agrees not to enforce his rights an equity will be raised in favour of the other part. This equity is, however, subject to the qualification that the other party has altered his position.'
The precise meaning of this requirement is not free from difficulties. The position is clear in the case of ordinary estoppel, the promisee must have altered his position to his detriment. As Far- well J. stated in Dixon v. Kennaway & Co. (1900) 1 Ch. 833 at 836, the phrase 'alter his posi- tion' does not mean that an active alteration is necessary, but that it is sufficient if the person to whom the statement is made rests satisfied with the position taken up by him in reliance on the statement, so that he suffers loss. Thus, the phrase imports two forms of action, one positive and the other negative, that is, doing something which he would not have done, or refraining from doing something which he would have done but for his reliance on the promise. In either case, the promisee must have suffered detriment.
But the position is not as explicit in promissory estoppel as formulated by Denning L.J. in The High Trees Case (supra). In that case, the promisee by acting on the promise, did not suffer any detriment; indeed, he paid less, on the strength of the promise made to him, than he was contrac- tually bound to pay. Furthermore, nowhere in the cases cited in support of the doctrine was con- sideration given to the relevance of detriment to the operation of the doctrine; admittedly, the cases were not expressly decided on estoppel though the conclusions seem to import the doctrine.
In Hughes case (supra) at 448, it was stated that a promisor would not be allowed to enforce and otherwise enforceable right where it would be inequitable having regard to the dealings which have thus taken place between the parties. In Birmingham and District Land Co. case (supra) at 286, Bowen L.J. stated that promisor will not be allowed by a court of equity to enforce the rights until such time has elapsed, without at all events placing the parties in the same position as they were before. The two judgments envisage change of relations between the promisor and the promisee though it would not appear from the judgments that the change should, necessarily be detrimental to the promisee.
However, the representation must be such that it will be inequitable to enforce the right under the original arrangement or transaction. And it will so be inequitable if the representation was made with the intention of being acted upon and was in fact acted upon; for in such a case, the courts have insisted that the representation must be honoured; to decide otherwise will be to encourage breach of faith, which itself constitutes unconscionable and inequitable conduct. Thus, once the representation is acted upon, on the good faith of the representor, then the representee would have altered his position and the circumstances would be that it would be inequitable if the repre- sentor is allowed to retract his promise. See Foster v. Robinson (1951) 1 K.B. 149; Wallis v. Se- mark (1951) 2 T.L.R. 222.
The extra-judicial opinion of Lord Denning on this aspect is instructive. He wrote - 'There still remains the question, when is it 'inequitable' to allow a person to go back on his promise? The test of what is 'inequitable' may be different when there is a promise from that when there is some other conduct which leads the other to believe that the strict rights will not be enforced. A promise has always been considered to be different in nature and quality from conduct of negli- gence or omission. A man should keep his word. All the more so when the promise is not a bare promise, but is made with the intention that the other party should act upon it. Just as contract is different from tort and from estoppel, so also in the sphere now under discussion promises may give rise to a different equity from other conduct.
'The difference may lie in the necessity of showing "detriment". Where one party delibe- rately promises to waive, modify or discharge his strict legal rights, intending the other party to act on the faith of the promise, and the other party actually does act on it, then it is contrary, not only to equity but also to good faith, to allow the promisor to go back on his promise. It should not be necessary for the other party to show that he acted to his detri- ment in reliance on the promise. It should be sufficient that he acted on it. That is suffi- cient in the case of promises given on the formation of a contract. It should also be suffi- cient in the case of a promise given on the modification or discharge of a contract.'
'But where the party has made no promise, express or implied, and all that can be said against him is that he by his conduct has induced the other to believe that the strict rights under the contract will not be enforced or kept in suspense, then the position is different because there is no question of good faith - no question of a man keeping his word. In those circumstances, it may be necessary for the other party to show not only that he acted but also that he acted to his detriment, in the belief that the strict rights would not be en- forced. That is what is necessary in the case of an estoppel and there is no good reason why it should not be necessary here.'
'It must be acknowledged that the foregoing distinction has not yet been drawn in the cas- es, but it is interesting to notice that the actual decisions are all consistent with it.' See Re- cent Developments in the Doctrine of Consideration (1952) 15 M.L.R. 1 at 5-6. Lord Denning insisted that the question is not whether promisee has, by acting on the promise, suffered detriment but whether it is inequitable to allow a promisor to deny his promise made in good faith and with the intention of being acted upon by the promisee and was in fact acted upon. The observations of the House of Lords on the matter in the Tool Metal Case (supra) at 686 are not inconsistent with Lord Denning's proposition. 'To make the principle applicable' observed Lord Cohen, 'the party setting up the doctrine must show that he has acted on the belief induced by the other part.' Viscount Simonds emphasised that 'the gist of the equity lies in the fact that one party has by his conduct led the other to alter his position. I lay stress on this, because I would not have it supposed, particularly in commercial transactions, that mere acts of indulgence are apt to create rights.'
The suggestion that a distinction should be drawn between a deliberate promise to waive or mod- ify strict legal rights and a mere conduct that has induced the other to believe that strict legal rights will not be enforced may provide for a more flexible application of the doctrine. In the former case, if the deliberate promise is intended to create legal relation, it is sufficient if the promise is acted upon even though the requirement as to detriment is not satisfied. But in the lat- ter case, where there is no question of good faith, the promisee must show not only that he has acted on the promise but also that he suffers loss.
In Nigeria, the topic has been the subject-matter of some consideration in two leading cases and judicial attitude in both cases tend to favour Lord Denning's view of the matter. In Ajayi v. R.T. Briscoe (Nigeria) Ltd. (1962) 1 All N.L.R. 673 at 678-679, the Federal Supreme Court dismissed the defence of promissory estoppel on the ground that the defendant could neither be said to have altered his position nor even to have acted on the promise and thereby altered his position. In that case, the Defendant/Appellant, under a hire-purchase agreement, hired lorries from the plain- tiffs/respondents.
The defendant/appellant, having fallen into arrears in his payment of the instalments, wrote to the plaintiffs/respondents complaining that the vehicles were not in good condition due to lack of proper service and that he had had to withdraw the vehicles from service. In their reply the plain- tiffs/respondents stated that they were agreeable to his withholding instalments due on the ve- hicles as long as they were withdrawn from active service. In fact this letter was written six months after the final instalment was due and the action claiming the balance due was brought two years after the last instalment should have been paid. The trial court gave judgment for the plaintiff/respondent. On appeal, the appellant/ defendant raised the defence of promissory estop- pel. He contended on the authority of the High Trees case that the respondents were estopped from bringing the action by virtue of the letter which the respondents had written to him and that that letter constituted a waiver.
Taylor F.J., delivering the judgment of the court said:
‘It is true that a promise was made, that as long as the lorries were off the road the defen- dant could withhold the payment of the instalments due. It has not been contended, and indeed it could not be contended that this was a promise which had the effect, in view of the subsequent sale of the lorries, of waiving the payment of the balance of the debit alto- gether; as distinct from suspending the time for payment. Finally, I cannot see in what way the present appellant altered his position, or can be said to have acted on the promise contained in the letter under consideration, and altered his position. The appellant states that before the letter was received, and ever since its receipt, eight of the lorries were with the respondents, and three in the appellant's garage. There is nothing in the evidence ... to show in what way the appellant having known of the promise acted upon it and thereby al- tered his position in any way, so as to make it unjust for the respondents to sue for the bal- ance on the hire purchase agreement, two years after the letter was written, and nearly three years after the final instalment was due’.
Assuming that the letter was a deliberate promise intended to create legal relations, it was rea- sonably clear that the appellant never acted on it so as to alter his position, for his position, at the time of the action, remained as it was before and after the promise was made. The court did not doubt the correctness of the principle in the High Trees case; in which there was no ques- tion of detriment; the promisee, did act on the promise; as Taylor F.J. observed, in that case the promise to reduce the rent was made in order to enable the defendants to continue to run their business which they continued to do.
In Esin v. Matzen & Timm (Nigeria) Ltd. (1966) 1 All N.L.R. 233 at 238-239, the application of the principles stated by the Privy Council upholding the decision of the Federal Supreme Court in Ajayi v. Briscoe, was followed. The case concerned another hire-purchase agreement under which the defendant was in arrears in respect of tippers which he purchased from the plaintiffs under the agreement. The plaintiffs seized the tippers and later sued the defendant for arrears of instalments due. Earlier on, in mid-August 1962, the plaintiffs were found to have given an unintended im- pression that the defendant was given a delay of two months (a moratorium) for payment. The court inferred a promise from this impression on the ground that external approach ought also to be applied in promissory estoppel.
On the strength of this promise, the defendant claimed that the plaintiffs were estopped. The question was whether the defendant had thereby altered his position. His contention was that he must be regarded as having altered his position because, in reliance on the promise, he did not pay and thereby laid himself open to the liability of seizure of the tippers. The Supreme Court found that before the promise in mid-August the defendant had not paid the arrears and the tip- pers were liable to seizure; and at mid-August the liability to seizure was suspended; but at the end of August the plaintiffs wrote telling the defendant that he must pay the sum due by the 6th of September.
Thus the suspension was withdrawn and the liability to seizure revived. In essence the defen- dant's position was again what it had been before and at the time (that is, mid-August) when the promise was made. There was nothing the defendant did after mid-August to alter his position so that he should need an opportunity of resuming his former position. 'It is not suggested that he did anything on the faith of the suspension. He had not the money to pay the arrears he owed be- fore mid-August, and he had it not afterwards. His case is merely this: he had been promised an indulgence, he expected it not to be withdrawn, and he complains that he was disappointed in his expectation.'
The question was not whether the defendant altered his position to his detriment, on the other hand, it was whether he acted on the promise and thereby altered his position. Even though the defence was one of promissory estoppel by conduct, in which case, on the strength of Lord Denning's extra judicial opinion, detriment would have been a requirement, the Supreme Court thought it sufficient merely for the defendant to have acted on the promise.
This judicial attitude was confIrmed in Tika-Tore Press Ltd. v. Abina ((supra), where the defence of promissory estoppel by conduct was upheld. It was a case of waiver whereby the defendant paid a lesser sum than he was contractually bound to pay. He acted on the representation by the payment of a lesser sum, he thereby altered his position but he did not suffer any detriment yet the Supreme Court stated that it would be inequitable to enforce the plaintiff's claim.
SELF ASSESSMENT EXERCISE
Describe the scope of promissory estoppel.
3.3 Effect of Promissory Estoppel
As a rule, the element of temporariness cannot be divorced from promissory estoppel. See J.F. Wilson, Recent Development in Estoppel (1955) 67 L.Q.R. 330; Re Venning (1947) 63 T.L.R.
Unlike proprietary estoppels, promissory estoppel does not give rise to permanent estoppel. The promissor can resile from his promise on giving reasonable notice which need not be a formal notice; giving the promisee a reasonable opportunity of resuming his position. See Ajayi v. R .T Briscoe (Nigeria) Ltd. (supra). In fact, it is not the promisor alone who can resile from his promise, either party can change his mind, provided adequate or reasonable notice is given, he can thereafter resume his original rights and compel performance in accordance with those rights from the other party. In some cases, giving of notice may not be necessary before either party re- sumes his original rights; for example, where the condition under which the promise was given no longer exist; this was the position in the High Trees case where the modern doctrine of prom- issory estoppel was formulated.
Therefore, the effect of the doctrine is to modify or suspend the original rights of the parties inter se until such a time has elapsed, without at all events placing the parties in the same position as they were before. See Birmingham and District Land Co. v. London and North Western Railway Co. (supra) at 286. Thus, it will no longer be inequitable to allow a promisor to enforce his origi- nal rights if he had given reasonable notice of his intention to do so to the promisee or if certain supervening events had restored the promisee to the position which he was at the time the prom- ise was made.
In the leading case of Tool Metal Manufacturing Co. Ltd. v. Tungsten Electric Co. Ltd. (supra) at 675, the House of Lords reversed the decision of the Court of Appeal and restored the judgment of Pearson, J. as to what constitutes reasonable notice of the promisor's intention to resume his original rights. Lord Tucker explained the position:
'It is, of course, clear, as Pearson J. pointed out, that there are some cases where the period of suspension clearly terminates on the happening of a certain event, or the cessation of a previously existing state of affairs, or on the lapse of a reasonable period thereafter. In such cases, no intimation or notice of any kind may be necessary. But in other cases, where there is nothing to fix the end of the period which may be dependent on the will of the person who has given or made the concession, equity will, no doubt, require some no- tice or intimation together with a reasonable period for re-adjustment before the grantor is allowed to enforce his strict rights. No authority has been cited which binds your Lord- ships to hold that, in all such cases, the notice must take any particular form or specify a date for the termination of the suspensory period. This is not surprising having regard to the infinite variety of circumstances which may give rise to this principle which was stated in broad terms and must now be regarded as of general application. It should, I think, be applied with great caution to purely creditor and debtor relationships which in- volve no question of forfeiture or cancellation, and it would be unfortunate if the law were to introduce into this field technical requirements with regard to notice and the like which might tend to penalise or discourage the making of reasonable concessions.'
However, much as the element of temporariness is inherent in promissory estoppel, there are cases in which the effect of the application of the doctrine creates permanent estoppel, such cases may therefore be regarded as exceptions to the temporariness and suspensory nature and charac- ter of the doctrine. Thus, a promissory estoppel will become final and irrevocable if, by super- vening events, the parties cannot resume or be restored to their original positions.' Cases of com- plete and effective waiver or variation of original contractual rights or arrangements provide am- ple illustrations. See Tika-Tore Press ltd. v. Abina (1973) 1 All N.L.R. (part II) 244; Offiong v. African Development Corporation Ltd. (1964) 2 All N.L.R. 75.
In Tika-Tore Press Ltd. (supra), the promisor had agreed to accept a lesser sum in full and final set- tlement of a greater sum which the promisee then owed the promisor. The amount having been paid as agreed the promisor was held to have waived his right and was, therefore, estopped from claiming the balance from the promisee. Similarly, in Fenner v. Blake (1900) 1 Q.B. 426, the te- nant was held liable to ejectment, three months before the expiration of his tenancy on the ground that he had earlier on promised the landlord that he would vacate the premises at that time and on the strength of this promise the landlord had sold the premises to a third party, and providing for a vacant possession to be given. In Salisbury v. Gilmore (1942)
2 K.B. 38, the tenant, who had vacated the premises was held not liable for breach of co- venant to repair on the ground that the landlord had before the expiration of the tenancy, represented to the tenant that the premises would be demolished at the expiration of the tenancy.
4.0 CONCLUSION
It is not certain whether the doctrine of promissory estoppel applies only to obliga- tions arising strictly out of an existing contract. The principle which has been de- scribed as quasi estoppel and perhaps more aptly as promissory estoppel, is that when one party to a contract in the absence of fresh consideration agrees not to enforce his rights an equity will be raised in favour of the other part. This equity is, however, subject to the qualification that the other party has al- tered his position.
5.0 SUMMARY
In this unit we considered promissory estoppel as an equitable defence. You should now be able to: define the scope of promissory estoppel; and describe the effect of promissory estoppel.
6.0 TUTOR-MARKED ASSIGNMENT
What do you understand by promissory estoppel? Discuss.
7.0 REFERENCES / FURTHER READING
Hackney J., (1987) Understanding Equity and Trusts; London: Fontana press
Jegede M. I. (2007rep.) Principles of Equity; Ibadan: Unique Design/Prints