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BUSINESS LAW The doctrine of promissory estoppel prevents one party from backing out from a promise made to a second party if the latter reasonably relied and acted upon that promise. In English law, a promise that is made without consideration, meaning something that is executed or acted upon in return for a contractual promise, is not enforceable. All contracts must have this element of consideration in order for it to be enforced. This paper gives a critical analysis of the statement: The doctrine of promissory estoppel formulated by Denning J in Central London Property Trust Ltd v High Trees House Ltd is not only an exception to the rule in Pinnel's Case but also casts doubt on the continuing relevance of the doctrine of consideration in the law of contract. (Central London Property Trust Ltd v. High Trees House Ltd. ).
In analyzing this statement, the paper delves on the different elements involved in these cases and discusses how there is now a lessening impact on the continued relevance of the doctrine of consideration in the law of contract. As records show, the doctrine of promissory estoppel came into being in the Hughes v. Metropolitan Railway Co. in 1677 but did not progress until Lord Deming resuscitated it in the controversial case Central London Property Trust Ltd. V. High Trees House Ltd (1947).
The case involves the plaintiffs who leased a block of apartments to the defendants at an annual rent of? 2500 but, because the defendants were not able to look for enough tenants during that time when London was being bombed, occupancy rate suffered. They then agreed to accept a reduction in rent to? 1250. In January 1940, in order to remedy the situation, High Trees House Ltd. entered into an agreement with Central London Property Trust Ltd.
in writing to reduce rent by half. However, neither party agreed on the period that this reduced rental was to take into effect. In short, there was no consideration for this promise to accept a lower rent. In the next years, High Trees paid the half price. The flats soon began to be filled again such that in 1945, all flats were full. Central London sued for payment of the full rental from June 1945 onward.
When the war was over, the apartments were fully packed and the plaintiffs wanted the full rent for the remainder of the contract beginning the last half of that year in 1945. It was Lord Deming who maintained that they were entitled to the full rent from the end of the war. However, he also saw that they were estopped from going back on their promise. This is a case of a promissory estoppel.
It requires that 1) an unequivocal promise by words or conduct 2) evidence that there is a change in position of the promise as a result of the promise reliance but not necessarily to their detriment and 3) inequity if the promise was to go back on the promise (Bigelow, Melville Madison). Some scholars have denied the claim made during the 1960 s and 1970 s that a reliance principle could explain the doctrine of promissory estoppel and even supplant altogether the traditional requirement of bargained-for consideration (Barnett, Randy). This is now an exception to the rule in the case of Pinnel (1602) which dates back as one of the earliest to establish the case that if one person owes money to another, then an agreement to take a lesser sum to settle the debt, if it well acknowledged, is not a binding obligation. There is no new consideration to support the new agreement. The case is such that Cole owed Pinnel? 8 10 s. Pinnel requested? 5 2 s 6 d one month before the full sum was sue.
Cole, however, claims that there was an agreement that the part payment was no longer considering the original debt. However, the court found it in favor of Pinnel and announced that paying half of the agreement did not make for a fresh consideration. Thus, it established that agreement was not a contract in this case (Pinnel's case). Pinnel learned a lesson. Cole could have extracted from Pinnel an agreement that early payment was in return for accepting part payment. In so doing, Cole would have won the case.
The statement above all too subtly casts doubts on the continuing relevance of the doctrine of consideration. Performance of the terms of contract by both parties to it discharges the contract. What was anticipated has been done, and no further obligations remain. But because contracts are entered into in such a variety of ways, to achieve such a variety of results, and because conditions so often change and relationships between the parties alter, the legislatures and the courts have recognized various methods of discharging a contract short of full performance.
Some of these methods of discharge are obvious. Yet it only shows that there is a lessening relevance on the doctrine of consideration. Here are some examples on the methods of discharge: Failure of consideration -- Consideration is important. It is the giving up of something to support a promise Inability to perform -- Some contracts are discharged because performance has become impossible. For instance, in the case of Pinnel, if Cole kept his money in his house and if a fire in his apartment destroys it, then Cole can no longer perform, and the law, sensibly, does not require him to do what he cannot Rescinding of the contract A contract may be rescinded: One engages the services of an engineer to survey ones property to find out exactly how much space is the property. But before he does anything, one decides that he does not need the survey afterall.
Both parties can simply agree orally that the deal is off, and there is no longer a contract between them. But if he has done any work, if he has started on the survey, rescinding the contract will require some payment by the other one for the work done, and as consideration for his giving up his rights under the contract. Cancellation and surrender of the contract. The situation is very similar in a cancellation of the contract and a surrender of the contract itself. Writing cancelled on the check one accepted when one sells something and the delivery of the uncashed check to the buyer discharges the contract and his obligation. If one got a simple IOU from the buyer, surrender of the note must be accompanied by a new agreement to release his obligation on the contract.
Substitution of a new contract. Substituting a new contract will discharge an old one. You contract with a builder that he shall build a house for you according to a set of specifications set forth in the contract; the price to be paid partly in cash and partly by accepting a mortgage from you. But later on, you and he agree on different specifications and on payment in cash only. Here there is a new contract, consisting of those terms of the original that remained unchanged, and of the new terms. The second contract is substituted for the old one, which is thus discharged.
Neither you nor the builder can then enforce the old contract in its original form. Novation. Substitution of new parties, which lawyers call novation also discharges a contract. By mutual agreement, supported by adequate consideration, a new contract comes into being. If you owe your brother 100 pounds and he owes your sister 100 pounds, the three of you may agree that you will pay your sister 100 pounds, thus ending your brothers obligation to her. Your contract with your brother is discharged, as is his contract with her.
Accord with satisfaction. When one of the parties is not satisfied with the performance of the other, accord and satisfaction is a way of discharging the contract. Suppose a patient and his doctor agree that the doctor will remove the patients appendix for 500 pounds. He does so, but the patient is unhappy with the way he did it and refuses to pay him more than 350 pounds. The doctor threatens to sue the patient for 500 pounds and the patient indicates hes prepared to make nasty charges about the doctor in court.
After a while the doctor realizes the expense of suing will more than eat up the 150 pounds difference. He says he will accept 350 pounds in full satisfaction of his claim. The patient agrees and sends him a check for 350 pounds, which the doctor encases. Here we have what is called an accord and satisfaction. An agreement by a creditor (the doctor) for the discharge of an obligation by a performance different from what the creditor is owed under the contract is an accord.
The completion of that according this case by the patients paying the doctor the 350 pounds and the doctor accepting itis the satisfaction. However, not all courts will agree to such a discharge of the original obligation. Account stated. Despite its formal sound, an account stated is familiar to almost everyone. Your monthly bank statement is one. It reflects what you have put in as deposits and what the bank has paid out at your direction in the checks you wrote.
If you raise no question about the monthly statement when you receive it, or within a reasonable period of time thereafter, any legal action you bring against the bank a year later for what you think is a mistake will not be enforced unless the bank has defrauded you or acted in bad faith. Failure of consideration is a valid defense to an action for breach of contract. One needs to remember that there is no contract without consideration: an undertaking by one person to support another's promise. If the consideration fails, the contract fails, that is, it cannot be enforced. Consideration under the English law is generally known as a controversial doctrine that involves a series of sub rules in English law. The concept of consideration in its traditional form in the English law is usually shown as the requirement that in order for the parties concerned to be able to enforce a promise, they must have given some quid pro quo for it.
This means that something must be given or promised in return for that promise. English law requires that a contract must be supported by the concept of consideration. Thus, if a contract contains a promise that is unsupported by any kind of consideration, then the contract is void ab initio. This can become confusing at times, especially since different laws are applied in different countries. Also, a promise by itself does not constitute a contract and cannot be enforced against the person making the promise, called the promise. To make the promise enforceable, the person to whom the promise is made must give something up.
He is called the promisee. Something already given up by the promisee before the promise was made will not support the promise. The common law plays a vital role over the years now as it finds its place to become a basis for binding people in unity with justice, peace and understanding between and among people from all walks of life. It finds its traces in the late sixteenth and early seventeenth centuries when the concepts of contracts became subjects of human agreements and arrangements among individuals. It developed when conflicts arose and there was a need to settle legal actions...
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