Promissory Estoppel
Rules of Application
Pre existing contractual relationship
Promisor made clear that he would enforce his leagal rights
Promisee acted in reliance to the promise
It is inequitable for the promisor to go back on the promise
Used as shield not sword does not create new action Combe v Combe
Suspends promisors rights but does not destroy them.
Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 (or the High Trees case) is an English contract law decision in the High Court. It reaffirmed the doctrine of promissory estoppel in contract law in England and Wales. Denning J held estoppel to be,
“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 1937, High Trees House Ltd leased a block of flats in London, for a rate £2500/year from Central London Property Trust Ltd. Due to the conditions during the beginning of World War II occupancy rates were drastically lower than normal.
In January 1940, to ameliorate the situation the parties made an agreement in writing to reduce rent by half. However, neither party stipulated the period for which this reduced rental was to apply. Over the next five years, High Trees paid the reduced rate while the flats began to fill, and by 1945, the flats were back at full occupancy. Central London sued for payment of the full rental costs from June 1945 onwards (i.e., last two quarters of 1945).
Based on previous judgments such as Hughes v Metropolitan Railway Co, Denning J held that the full rent was payable from the time that the flats became fully occupied in mid-1945. However, he continued in an obiter statement that if Central London had tried to claim for the full rent from 1940 onwards, they would not have been able to. This was reasoned on the basis that if a party leads another party to believe that he will not enforce his strict legal rights, then the Courts will prevent him from doing so at a later stage. This obiter remark was not actually a binding precedent, yet it essentially created the doctrine of promissory estoppel.
Hughes v Metropolitan Railway Co [1877] UKHL 1 is a House of Lords case considered unremarkable for many years until it was resurrected by Lord Denning in the case of Central London Property Trust Ltd v High Trees House Ltd in his development of the doctrine of promissory estoppel. The case was the first known instance of the concept of promissory estoppel.
Thomas Hughes owned property leased to the Railway Company. Under the lease, Hughes was entitled to compel the tenant to repair the building within six months of notice. Notice was given on October 22, 1874 from which the tenants had until April 22 to finish the repairs. On November 28, the tenant railway company sent a letter proposing to purchase the building from Hughes. Negotiations began and continued until December 30th, at which point nothing was settled. Once the six months had elapsed the landlord sued the tenant for breach of contract and tried to evict the company.
The House of Lords affirmed the Court of Appeal. It ruled that with the initiation of the negotiations there was an implied promise by the landlord not to enforce their strict legal rights with respect to the time limit on the repairs, and the tenant acted on this promise to their detriment. SA Lord Cairns LC gave the lead judgment, with which Lords OHagan, Selborne, Blackburn and Gordon concurred.
Intention to create legal relations
The requirement of intention to create legal relations in contract law is aimed at sifting out cases which are not really appropriate for court action. Not every agreement leads to a binding contract which can be enforced through the courts. For example you may have an agreement to meet a friend at a pub. You may have a moral duty to honour that agreement but not a legal duty to do so. This is because in general the parties to such agreements do not intend to be legally bound and the law seeks to mirror the partys wishes. In order to determine which agreements are legally binding and have an intention to create legal relations, the law draws a distinction between social and domestic agreements and agreements made in a commercial context. It can be seen that intention to create legal relations therefore seeks to keep agreements between family and friends outside the courts jurisdiction.
Intention