MGMT2021/MS27B
Law of Contract
Equitable Estoppel
Lecturer: Arlene A. Williams
Equitable Estoppel
The rule in Pinnel’s Case states that payment on
the day a debt is due of less than the full amount
of the debt is not consideration for a promise to
release the balance.
A strict application of the rule could cause
hardship to a person who relies on a promise
that a debt will not be enforced in full.
The doctrine of equitable estoppel is invoked to
mitigate this harshness.
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Equitable Estoppel
The doctrine states that:
If X, a party to a legal relationship, promises Y,
the other party, that he (X) will not insist on his
full rights under that relationship, and this
promise is intended to be acted upon by Y, and
is in fact acted upon, then X is estopped
(stopped by his own previous conduct) from
bringing an action against Y which is
inconsistent with his promise, even if Y gives no
consideration. i.e. Y can use the principle of
equitable estoppel as a defence against X
should X attempt to enforce his original rights.
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Equitable Estoppel
This principle is illustrated in the case of Central
London Property Trust v High Trees House.
In September 1939, the plaintiffs leased a block
of flats to the defendants at a rent of £2,500 per
annum. In January 1940, the plaintiffs agreed in
writing to reduce the rent to £1,250 because of
war conditions which had caused many
vacancies in the flats. No express time limit was
set for the operation of this reduction. From 1940
to 1945 the defendants paid the reduced rent.
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Equitable Estoppel
In 1945 the flats were again full, and the
receiver of the plaintiff company then
claimed the full rent both retrospectively
and for the future. He tested his claim by
suing for rent at the original rate for the
last two quarters of 1945. This claim
succeeded but the court also considered
whether the plaintiffs would have
succeeded if they had claimed the full
back rent to the start of the war.
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Equitable Estoppel
Denning J was of the opinion that the agreement
of January 1940 was intended as a temporary
expedient only and had ceased to operate early
in 1945. The rent originally fixed by the contract
was therefore payable, and the plaintiffs were
entitled to judgment. But he was also of the
opinion that, had the plaintiffs sued for
arrears for the period 1940-1945, the
agreement made in 1940 would have
operated to defeat their claim because they
would have been estopped in equity from
going back on their promise.
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Equitable Estoppel
But it must be noted that:
1. The effect of equitable estoppel is suspensory.
i.e. when circumstances change, so as to
remove the reasons for the promise, the
original rights of the promisor become
enforceable again as in the High Trees case.
2. The principle acts as ‘a shield and not a sword’
(per Birkett L.J.). It only prevents the promisor
from insisting on his strict legal rights when it
would be unjust to allow him to do so, it does
not enable the promisee to sue on an action
unless he has given consideration.
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Equitable Estoppel
Accordingly in Combe v Combe, a wife started
divorce proceedings and obtained a decree nisi
against her husband. The husband then
promised to allow her £100 per annum free of
tax as permanent maintenance. The wife did not
in fact apply to the Divorce Court for
maintenance, but her forbearance was not at the
husband’s request. The decree was made
absolute. The annual payments were never
made and the wife sued the husband on his
promise to make them.
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Equitable Estoppel
At first instance her claim succeeded on the authority of
the High Trees case. Byrne J held that there was no
consideration for the husband’s promise. It had not been
induced by any undertaking on the wife’s part to forego
maintenance; and, in any case, since it was settled law
that maintenance was exclusively a matter for the court’s
discretion, no such undertaking would have been valid or
binding. But the principle enunciated in High Trees case
allowed the wife to succeed since the husband had
made an unequivocal promise to pay the annuity,
intending the wife to act upon it, and she had in fact so
acted.
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Equitable Estoppel
The Court of Appeal reversed the decision and
restated the position:
• Equitable estoppel may only be used when a
person who promises not to enforce his strict
legal rights goes back on this promise. It does
not give effect to a new contract. It does not
create new causes of action where none existed
before. Any new contract must be supported by
consideration in the usual way
• The wife had not supplied consideration since
her forbearance to apply for a maintenance
order was not at the husband’s request.
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Modern Approach to Consideration
and Existing Duties
Problems concerning consideration rarely occur in
practice and when they do occur it is usually because
the parties to a binding contract have suffered a change
in circumstances and agree to vary the original terms of
the contract in a manner which confers a benefit to only
one party, then at a later stage the other party seeks to
enforce the original terms. The modern approach has
been more flexible and the courts will consider whether
unfair economic pressure has been brought to bear on a
defendant by a plaintiff seeking to enforce an altered
agreement. This approach allows for re-negotiation of
contract terms in light of changed circumstances
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