BUSINESS LAW
A Contract is as a result of an agreement between two parties.1Some essentials for any
contract for it to be enforced according to the common law include; the parties must possess the
legal capacity, and this excludes minors and people suffering from mental disorders. Also, there
must be the concept of offer and acceptance, and the contract must be supported by
considerations.
Only promises that involve the signing of seal or that are backed by considerations are
enforced by the common law. In the common law, the term consideration is used to denote the
giving of a promise in return for receiving a promise. In English, common law consideration may
take the form of an item or service or any item of value that a party to a contract is willing to
exchange for the agreement to be valid. The principles of quid pro quo must be applicable to
considerations as the failure on one side to give it makes the contract unenforceable2. The
manifestation of an intention by parties to undertake to create a legal relationship is under the
principle of intention. The other element calls for the overt presentation of the parties’
obligations and rights of enforcement. In business law, there are some contracts where a signed
document must be present and others, which are enforceable even in the absence of a written
document3.
1
1.
2.
3.
1
Barker, David. Essential Australia Law (2000). Cavendish Publishing Limited
Baker, H, 'Origins of the Doctrine of Consideration (1986) the Legal Profession and the Common Law:
Historical Essays
J Atiyah ‘Consideration: A Restatement, Essays on Contract’ (1986). Oxford University Press
The doctrine of promissory
In the common law, contracts are enforced when the element of consideration is evident
as explained above. Only two options are available in the enforcement of the promise that is,
the promise is either in a legal agreement or contract which means it is in a dead or the element
of consideration is present. However, the understanding of the law of contract has changed with
the development of the doctrine of promissory estoppels by the Australian Law and proceeded by
several precedents by the Australian courts. In contract law, the doctrine of promissory estoppels
gives the court the discretion to decide whether the contract is enforceable or not, even if it does
not meet the set traditional rules for contract formation.
Elements of the promissory estoppels
From the traditional rules, the legal relations took the form of a contractual relationship
or a pre-contractual negotiation outcome, but with the doctrine of promissory there is only the
existence or anticipated legal relationships between the parties. A promise or representation by
one party must be present. One party to the contract must have come to rely on the promise or
representation, and the reliance must be accompanied by a detriment. The party suffering from
the detriment must be able to demonstrate that they suffered as a result of relying on the promise.
Lastly, the doctrine expresses the feeling that the promisee will only be relieved with the
fulfilment of the promise .4
2
4
. Capper, David ‘The Extensive Effect of Promissory Estoppel' (2008). Common Law World Review, Page 10
History of the Doctrine of Promissory
The Central London Property Trust Ltd V High trees case is when Lord Denning cited
the case as he was advancing the case of the doctrine of promissory estoppels in the case Hughes
v Metropolitan Railway Company .8 The case involved Thomas Hughes, the owner of the property
which he had leased to the Railway Company. Under the lease terms, Hughes as the owner was
to compel the tenants to make repairs to the property within a duration of six months after
issuing the notice. During the course of the notice, the railway company made a proposal that
Hughes make the purchase of the Company's leasehold interest after which the negotiations
ensued, but nothing came out of it. 8 It is after the notice period had elapsed that Hughes sued the
company for the breach of contract.7 The ruling by the Court of Common Pleas was in favor of
the Mr. Hughes, but on appeal the Court of Appeal reversed the ruling, and the House of Lords
later affirmed the ruling by the court of appeal.7 According to the ruling by the House of Lords,
from the onset of the negotiations the tenants were acting on the promise that Mr. Hughes was
not to enforce his legal rights.5 Even if no considerations was given by the Company as a sign of
the contract, the oral contract was enforced as it the judge argued that the tenant was acting on it
to their detriment.63
The genesis of the adoption of the doctrine of Promissory estoppels in Australia is the case
Legione v Hateley---awkward facts (1983) 57 ALJR 292 High Court Aust though the element of
5
Michael, Spence, Protecting Reliance: The Emergent Doctrine of Equitable Estoppels (1999). Hart Publishing.
pp. 60–66.
Brendan, Sweeney, Jennifer O'Reilly and Andrew Coleman, Law in Commerce (LexisNexis Butterworth’s, 4th Ed,
2010).
6
7
Hughes v Metropolitan Railway Company (1877) 2 App Cas 439, HL
Austen, Baker. (2008) “A Strange Sort of Survival for the Pinnel’s Case: Collier V P & MJ Wright (Holdings)
Ltd.” (2008) Vol. 71(4). Modern Law Review 61.
8
estoppels was found missing.9 The case involved a property buyer who wanted the time needed
for him to complete the payment to be extended. Their extension was denied, but the buyer went
ahead to speak with the property solicitor for payment to be paid in 7 days time, and the
solicitor’s response was that it was alright, but there was needed to for him to seek further
instruction. After some days, the vendor’s solicitor announcing the rescission of the contract and
according to the court the representation by the seller’s solicitor was vague and was not
sufficient as a promise for further extensions.
In Walton's Stores Ltd v Maher (1988) 164 CLR 387 High Court Aust Mr. Maher was
given a deal to lease his land of course after demolishing the old buildings and constructing new
ones to Walton stores.10 The sense of urgency within which the new buildings were to be
constructed overshadowed the sealing of the contract. It is after Maher had completed the
demolition and was 40% done with the construction of the new buildings that Walton was citing
the new retailing policy pulled out of the contract. The Supreme Court Ct of NSW argued the
Walton was prevented from denying the oral contract by the doctrine of promissory estoppels.
Also, the Court of Appeal had earlier held the same argument. In this case, the aspect of the
promise of future conduct made by Walton stores undermined the traditionally held principle that
forbid the representation of future conduct as only representations of an existing fact were
enforceable.11
4
It has its origin in the Central London v High Trees case which trace back to the second
war where the Landlord of a flat on his will decided to cut the house rent by half to mitigate the
9
Cooke, E, the Modern Law of Estoppel. Oxford University Press
10
Waltons Stores (interstate) Ltd v Maher (1987) 164 CLR 387
A Trukhtanov, ‘Foakes v Beer: reform at common law at the expense of equity’ (2008) 124 LQR 364-368
11
effect of the war as most people were migrating to other places. The case was a landmark in the
overturning the consideration element in the common law. The promise by the landlord made the
tenants not to migrate and during the war, the flats were fully occupied hence the promise was
supposed to be enforced. According to Judge Denning, “a promise to accept a smaller sum, in
discharge of a larger sum, if acted upon is binding notwithstanding the absence of
consideration.” 12 this is considered to be the birth of the doctrine of promissory where
consideration was never a vital element in the enforcement of the promise. The doctrine now
applied to mitigate the strict Common Law in the contract is based on an idea that one party to
the contract can be stopped to retract their promise if it can be confirmed that the other party has
consequently relied on the promise and in the process, has suffered from its detriment. The
doctrine seeks to protect the persons who on their reliance on the promise has suffered its
detriment without the court giving considerations. After the war, the promise by the former
landlord took a different direction when the landlord company was put under receivership.
According to the receivers, each of the tenants had to pay full rent for the flats. According to
Judge Denning acting as a judge of the High Court, the promises were abiding by both parties
only during the time of the war as it was the only condition that gave rise to the promise. Even
with the new landlord (the receiver) the rent could only have returned to its usual amount after
the war. The judge argued that the company legal right of claiming the full amount was in
suspense all the time of war. After conditions that lead to both parties entering into the contract
has changed the company will be entitled to increase the rent.
12
Central London Property v High Trees House Ltd (1947) KB 130
In the Combe v Combe (1951) 2 KB 215 Court of Appeal the husband had made a promise to be
paying his wife maintenance fee .14 Even without the formal order of the divorce court as
required by the law the wife continued to press for the money. The trial judge held that the
promise was enforceable citing the High Trees case as it was binding on both parties hence the
wife was right, or her insisting that the husband continue remitting the payment. However, in this
case, the legal relationship was lacking as there was a problem in defining what the relationship
between the Combe and his wife was in the legal context. Under the doctrine of promissory the
wife could not sue Combe because of failing to act on his promise even no considerations were
entered when making the promise.
The Collier v, P & MJ Wright (Holdings) saw the clash of the common law principle of
consideration before the enforcement of a contract and the doctrine of promissory estoppels.16
During the case, Judge Arden LJ applied the Foakes and Beer precedents and referred to the
dictum by Judge Denning in the High Tree case. 15Mr. Collier and the other three partners had
assented to making a payment of 46,000 Euros to Wright Ltd as directed by the court order, and
the payment was to be paid in monthly installment of 200 Euros. In 2000 Mr. collier promised to
Wright Ltd to pay his share of the money which was 15,000 Euros and in 2006 he was done with
the payment, but his other two partners had gone bankrupt in 2002 and 2014 respectively. It is
the doctrine of promissory estoppels that saved Mr. Collier from being held liable for the
remaining debt as the court held that he was acting on the assurance OF Wright Ltd. 13
consideration has been rescinded in the Common Law. In the case, Hope Davis was making a
purchase of the Creech Hill Farmhouse from Ogilvy.19 5
13
Austen, Baker R. (2008) “A Strange Sort of Survival for the Pinnel’s Case: Collier V P & MJ Wright (Holdings)
Ltd.” (2008) Vol. 71(4). Modern Law Review 61.
14
Combe v Combe (1951) 2 KB 215
15
Foakes v Beer (1884) 9 App Cas 605
16
Collier v P & MJ Wright (Holdings) Ltd (2007) EWCA Civ 1329
The Ogilvy v Hope Davies (1976) 1 All ER 683 Case also shows how the principle of
17
Treitel, M ‘Some Landmarks of Twentieth Century Contract Law’ (2002). Oxford University Press.
The abstract title deed of the farmhouse was to be sent to Davies solicitors, but Ogilvy failed to
add the deed of his appointment as a trustee until after some time. 14 Consequently, Davis had to
delay in making requisitions until Ogilvy sent the deed. In the case, Ogilvy sued Hope Davis for
the delay that according to him resulted in a loss. 20
In the Crabb V ARUM District Council (1975) EWCA Civ 7 Judge Denning Mr. held that
where the contract was something to do with the acquisition rights over land there was no need
for the parties to the contract to provide consideration for the contract. 18 The case involved the
use of the gate by Mr. Crabb, and which ADC, who were asking for 3,000 Euros if the gate was
to be reopened. Mr. Crabb argued that he had sold the land that had other access points on
assurance that he will still have the access B. According to the trial judge, Mr. Crabb had not
received enough formal or firm assurance and neither had he given consideration in return hence
the promise could not enforceable. According to Lord Denning on the appeal of the case the
promise could be enforced hence Mr. Crab had the right to access ‘B ‘which was over ADC’s
Land overruling the need for considerations for the enforcement of the promise.17
Bibliography
ARTICLES/BOOKS/REPORT
A Trukhtanov, ‘Foakes v Beer: reform at common law at the expense of equity’ (2008) 124 LQR
364-368
18
19
Crabb v Arum DC (1975) EWCA 77
Ogilvy v Hopes Davies (1976) 1 All ER 683
20
Wilken, S and Villiers, k., The Law of Waiver, Variation and Estoppel (Oxford University Press 2nd Ed, 2002.).
Austen, Baker. (2008) “A Strange Sort of Survival for the Pinnel’s Case: Collier V P & MJ
Wright (Holdings) Ltd.” (2008) Vol. 71(4). Modern Law Review 61.
Baker, H, 'Origins of the Doctrine of Consideration (1986) the Legal Profession and the
Common Law: Historical Essays
Barker, David. Essential Australia Law (2000). Cavendish Publishing Limited
Brendan, Sweeney, Jennifer O'Reilly and Andrew Coleman, Law in Commerce (LexisNexis
Butterworth’s, 4th Ed, 2010).
Capper, David ‘The Extensive Effect of Promissory Estoppel' (2008). Common Law World
Review, Page 10
Cooke, E, the Modern Law of Estoppel. Oxford University Press 2000.
J Atiyah ‘Consideration: A Restatement, Essays on Contract’ (1986). Oxford University Press
Michael, Spence, Protecting Reliance: The Emergent Doctrine of Equitable Estoppels (1999).
Hart Publishing. pp. 60–66.
Paterson, Jeannie, Andrew Robertson and Peter Heffey, Principles of Contract Law (Lawbook
Co, 2005)
Treitel, M ‘Some Landmarks of Twentieth Century Contract Law’ (2002). Oxford University
Press.
Wilken, S and Villiers, k., The Law of Waiver, Variation and Estoppel (Oxford University Press
2nd Ed, 2002.).
CASES
Central London Property v High Trees House Ltd (1947) KB 130
Combe v Combe (1951) 2 KB 215
Crabb v Arum DC (1975) EWCA 77
Foakes v Beer (1884) 9 App Cas 605
Hughes v Metropolitan Railway Company (1877) 2 App Cas 439, HL
Collier v P & MJ Wright (Holdings) Ltd (2007) EWCA Civ 1329
Ogilvy v Hopes Davies (1976) 1 All ER 683
Waltons Stores (interstate) Ltd v Maher (1987) 164 CLR 387