DOCTRINE OF PROMISSORY ESTOPPEL
The general rule is that broken promises, by themselves, are not valid in courts. But there is an exception which is tiny but carries out its deep meaning. That exception is known as promissory estoppel. The following study highlights the traditional as well as the modern approach towards the doctrine. In the first part we will study about the origin and distinct scope of the doctrine with reference to different countries other than India like USA, England. In the second and final part, the development and limitations of promissory estoppel are discussed and examined.
Promissory estoppel is a doctrine of equity, evolved to prevent injustice where a promise is made by a person, knowing that it would be acted on by the person to whom it is made such that it would be inequitable to allow the party making the promise to go back upon it.
Promissory estoppel, to be applied, needs three requirements and those are:
1. There must be a promise or representation by one person,
2. The other person must act based on that promise, and
3. There must be a loss caused to the latter after depending upon former’s promise.
If a party is induced by the other into some definite beliefs and results him into act on its faith, then such party can be relieved with the help of doctrine of promissory estoppel. In such a case, the promisor is not allowed to go back on his promise so as to prevent injustice and reduce the rigor of common as well as statutory law, which is the sole purpose of this doctrine. And the extent of its application requires a systematic study.
Lord Denning has explained promissory estoppel in his words where he highlighted the importance of the knowledge and legal intention to bind in a contract. He stated that there were cases before where the person had legal intention and knowledge to bind in with the other party in a contract and the promise was upheld valid and was duly honored. He also said that once the promisee has acted upon the promise, the promisor cannot alter his statements after that. The previous promise must be followed and acted upon thereafter.
In Commonwealth of Australia v. Verwayen or the Voyager case, Mason Ci stated the importance of the doctrine and also held that the assumption should be made good unless there is an exception.
ANCIENT & MODERN ERA
In the ancient era, the common law estoppel which was applicable to the misrepresentation of facts would not extend to the promises de future (promises in future). In other words, a man was free to alter his promises in future even if he may be bound by his past or present conduct on the grounds of factual misrepresentation and this may bring injustice to the promisee. Future promises were held enforceable only on the theory of a contract.
In the modern era, there have been changes in the laws since the case of Jorden v. Money. The cases in which the intention to create legal relations and knowledge was present were upheld valid and in such cases the courts said that the promise must be honoured.
The modern history of promissory estoppel starts with the well known landmark case of Central London Property Trust Ltd. v. High Trees House Ltd.. The facts of this case are that the Plaintiffs leases some block of flats to defendant for ninety-nine years. The rent was reduced and brought down to a fixed amount due to the war conditions prevailing at that time. This continued for few years. But later on, when the High Trees started to return to full occupancy, they wrote to Central London property asking for the rest of the full rent with the arrears since the war started. Based on The Hughes Case, Justice Denning, at that time, allowed the full claim starting from 1945, i.e., the time when High Trees house approached the Central London and the rent is reduced but not for the time period before that. On the basis of the principle of equity, Justice held that a promisor cannot alter his conditions and promises later and after the promisee has acted upon it.
LIMITATIONS OF THE DOCTRINE
The following problems arise under the doctrine:
(1) It is often said this doctrine is not applicable to the exercise of functions of a legislative, sovereign and sometimes even executive nature. This rule seems to have been followed more in its breach than observance.
(2) It is said to be not applicable to matters of policy but there are no reliable criteria for deciding which matters are related to policy and which are not.
(3) It is not clear whether an estoppel-promissory or otherwise-can arise in the face of non-observance of the mandatory rule in article 299(1) of the Constitution.
(4) The cases in which relief has been denied for non-compliance with Article 299(1) will, on examination, be found to be no less worthy than those cases which quite by accident were treated as cases fit for the application of promissory estoppel and in which therefore the aggrieved party was lucky in getting relief without being debarred by non-compliance with article 299(1). In other words the relief one may get depends on whether we call it a contract or a case of promissory estoppel. This will also lead to the bypassing of article 299(1) which it has been repeatedly asserted is mandatory.
(5) It is said that promissory estoppel cannot apply to a concluded contract. Justification for such exclusion must be based on valid reasons and we shall evaluate them in appropriate place.
The characteristics of promissory estoppel are the same in India, England and the United States. The scope of the doctrine, however, is not common in these countries. In the United States, it has governed even gratuitous promises, in England, generally, cases of modification and discharge of agreements as against formation of contracts for which consideration is still a requisite, and in India, cases which concern neither gratuitous promises nor agreements to modify the existing contracts. In India, it appears that many cases could well be decided with the same result, not on promissory estoppel, but on the settled principles of contract law. Defendant could be held liable on the ground that plaintiff had altered his position, either by incurring expenditure or by abstaining to do an act "at the desire of the promisor" - a phrase used in the definition of consideration. This would have supplied consideration for defendant's promise. In the few other cases decided on the subject, this theory fits well in the context. In the Hungerford case, there was an implied offer and acceptance by conduct, year after year, which matured into a series of contracts from 1939 to 1955, which were duly acted upon by both parties. After mutual performance, the one company could not hold the other liable for income-tax payments. In other words, the payment of these amounts was not voluntary but was based on reciprocal considerations.
Thus, a device which can, by and large, be a good substitute for promissory estoppel (in the absence of amendment in the Act) is the liberalization by courts of the notion of consideration as contained in section 2(d) of the Act. This can be done by implying a request of the promisor where the promisee has injuriously acted in reliance on the promise. The courts will, of course, be the sole judge whether or not such implication is warranted. Care should be taken to avoid far-fetched implications. In such a case, even promissory estoppel would not apply because the promisor cannot be imputed to have reasonably foreseen the consequences of his promise. The principle of justice, equity and good conscience cannot apply in violation of the Indian Contract Act.
In India, therefore, the courts have a limited role to play in view of the statutory nature of the law of contract. Really speaking, promissory estoppel applies in cases where for want of consideration, the promisee cannot be protected. It is then that it is thought to stop a promisor from going back on his promise with a view to aiding an injured promisee. Thus, in the teeth of the statutory requirement of consideration, promissory estoppel, at best, can have a very limited scope. It was for this reason that the Law Commission thought fit to engraft exceptions to the rule of consideration to import the new estoppel in the Act.
In a nutshell, promissory estoppel can be replaced with the liberalization and with the help of the courts. And thus only a promisee and a promisor will be positioned at balance and justice and the contract will be carried out effectively and smoothly with the bona fide intention.
1. Saxena, I. (1974). THE TWILIGHT OF PROMISSORY ESTOPPEL IN INDIA: A CONTRAST WITH ENGLISH LAW. Journal of the Indian Law Institute, 16(2), 187-228.
2. Ghosh, C. (2006). Promissory Estoppel: Its Space in Public Law. Student Bar Review, 18(2), 59-74.
3. Ramaseshan, V. (1989). PROMISSORY ESTOPPEL AND STATE LIABILITY. Journal of the Indian Law Institute, 31(4), 482-520.
4. Fazal, M. (1994). ESTOPPEL IN ENGLISH ADMINISTRATIVE LAW. Journal of the Indian Law Institute, 36(4), 455-473.