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Law Notes Contract Law Notes

Promissory Estoppel Notes

Updated Promissory Estoppel Notes

Contract Law Notes

Contract Law

Approximately 223 pages

These contract law notes are very comprehensive and come complete with comments made by the lecturer. Contract law is an old area of the law that relies on old case law. Therefore even though I completed Contract law in 2009, these notes should still be very relevant today and useful. They go through all the core concepts of contract law in very plain english that is easy to understand. These notes will save you a lot of time!...

The following is a more accessible plain text extract of the PDF sample above, taken from our Contract Law Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Week 10- Promissory Estoppel

Page 141-160

What is estoppel?

  • Estoppel operates where non contractual promises and representation have been relied upon. They provide enforceable rights where none are provided by contract law or can stop a person enforcing their contractual rights against another.

What is estoppel by conduct?

  • Inconsistent conduct by one party that causes harm to another party due to reliance on their conduct.

What is common law estoppel?

  • If person A leads B a long by making them believe a fact and then person B suffers a detriment, A will be estopped from denying the truth of the representation.

  • For example if a person claimed that they signed a contract, they will be estopped from later denying that they did not.

What is equitable estoppel?

  • It is a cause of action in respect to the future. It is used as a sword, not just a shield or a defence. You can enforce non contractual rights that might arise in the future.

  • Proprietary estoppel is when one person acts to their detriment because they are relying on being granted an interest in land.

  • Promissory estoppel is now used to describe any estoppel not relating to land.

  • These terms are used less frequently.

  • In the High Trees (1956) case, A landlord reduced the rent in WWI and at the end of the war, the liquidator sued for full rent. Lord Denning found that the liquidator should be estopped from reducing the rent. This was the first equitable estoppel case. He reasoned that all that must be established is reasonable reliance on the promise and not detriment or unconscionablity. This is not the case in Australia.

What are the elements of estoppel?

  • Assumption

    • The relying party must have adopted an assumption.

    • Common law estoppel can only arise from an assumption of fact.

    • Equitable estoppel must arise from the assumption that the representor will act a particular way in the future.

    • The assumption must relate to a legal relationship.

    • E.g. Waltons Stores v Maher needed an existing legal relationship.

  • Inducement

    • The assumption of the relying party must have been induced by the representor.

    • Estoppel can only arise from a clear or unequivocal promise or representation made by the representor.

  • Detrimental reliance

    • The relying party must have acted on the assumption in such a way that they will suffer detriment if the representor is allowed to depart from the assumption.

    • There is a difference between expectation and reliance loss. In Waltons Stores v Maher, the expectations loss was the rent they expected to receive from the anticipated lease to the Waltons. The reliance loss was the wasted expenditure in demolition.

    • Reliance loss is often wasted expenditure or contract preparation.

    • Je Maintiendra Pty Ltd v Quaglia showed that detriment must be assessed at the time the representor tries to depart from the assumption.

    • The detriment does not need to be financial as shown in Commonwealth v Verwayen.

    • Material detriment: The loss of a single peppercorn is not enough for estoppel. The detriment must be material, significant or substantial.

Required in some cases:

  • Reasonableness

    • The relying party’s reliance must be reasonable.

    • Did the relying party act reasonably in adopting the relevant assumption?

    • Did the relying party act reasonably in taking the relevant detrimental action on the faith of the assumption?

  • Unconscionable

    • The representor’s departure from the relevant assumption must be unconscionable.

    • Does the representor deserve blame?

    • It is an underlying principle forming the elements of estoppel.

  • Threatened departure

    • The relying party has nothing to complain about unless the representor tries to breach the promise or deny the truth of the representation.

What is the effect of an estoppel?

  • A common law estoppel can be used to create a cause of action where one was previously not available. E.g. Able to enforce a contract.

  • An equitable estoppel must give equitable relief. The court can give specific performance or damages in lieu of specific performance or transfer land or compensation.

Cases

Elements of equitable ESTOPPEL

Page 214

Je Maintiendrai v Quaglia (1980)

Facts:

  • Qualiga owned a hairdressing business in a shopping centre.

  • They had a contract with Je Maintiendrai, the landlord, for a fixed 278 pound rent to be increased at a rate of CPI each year.

  • When Je Maintiendrai was unable to keep tenants, he agreed to reduce the rent to 240 a month.

  • Quaglia later vacated the premise.

Remedy sought:

  • Je Maintiendrai wants the unpaid rent.

Prior proceedings:

  • Je Maintiendrai was estopped from claiming the rent in the Local Court.

  • Je Maintiendrai is appealing to the Supreme Court of South Australia.

Legal issue:

  • Did an estoppel arise when Je Maintiendrai led Quaglia to believe that the rent had been reduced even though there was no consideration for the reduced rent?

Outcome:

  • Quaglia won 2:3. Cox J dissented.

Legal reasoning:

  • King CJ reasoned that there was no contract and Quaglia did not suffer an obvious detriment but the detriment is enough. The landlord promised not to enforce his legal right. Even though the detriment of having to pay a lump sum payment is not large, the trial judge is in a better position to decide the magnitude of the detriment.

  • White J reasoned that the detriment that Quaglia suffered must be judged at the moment when it is greatest and when the representor threatens to withdraw. Quaglia could have chose to abandon ship and taken their chances of being sued for breach of contract or found another tenant to replace them. It would be unjust in the extreme to demand a lump sum not readily available.

  • Cox J dissented. He reasoned that it is impossible to find any detriment to Quaglia. They needed to prove that Quaglia substantially changed their conduct as a result on reliance of the promise. They might have suffered a detriment and they might not have. It is too hard to tell.

Ratio decidendi:

  • Detriment in equitable estoppel must be assessed at the time the representor seeks...

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