Promissory Estoppel
Promissory Estoppel
Introduction
Promissory estoppel, sometimes called waiver by estoppel, is an equitable doctrine in contract law that prevents a party from reneging on a promise if the other party has relied on that promise to their detriment. It is a principle designed to stop a promisor from going back on a clear promise made to a promisee who has reasonably relied on it. Courts developed this doctrine to ensure fairness, especially in situations where strictly enforcing legal rights would result in an unjust outcome.
Understanding the Doctrine of Promissory Estoppel
Promissory estoppel is rooted in equity and fairness, rather than strict legal rules. It serves as an exception to the normal requirement of consideration in contract variations. Even if a promise is not supported by fresh consideration, it may be enforced if it would be unjust for the promisor to break their word. As Lord Cairns explained in Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 (HL), when parties are in a legal relationship and one party leads the other to believe that strict rights will not be enforced, the party who could have enforced those rights will not be allowed to do so when it would be inequitable to insist on them. In practical terms, promissory estoppel gives courts a tool to uphold fairness by preventing a party from insisting on their strict legal rights if doing so would be unjust in light of a prior promise.
Promissory estoppel operates as a shield, not a sword. This means the doctrine can only be used as a defence, not as the basis for bringing an independent claim. In other words, it does not create new causes of action, it only prevents a party from enforcing their rights when it would be unfair to do so. Typically, an existing legal relationship (such as a contract or other obligation) must be in place between the parties for promissory estoppel to arise, one cannot enforce a mere gratuitous promise made to a stranger. The effect of a successful promissory estoppel is usually to suspend the promisor’s strict rights for a period, rather than to extinguish them permanently. However, rights may be lost for good if the promisee’s reliance makes it inequitable to revert to the original terms, or at least the promisor must give reasonable notice before resuming strict enforcement of the original agreement.
Key Elements and Requirements of Promissory Estoppel
For promissory estoppel to apply, several conditions must be met. The courts will closely scrutinise these elements on a case-by-case basis:
Clear and Unequivocal Promise or Representation
The promisor must have made a clear and unambiguous promise or representation that they will not enforce certain legal rights under the existing arrangement. The promise can be express or implied from conduct, but it must be definite enough for the promisee to reasonably rely on it. Vague or equivocal statements will not suffice, for example, in Woodhouse A.C. Israel Cocoa Ltd S.A. v Nigerian Produce Marketing Co Ltd [1972] AC 741 (HL), an imprecise assurance could not form the basis of a promissory estoppel.
Intention to Induce Reliance
It should be intended by the promisor, or reasonably foreseeable, that the promisee will rely on the promise. In Little v Olympian Homes Ltd [2024] EWHC 1766 (Ch), for example, the judge emphasised the need to examine whether a representation was made with the intent that it be acted upon by the other party. This criterion often overlaps with the clarity of the promise, if the promise is clear and made in a serious context, an intention to induce reliance can usually be inferred.
Reliance by the Promisee (Alteration of Position)
The promisee must in fact rely on the promise, changing their position or course of action as a result. This reliance could involve doing something they otherwise would not have done, or refraining from doing something they otherwise would have done, for example, not enforcing a right or not pursuing alternative remedies because of the promise. The reliance should be reasonable and in line with what the promisor intended. If the promisee suffers a detriment, or confers an advantage on the promisor, based on the promise, it strengthens the case for an estoppel. However, some case law suggests that showing detriment is not strictly necessary as long as a meaningful change of position has occurred, the core idea is the promisee’s alteration of position in reliance on the assurance.
Inequity (Unfairness in Reneging on the Promise)
It must be inequitable for the promisor to go back on their promise in the circumstances. This is a fundamentally discretionary, equitable judgment. The court applies an objective test of fairness: given what the promisee did, or did not do, in reliance on the promise, would it be unjust to allow the promisor to enforce their original rights? If the promisee did not substantially rely on the promise, or would suffer no real harm from the promisor reverting to their strict rights, a court may find no inequity in allowing enforcement of the contract as written. Conversely, where the promisee has clearly relied to their detriment, equity may insist on holding the promisor to their word to avoid an unjust result.
Existing Legal Relationship (Shield Not Sword)
Promissory estoppel generally requires a pre-existing legal relationship between the parties, typically a contract or other enforceable obligation. The doctrine is invoked to modify or suspend existing obligations, not to create new ones where none existed before. Lord Denning stated that promissory estoppel “does not create new causes of action where none existed before, it only prevents a party from insisting on their strict legal rights when it would be unjust to allow them to enforce them.” Thus, promissory estoppel can be used only as a defence if one is sued, as a shield to argue that the other party cannot enforce a particular right because they promised not to, and not as a cause of action to sue on a broken promise itself. In other words, one cannot bring a lawsuit solely on the basis of an unfulfilled promise if there was no underlying legal duty or contract apart from that promise.
No Unclean Hands by the Promisee
Because promissory estoppel is an equitable doctrine, the party seeking to rely on it should have behaved equitably themselves. The courts will not assist a promisee who has acted fraudulently or in bad faith in procuring the promise. For instance, if the promisee forced or unduly pressured the promisor into making the promise, or otherwise engaged in unscrupulous conduct, a court may refuse to uphold the estoppel. In D & C Builders Ltd v Rees [1966] 2 QB 617 (CA), a debtor’s wife pressured a small building firm to accept a part-payment of a debt by effectively holding the firm to ransom, she told the builders to “take £300 or leave it,” knowing they were in financial distress. The builders reluctantly accepted £300 in full settlement and later sued for the balance. Mrs Rees then tried to invoke promissory estoppel, arguing the builders had promised to accept £300 in full. Lord Denning, however, refused to allow her to rely on estoppel because the promise had been extracted under compulsion and her conduct was inequitable. Equity requires fair dealing, so a promisee who has acted unfairly cannot expect the court to intervene on their behalf.
Suspensory Effect and Temporal Scope of the Promise
In general, promissory estoppel suspends the promisor’s rights for a period, rather than extinguishing them permanently. The rights in question may be resumed in the future, usually upon the promisor giving the promisee reasonable notice that the original terms will once again be enforced. This principle was illustrated in Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955] 1 WLR 761 (HL). During World War II, Tool Metal agreed not to enforce certain royalty payments owed by Tungsten Electric, to help that business through wartime. After the war, Tool Metal sought to revive the original contract terms and claim the accumulated royalties. The House of Lords held that Tool Metal was estopped from claiming the payments immediately after the war because Tungsten Electric had not been given an opportunity, with reasonable notice, to resume the original terms. However, the estoppel did not extinguish Tool Metal’s rights permanently, once Tool Metal did give clear notice that it would enforce the full royalties, it was entitled to do so for the period after that notice. This case established that reasonable notice is needed to end the effect of a promissory estoppel in ongoing arrangements. It also showed that some promises, especially those meant to address temporary hardships, are understood as suspending obligations rather than waiving them forever.
In some situations, however, the promise and the reliance on it may effectively extinguish the right entirely, for example, where enforcing the original right is no longer possible, or would be grossly unfair, after the promisee’s reliance. In the High Trees case, the court suggested obiter that the landlord was permanently barred from collecting the forgone wartime rent, even though the rent obligation revived for the future once conditions had changed.
Historical Development and Key Cases
The concept of promissory estoppel emerged to mitigate the rigidity of contract law’s doctrine of consideration. Under the strict common law rule, exemplified by Foakes v Beer (1884) 9 App Cas 605 (HL), a creditor’s promise to accept less than their full contractual entitlement is not binding without fresh consideration. This meant a creditor could later insist on the full amount despite having promised to waive part of the debt. This strict rule often led to harsh results. Over time, courts and commentators criticised it as unfair, and the seeds of an equitable solution were planted, eventually leading to the modern doctrine of promissory estoppel.
Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 (HL)
Although not termed promissory estoppel at the time, this House of Lords decision is regarded as the origin of the principle. In Hughes, a landlord gave a tenant six months’ notice to carry out repairs, but during that period the parties entered into negotiations for the tenant to purchase the property. The negotiations faltered, and the landlord then sought to enforce forfeiture of the lease when the repairs were not completed within the original six-month timeframe. The House of Lords held that the landlord’s conduct implied a promise to suspend the running of the repair notice during the negotiations. Having led the tenant to believe the strict timeline would not be enforced, the landlord could not insist on it afterwards. Lord Cairns stated the broad equitable rule: if one party’s conduct would make it unjust to enforce their strict legal rights, those rights will be held in abeyance. Hughes thus demonstrated that equity can “stop the clock” on legal rights in order to prevent injustice.
Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 (KBD)
This case formally introduced promissory estoppel into modern law. Commonly known as High Trees, it arose during World War II when a landlord agreed to halve the rent for a tenant on a London block of flats because many flats were empty due to the Blitz. No consideration was given for this reduction. By 1945 the flats were full again, and the landlord sought to restore the full rent going forward and also claimed the half rent that had been waived during the war years. Denning J held that while the landlord was entitled to resume charging the full rent once the wartime conditions ended, it would be inequitable for the landlord to retrospectively claim the forgone rent for the wartime period. The tenant had relied on the lower rent during the war, and although the promise to reduce rent lacked consideration, equity stepped in to enforce it for that period. High Trees thus exemplifies that a clear promise to reduce or suspend contractual obligations, relied upon by the other party, can temporarily bind the promisor in equity. Notably, the landlord’s claim for future rent at the full rate (after the war) succeeded, underscoring that the estoppel in that case was suspensory rather than permanent.
Combe v Combe [1951] 2 KB 215 (CA)
After High Trees, it remained unclear how far the new doctrine could go. Combe v Combe in the Court of Appeal, again with Lord Denning, clarified a crucial limitation: promissory estoppel is only a shield, not a sword. In this case, a husband had promised to pay his ex-wife an annual sum after their divorce, but provided no payment. The wife sued solely on the basis of that promise, arguing promissory estoppel should enforce it even though she gave no consideration. Denning LJ rejected her claim because she was attempting to found a cause of action on a promise, rather than using the promise as a defence. He affirmed that promissory estoppel cannot create new contractual obligations, it cannot be used to sue someone for breach of a promise in the absence of an existing contract or legal duty. The case confirmed that an existing legal relationship, such as a prior contract or a debt, is typically needed, and the doctrine’s role is to prevent a party from enforcing their right if doing so would be unfair, not to create a new right for the other party. Combe v Combe has since been the authority for the “shield not a sword” maxim in English law.
D & C Builders Ltd v Rees [1966] 2 QB 617 (CA)
This Court of Appeal case illustrates the requirement of equity and “clean hands” on the part of the promisee. A small building firm was owed £482 by the Rees family for work done, and the builders were in serious financial difficulties. Mrs Rees offered to pay only £300, telling the builders to take it or leave it, knowing they were desperate. The builders reluctantly accepted £300 in full settlement, and later sued for the balance of the debt. Mrs Rees tried to invoke promissory estoppel, arguing that the builders had promised to accept £300 in full satisfaction. Lord Denning held that estoppel did not apply because Mrs Rees had effectively held the builders to ransom, her conduct was inequitable. He observed that a creditor is only barred from insisting on their legal rights when it would be inequitable for them to do so, and here it was not inequitable to insist on full payment, since the promise had been extracted under pressure. D & C Builders v Rees demonstrates that a court will refuse to uphold a promise unless enforcing it would be truly unfair to the promisee. For example, if the promisee acted inequitably or the promise was not given voluntarily, no estoppel will apply. It underscores that promissory estoppel is an equitable remedy, subject to the discretion of the court and dependent on the conduct of both parties.
Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955] 1 WLR 761 (HL)
This House of Lords case is significant for confirming the temporary nature of promissory estoppel (unless proper notice is given to the promisee). During World War II, Tool Metal agreed not to enforce certain royalty payments from Tungsten Electric to help that company during the war. After the war, Tool Metal sought to revive the original contract terms and claim the accumulated royalties. The court held that Tool Metal was estopped from claiming those payments immediately after the war because Tungsten had not been given an opportunity, with notice, to resume the original terms. However, the estoppel did not extinguish Tool Metal’s rights permanently. Once Tool Metal later gave clear notice that it intended to enforce the full royalties, it was entitled to do so for the period after that notice. This case established that reasonable notice is required to end the effect of a promissory estoppel in ongoing arrangements. It also showed that some promises, especially those made to address temporary hardships, are understood as suspending obligations rather than waiving them forever.
Recent Developments
Promissory estoppel continues to be applied and refined in modern litigation.
Little v Olympian Homes Ltd [2024] EWHC 1766 (Ch)
A recent example is Little v Olympian Homes Ltd. In that case, guarantors of a debt argued that the lender had, by its promises or conduct, waived its right to claim default interest. The High Court accepted that a waiver by estoppel (i.e. promissory estoppel) was arguable because the lender’s emails contained a clear representation that the guarantors were released from the obligation to pay interest, and the guarantors had reasonably relied on that representation by not making interest payments. They even provided an interest-free loan to a related party in reliance on the lender’s promise. The judge outlined the familiar criteria for promissory estoppel: a clear and unequivocal promise intended to be relied upon, and actual, reasonable reliance by the promisee. He found there was a genuine triable issue that those elements were met. While this was an interim application (to set aside statutory demands), the case illustrates that promissory estoppel remains a vital defence in contemporary commercial disputes, and courts in 2024 are explicitly reaffirming the traditional elements when evaluating such claims. It also highlights that even where contracts include clauses requiring variations or waivers to be in writing, informal communications (such as emails) can, through estoppel, preclude a party from relying on those formal clauses, provided the communications clearly indicate the promise being relied upon.
Baird Textile Holdings Ltd v Marks & Spencer plc [2001] EWCA Civ 274
Several decisions in the twenty-first century have further clarified the scope of promissory estoppel. In Baird Textile Holdings Ltd v Marks & Spencer plc (2001), the Court of Appeal confirmed that promissory estoppel requires a pre-existing contractual relationship and cannot itself create a cause of action. In that case, a long-term supplier (Baird) attempted to use promissory estoppel as a basis to claim that Marks & Spencer was estopped from terminating an informal supply arrangement without reasonable notice, even though no contract existed. The court refused to apply promissory estoppel to create a brand new obligation where none had formally existed, reinforcing the principle that the doctrine is a shield for existing rights, not a sword to generate new ones.
Collier v P & MJ Wright (Holdings) Ltd [2007] EWCA Civ 1329; [2008] 1 WLR 643 (CA)
In Collier v P & MJ Wright (Holdings) Ltd (2007), the Court of Appeal suggested that if a creditor agrees to accept part payment of a debt, and the debtor pays that part in full reliance on the promise, then equity might prevent the creditor from later claiming the balance. In other words, promissory estoppel could have an “extinctive” effect in such a scenario, completely extinguishing the creditor’s right to the remainder of the debt. Arden LJ’s judgment indicated that the debtor’s reliance (by paying the agreed smaller sum) made it inequitable for the creditor to renege and insist on the full debt. This reasoning, while influential, has generated discussion because it appears to relax the traditionally suspensory nature of promissory estoppel, suggesting that in one-off debt situations the estoppel might entirely absolve the remaining obligation. Collier is notable for hinting that promissory estoppel could, in exceptional circumstances, effectively override the rule in Foakes v Beer by making a lesser payment satisfaction of the whole debt.
Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24
Finally, in Rock Advertising Ltd v MWB Business Exchange Centres Ltd (2018), the Supreme Court upheld the general enforceability of “no oral modification” (NOM) clauses in contracts, but acknowledged that an estoppel could potentially bar a party from relying on a NOM clause if the other party has relied on an informal promise to modify the agreement. The Court cautioned, however, that clear and unequivocal words or conduct beyond the informal promise itself would be required to raise such an estoppel, so that the doctrine does not undermine the certainty provided by written variation clauses. In practical terms, this means a party seeking to avoid a NOM clause via estoppel must show something more than just an oral agreement to vary, there must be a clear representation that the variation is valid despite the contractual requirement for writing, and detrimental reliance on that representation. Rock Advertising thus preserves the strength of NOM clauses while leaving a narrow door open for promissory estoppel in cases of significant reliance.
Conclusion
Promissory estoppel remains an important doctrine, acting as a safeguard against the unfair enforcement of strict rights in the face of a promise on which the other party has relied. It operates on a principled yet flexible basis: the promise must be clear, the reliance must be evident and reasonable, and the overall circumstances must be such that it would be unjust for the promisor to retract. When those factors align, the courts will hold the promisor to their word, even if no formal consideration was provided, to the extent that justice requires.
However, parties invoking promissory estoppel must remember that it is an exceptional remedy. It cannot create new rights out of a mere promise, nor will it assist a promisee who acted inequitably in obtaining the promise. Each case is fact-specific, and judges will carefully weigh the balance of law and equity in deciding whether to apply an estoppel in the particular circumstances.
For clients and practitioners, the doctrine underlines two key lessons:
- Be cautious when making informal promises or accommodations in a legal relationship. Such assurances may become binding if the other party relies on them.
- If you have relied on someone’s clear promise to your detriment, you may have a valid defence if that person later tries to renege on that promise.
You may also be interested in our article on proprietary estoppel, which frequently arises in inheritance and property disputes. In addition, issues of estoppel often feature in will disputes and contentious probate, where assurances and reliance can give rise to complex claims.
If you require advice or representation in relation to estoppel, contractual rights or commercial disputes, please contact Carruthers Law. We have over 30 years’ experience in complex litigation.
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Related services and articles:
Commercial Disputes & Litigation |
Professional Negligence |
Proprietary Estoppel |
Will Disputes
Disclaimer: This article is provided for general information purposes only and does not constitute legal advice. Carruthers Law accepts no responsibility for any reliance placed on the contents. This article may include material from court judgments and contains public sector information licensed under the Open Justice Licence v1.0.
Disclaimer: This article is provided for general information purposes only and does not constitute legal advice. Carruthers Law accepts no responsibility for any reliance placed on the contents. This article may include material from court judgments and contains public sector information licensed under the Open Justice Licence v1.0.