Promissory estoppel as a substitute to the consideration

The doctrine of consideration and promissory estoppel is a term used in contract law that deals with the bargaining condition of the contract.

The Doctrine of Promissory Estoppel

The doctrine of promissory estoppel is an equitable doctrine. It is a principal evolved by equity to avoid injustice to the parties. The true principal of promissory estoppel is where one party has by his worlds on conduct made to the offer a clear and unequivocal promise which is intended to create legal relations or effect a legal relationship to arise in the future knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go upon it is necessary for the application of the doctrine that one party has his position in reliance of the other words, promissory estoppel is a unilateral promise from one side and intended to induce some action by the other party. The promisee is note bound to act, for his gives no promisor to his promise. His act is at the same time an acceptance of and a consideration for the same. To attract the application of this doctrine, the following ingredient must be satisfied:

1)         That there was a promise in regard to something to be done in future.

2)         That the promise was intended to affect the legal relationship of the parties and to be acted upon accordingly.

3)         That it is one on which the other side has, in fact acted to its prejudice. 

The case of Hughes v. Metropolitan Railway[1] is known as a part of the origin of the doctrine. In the case the property owner gave his tenant the option of repairing the property in six months or face forfeiture. Under the lease, the owner, could make the tenant. Metropolitan Railway, do repairs on the building, so the tenant had six months to complete the repairs. Before the six months had transpired, the tenant proposed to the owner to buy the property. There were negotiations for the purchase of the property, but it wasn’t settled. After the six months expired, the owner sued the tenant for breach of contract and attempted to evict the tenant. The tenant had completed the agreed upon repairs past the six-month deadline. The owner was successful in suing the tenant, however, the appellate court overruled the decision. It was originally believed that the plaintiffs were trying to take advantage of the defendants by negotiating with them and then stalling, causing the six months to expire and then suing them. But that wasn’t true. They sued them because the six months had expired.

The ruling was that through their dealings, both parties made it inequitable to count the time of the negotiations as a part of the six months. The defendants relied on this promise, and therefore, it would be unfair to make them liable in this case. The implied promise is enough to allow estoppel to apply.

The Doctrine of Consideration

Consideration is defined under section. 2(d) of Indian Contract Act, 1872. The doctrine of consideration is defined as an act, or promise, of the price in which the other party is bought, and the entire agreements is then enforceable. The doctrine of consideration is important in all contracts, as it refers simply to an agreement that is legally enforceable.

However, it is important to note that there have been significant modifications to the pre-existing doctrine of consideration.

 In the case of Dunlop Pneumatic Tyre Co Ltd v Selfridge Ltd[2] the court held in a unanimous decision that Dunlop could not claim for damages in the circumstances. The court found that firstly, only a party to a contract can claim upon it. Secondly, Dunlop had not given any consideration to Selfridge and therefore there could be no binding contract between the parties. Lastly, Dunlop was not listed as an agent within the contract and could therefore not be included as a valid third-party who had rights to claim on the contract.

Promissory estoppel as a substitute to the consideration

The doctrine of promissory estoppel is an alternative to the doctrine of consideration. It refers to a contract that cannot be withdrawn because one party acted on the other parties’ promise. In most cases, one party was harmed or served injustice because of the broken promise that they relied on. The promissory estoppel acts as a legal shield against the other’s claim, even though they did not give any consideration.

The doctrine of promissory estoppel is the exception to the contract consideration rule. It implies that a contracted promise is enforceable by law even without any consideration present. It is important, however, to understand that the promissory estoppel can only be used as a legal defense and not to initiate a legal claim.

Promissory estoppel is an important doctrine in contract law in which a non-contractual promise lacking consideration rendered enforceable to avoid an injustice. Promissory estoppel arises when injustice can be avoided only by means of the enforcement of a promise that would otherwise be unenforceable for lack of consideration. It is usually applied in cases in which a party has relied on another party’s promise, and that party’s nonbinding promise will be enforced because to do otherwise would be unfair. Promissory estoppel is commonly used in the context of charitable donations. In some jurisdictions the charity must have reliance on the promise but in others reliance is not necessary.

[1] UKHL 1977 AC 439

[2] UKHL 1915 AC 847