Waiver, and Promissory Estoppel
14.1 Alteration of the contracted obligation
Whole, complete and exact performance
Each party to a contract is entitled to demand of the other – whole, complete and exact performance.
In the absence of a valid alteration the original contract remains in force until discharged by performance, breach, frustration or by agreement between the parties under an accord and satisfaction.
The parties, having concluded a contract on agreed terms, may, however, alter the nature of the obligation or even replace it altogether.
By way of illustration:
1. The parties may alter the contract and replace it with a new contract. This would amount to a rescission.
2. The parties may vary the terms of the contract. This variation benefits both parties and generates its own consideration.
3. A party to the contract may agree a variation which benefits one party only. Such a variation does not generate its own consideration. This category is exemplified by a promise by one party to release the other from a debt. The contrast between the common law rule and equity – promissory estoppel – is considered below.
14.2.1 The principles
The need for consideration
For a rescission to be effective at law consideration must be present.
Where a contract is executory and neither person is in breach any agreement between the parties to rescind the contract will generate its own consideration and be valid.
The Trado  Lloyd's Rep 157
The same is true where both parties have broken the contract and in cases where the contract is not wholly executed and there are obligations on both sides yet to be performed.
Morris v Baron & Co  AC 1
Both sides are able to forego a right and in so doing provide consideration.
Collin v Duke of Westminster  QB 581
Where the rescission does not generate its own consideration
Where only one party has extant srights under the contract any agreement to rescind, in the absence of a separate consideration, will fail for lack of consideration.
Treitel gives the illustration of goods having been sold and delivered and the parties then agree to rescind the contract. If the buyer is simply released from his promise to pay the price he provides no consideration and the promise is not legally enforceable for a ‘debt can only be truly released and extinguished by agreement for valuable consideration or under seal' ( Commissioners of Stamp Duties v Bone  AC 511). Whereas, if the buyer returns the goods, in so doing he provides consideration for the promise and is thus able to enforce it.
Accord and satisfaction
Where a rescission does not generate its own consideration a separate consideration is required. There must be an accord and satisfaction.
British-Russian Gazette Ltd v Associated Newspapers Ltd  2 KB 616
Treitel observes that an executory accord may be enforced by the person to whom the satisfaction was offered.
Elton Cop Dyeing Co Ltd v Robert Broadbent & Son Ltd (1920) 89 LJKB 186
14.3.1 The principle
The creation of a fresh contract
Where the parties rescind a contract and replace it with a fresh contract the variation is legally enforceable. The variation generates its own consideration.
Stead v Dawber (1839) 10 A&E 57
Variation which benefits both parties
Where the parties vary the contract and both benefit the variation is legally enforceable. The variation generates its own consideration.
Variation benefiting only the one party
A variation which benefits only one party does not generate its own consideration and will not be enforceable unless supported by a separate consideration. See:
Vanbergen v St Edmunds Properties Ltd  2 KB 233
Discussion of Promissory Estoppel (Infra)
The part payment of a debt does not discharge the obligation at law even if a promise to accept the tendered sum in full and final satisfaction is given by the creditor.
Pinnel's Case (1602) 5 Co Rep 117a
Foakes v Beer (1884) 9 App Cas 605.
14.4.1 The principle
Where an individual promises to give up rights under a contract this may amount to a waiver.
Treitel identifies three meanings of the word ‘waiver':
(a) To mean rescission
(b) To mean variation
(c) To mean forbearance
(a) To mean rescission
Where both parties abandon the contract the rescission is valid. The rescission generates its own consideration.
Rescission unsupported by consideration is not enforceable at law. (Infra)
(b) To mean variation
Where both parties vary the contract the variation is valid provided the variation generates its own consideration.
(c) To mean forbearance
A variation of the contract may fail for want of consideration or for lack of form, yet have some limited effect in law.
Treitel distinguishes such variations from contractually binding variations and calls them ‘forbearances'.
Treitel develops three points to illustrate principle:
“(i) The party requesting the forbearance cannot refuse to accept the varied performance. Thus, if a seller at the request of the buyer delivers late, the buyer cannot refuse to accept on the ground that delivery was not made at the time specified in the contract.
Hickman v Haynes (1875) LR 10 CP 598
(ii) If the varied performance is actually made and accepted, neither party can claim damages on the ground that performance was not in accordance with the original contract. Thus in the above example the seller who delivers late, or the buyer who takes delivery late, is not liable in damages. But if the contract is not performed at all, the damages are assessed on the footing that the breach took place at the end of the extended period.
Ogle v Vane (1868) LR 3 QB 272
(iv) The cases that give rise to the greatest difficulty are those in which the party granting the forbearance refuses to perform, or to accept performance, in accordance with it.
Suppose, for example, that a buyer agrees, at the seller's request, to accept late delivery. The buyer cannot then claim damages for the seller's failure to deliver within the contract period; but a further set of problems can arise if, after expiry of that period but within the extended period, the seller tenders delivery, and the buyer refuses to accept it. One possible view is that the seller cannot derive rights from a forbearance that is not binding as a contract, and that therefore he is not entitled to damages for the buyer's refusal to take delivery within the extended, but outside the original, contract period. A claim for such damages was accordingly rejected in Plevins v Downing (1876) 1 CPD 230 where the agreement to extend the delivery dates had no contractual force since it was oral when it should have been evidenced in writing and since it was probably unsupported by consideration having been made at the request, and for the sole benefit, of the seller.”
Treitel, Law of Contract (11th Edition) pp 103-104
Forbearance differs from variation supported by consideration in the sense that it does not irrevocably alter the rights of the parties under the original contract. The party giving the forbearance may, in most cases, retract it.
Charles Rickards v Oppenheim  1 KB 616 A buyer who pressed for delivery after the delivery date was not allowed to sue for late delivery but could retract the forbearance by giving the seller a new delivery date (a reasonable date) beyond which he must not go.
The Courts have extinguished legal rights on a forbearance when the party relying on the forbearance is not able to return to the status quo ante. A buyer who states that he will accept goods of a lesser quality from those contracted for will lose his right by forbearance if the seller then acts in such away that he cannot then supply goods of the contract quality within the delivery period.
Toepfer v Warinco A.G.  2 Lloyd's Rep 569
The Doctrine of Promissory Estoppel
1 The context
“Where by his words or conduct one party to a transaction makes to the other a clear and unequivocal promise or assurance which is intended to affect the legal relations between them (whether contractual or otherwise), or was reasonably understood by the other party to have that effect, and, before it is withdrawn, the other party acts upon it, altering his or her position so that it would be inequitable to permit the first party to withdraw the promise, the party making the promise or assurance will not be permitted to act inconsistently with it.”
Snell's Equity (31st Edition) 10-08
Central London Property Trust Ltd v High Trees House Ltd  KB 130 Denning J In 1937 the plaintiffs let a block of flats to the defendants for a period of 99 years at a rent of £2500 per annum. In 1940 plaintiffs agreed to reduce the rent to £1250 because many of the flats were unlet due to the war. At the end of the war the plaintiffs asked for the full rent to be reinstated. Denning J HELD that the plaintiffs were entitled to reinstate the rent. Denning J went on to state that the plaintiffs could not have sued for the full rent for the period covered by the agreement.
“The logical consequence no doubt is that a promise to accept a smaller sum, if acted upon, is binding notwithstanding the absence of consideration.”
Denning J. @ 134.
Denning founded his assertion upon the dictum of Lord Cairns in Hughes v Metropolitan Railway Co (1877) 2 App Cas 439
“it is the first principle upon which all the Courts of Equity proceed, that if parties who have entered into definite and distinct terms involving certain legal rights – certain penalties or legal forfeiture – afterwards by their own act or with their own consent enter upon a course of negotiations which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced these rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties.'
Hughes had been cited with approval in Birmingham & District Land Co v L&NW Ry (1889) LR 40 Ch D 268
The precedents Denning avoided
(a) Jorden v Money (1854) 5 HL Cas 185
Jorden v Money  UKHL J50 (1854) 5 HL Cas 185, (1854) HL 185, 10 ER 868
The House of Lords held that only a representation of past or existing fact could establish an estoppel – whereas Denning J was asserting the promise as the foundation of estoppel.
Denning J, while acknowledging Jorden, evaded the point by declining to describe his doctrine as an estoppel.
(b) Foakes v Beer (1884) 9 App Cas 605.
Foakes v Beer  UKHL 1 (1883-84) L.R. 9 App. Cas. 605;(1884) 9 App Cas 605
Payment of a smaller sum in satisfaction of a larger sum is no satisfaction of the larger sum.
Pinnel's Case (1602) 5 Co Rep 117a
A rule confirmed by the House of Lords in Foakes v Beer – the facts of which have been canvassed earlier in relation to the doctrine of consideration.
Two members of the House of Lords who sat in Foakes were members of the House in Hughes – seven years before. While the Hughes point was not pleaded in Foakes the two members of the Lords appear to have been quite unaware of the ‘effect' of the Hughes decision some seven years later!
Denning made the point that Hughes was not pleaded in Foakes , that the decision was per incuriam.
It is possible to reconcile Foakes with High Trees . In Foakes the debt had already accrued whereas in High Trees the promise was in relation to future payments. If this point is taken and accepted the two cases are reconcilable and that Foakes remains good law.
2 The conditions for the applicability of the doctrine
There must be a pre-existing legal relationship
Hughes v Metropolitan Railway Co (1877) 2 App Cas 439
There must be a promise
There must be a clear promise intended to alter the contracted (or otherwise legally binding) obligation. The court assesses intention objectively rather than taking evidence on the party's state of mind.
Woodhouse Israel Cocoa Ltd v Nigerian Produce Marketing Board  AC 741
There must be reliance on the promise
The promisee must have acted upon the promise and altered his position.
Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd  1 WLR 761 HL
Does the promisee need to act to his detriment?
While there was no detriment in High Trees and the point was not taken in Ajayi v Briscoe or in Tungsten Electric it appears to be the case – strictly speaking – that detriment is not required.
Detriment not required in WJ Alan & Co v El Nasr Export and Import Co  2 QB 189.
In Goldsworthy v Brickell  1 All ER 853 Nourse LJ in the Court of Appeal indicated that detriment was required.
Goff J in Societe Italo-Belge v Palm Oils  1 All ER 19 thought that detriment was not required.
The issue has never been tested on appeal. The usual view is that to invoke the doctrine, it must be ‘inequitable' for the promisor to go back on his promise. Detriment is one reason why it may be inequitable, but not the only one. ‘Misconduct' by the defendant, e.g. unreasonably withdrawing the forbearance at short notice, may make it inequitable.
It must be inequitable to go back on the promise .
The point on detriment may be academic for there is a further requirement that it must be inequitable to go back on the promise. If a person has not altered his position to his detriment it may be easier to assert that it is not inequitable to go back on the promise.
A shield and not a sword
The doctrine cannot create any new rights. Denning made this perfectly clear in the Court of Appeal in the case of Combe v Combe  2 KB 215.
The doctrine operates as a defence to a cause of action and not to found a cause of action in itself.
Baird Textile Holdings Ltd v Marks and Spencer  EWCA Civ 274
Baird had made clothes for M&S for 70 years. The companies had worked closely together. M&S was Britain's most successful clothes retailer. Wishing to build on that position, M&S decided to stop buying from Baird and to import clothes from cheaper suppliers abroad. This was disaster for Baird. Baird argued that M&S's close involvement with them amounted to conduct which induced Baird to believe M&S would not ‘pull the plug' without reasonable notice. HELD: the argument that M&S could not suddenly stop buying from Baird was an argument for a positive legal right (i.e. that M&S would continue to buy for a reasonable period after giving notice). Promissory Estoppel cannot be used to create a legal right, so Baird's case could not succeed on the basis of promissory estoppel.
Those who seek the protection of equity must have clean hands – they must have behaved equitably themselves.
D &C Builders v Rees  2 QB 617
Plaintiffs were owed £480 for building works. The defendant offered £300 which was accepted. The defendant had delayed in payment and had indicated that it was £300 or nothing, knowing that the builders were in serious financial difficulties. The plaintiffs sued for the balance. Lord Denning held that the plaintiffs were entitled to the full amount. The defendants had not behaved equitably.
The effect of the doctrine
Does the doctrine operate to extinguish legal rights or merely so as to suspend them.?
Denning – extinctive
Others – suspensory.
In Tool Metal v Tungsten Electric the effect of the doctrine was to suspend legal rights.
The doctrine of promissory estoppel has had a major impact on English and Irish contract law since the High Trees case. Debates surrounding the expansion and application of the doctrine have included whether or not detrimental reliance is required in order to bring the doctrine into effect, whether the doctrine can create a cause of action or merely provide a defence to a cause of action and whether or not the evolution of the doctrine has abrogated or abolished the rule in Pinnel's case .
In Amalgamated Investment Co v Texas Bank  1 QB 122 it was held that the doctrine could act as a sword and not merely as a shield (that is, it could be used as a cause of action rather than merely providing a defence to an action).
Attempts have been made to utilize the doctrine of promissory estoppel after High Trees to create a new inroad into the rule in Pinnel's case that an agreement to accept part payment of a debt in full satisfaction of it is unenforceable for want of consideration. In the High Trees case Lord Denning commented, obiter , that such an agreement should now be enforceable under the doctrine of promissory estoppel. However, the courts have traditionally been reluctant to overrule cases like Pinnel's case and Foakes v Beer as they have formed part of the common law for so long. Lady Justice Arden in Collier v P & MJ Wright (Holdings) Ltd  EWCA Civ 1329 accepted in principle that High Trees could be used to extinguish a creditor's right to full payment of a debt in such circumstances.
Charles contracted to supply Peter with 10,000 widgets per month for 24 months, for a fixed sum of £20,000, payable in advance. After six months the market price of widgets unexpectedly doubles, due to the outbreak of war in Ruritania (the main widget producing country) Peter, hearing that as a result of this Charles has started to cancel similar contracts, suggest to Charles that he will be prepared to take 7000 widgets per month in satisfaction of their contract.
Charles agrees, and delivers 7000 widgets per month for the next five months. The war in Ruritania then ends and the market price of widgets collapses. Peter now demands (a) the 15,000 shortfall in deliveries in relation to the past five months; and (b) 10,000 widgets per month for the rest of the contract.
Tutorial – Alteration of the contracted obligation
1. The doctrine of promissory estoppel interferes with the purity of absolutist principle and militates against certainty in commercial contracts.
2. If the facts of Foakes v Beer were to be repeated before the House of Lords today the Lords would decide the case in exactly the same way.