Promissory Estopel

Promissory estopel helps to enforce a contract between two parties when a contract is otherwise unenforceable. A mere agreement between two parties does not create a binding, enforceable contract. In addition to offer and acceptance there must be sufficient consideration to make the contract enforceable.

Consideration is an essential element when forming a contract. A classic definition of consideration has been given in Currie v Misa: “a valuable consideration, in the sense of the law, may consist either of some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other” i.e. the promise has to give something in return for the promise of the promisor to turn a promise into a contract.

Once the contract is made it cannot be varied without further exchange of promises or promise supported by consideration. The doctrine of consideration therefore applies to formation as well as variation of contracts. So, if person A owes money to person B under a debt contract and person B accepts a lesser amount in full settlement, person B has all the rights to enforce payment of the balance (Pinnel’s case, Foakes v Beer) as a part payment of the debt is not a good consideration for promise to forgo the balance – A is already obliged to pay the full balance under the debt contract (Stilk v Myrick).

It was held in Pinnel’s case that an agreement to accept a part payment would be binding if there was a fresh consideration provided by the debtor e.g. if there is an additional benefit for the creditor. The exception includes creditor’s acceptance to a part payment on an earlier date than the due date or if the creditor accepts a “gift of horse, hawk or robe” it would amount to good consideration to forgo the balance. The court is not concerned about whether the parties made good or bad bargain – the consideration needs to be sufficient but need not to be adequate (Chappel v Nestle). A payment at different place is also a valid consideration...