Promissory Estoppel: Explained

Lessons From The Law

Rayees Ahmed Wani
Author is Senior lecturer at KCEF Law College Pulwama

Promissory estoppel is a moderately new advancement. To follow the development of teaching in England, we have to allude to a portion of the English choices. The early cases did not talk about this tenet as estoppel. They discussed it as ‘raising equity’. Lord Cairns expressed the regulation in its most punctual structure in the accompanying words in Hughes v. Metropolitan Railway Company.

“It is the main rule whereupon all courts of equity continue, that if parties who have gone into clear and unmistakable terms which includes certain lawful outcomes for a short time later by their own demonstration or with their own consent enter upon a course of exchange which has the impact of driving one of the parties to assume that the severe rights emerging under the agreement won’t be enforced, or will be kept in anticipation, or held in hold, the individual who generally may have enforced those rights won’t be permitted to uphold them where it would be inequitable having respect to the dealings which have along these lines occurred between the parties.”

The doctrine of Promissory Estoppel was also based on obiter dicta of Justice Denning in Central London Property Trust Ltd vs. High trees House Ltd wherein the court ruled that after promising to reduce the rent of flats and then again increasing it, would affect the intended legal obligations of the parties. It was also held in Combes vs Combes that where one party by his words or conduct made an offer to another party to which any promise and assurance was intended to affect relations between them and to be acted upon accordingly, then one party has taken him on his word and then acted upon it.Under English Law, the principle and rule has been applied in the case of explicit and not an unequivocal promise where one party, without a new consideration, makes a deal to avoid implementing his rights, since it is inequitable for the promisor to backpedal on such guarantee since the promisee probably adjusted his position independence of the guarantee made, which need not really be inconvenient.The promisor can resile from his guarantee on giving reasonable notice, which may not be formal, giving the promisee a reasonable chance of continuing his position. The promise would move toward becoming last and irreversible if the promisee can’t continue his position, promissory estoppel serves to suspend and not entirely quench the current obligation, the rule applies not exclusively to the contractual relationship, yet additionally to statutory rights, or to a connection between neighbouring landowners.

Evolution of the doctrine of promissory estoppel

Estoppel talks about rules of equity, fairness and justice. And in recent years that rule expanded its dimensions. One of the classifications of estoppel was Promissory Estoppel that was acknowledged by courts in the country. In 1880, the concept of Promissory Estoppel was originated in the Indian Law System through Ganges Manufacturing Co. V. Soorajmull, when Calcutta High Court upheld that a promise without consideration was enforceable merely on the basis of interest and reliance. In 1892, judgement of Calcutta High Court was not followed as Madras High Court dismissed the basis of interest and reliance and returned back to the traditional approach that consideration is necessary in Schoulank V. Mulhunaryan and examined the application of estoppel under provisions of Indian Evidence Act. During the developing period, the promisee cannot appeal the doctrine of promissory estoppel unless any damage was suffered by the party. One thing that is mandatory is the other party’s reliance on the promise and acting upon the assurance given by the promisor. The only crucial requirement of this doctrine is the change of position by the party. The doctrine of promissory estoppel found its complete explanation in the case of Union of India V. Anglo Afghan Agencies. Earlier promissory estoppel was never applied against the government. But with time, this case changed the position. To uplift export of woollen garments to Afghanistan, the government made a declaration about specific modifications regarding the import of specific raw materials. But later, only limited modifications were permitted, not all modifications as promised were permitted. The government was held liable by the Supreme Court as they were stopped by its promise. So, the promissory estoppel was applied against the Government by the courts. The doctrine of promissory estoppel was fully accepted in India devoid of notion of consideration and made it familiar as a reason of action to the parties to whom the promise was made.

Fundamental components of promissory estoppel

Following five components existence are very much crucial for the doctrine to be enforced properly-

  • Lawful Relationship: There must be an existence of a lawful relationship or a relationship anticipated to exist between the two parties.
  • Assurance: It must be clearly displayed that a promise was made between the two parties which ultimately led the aggrieved party to presume that some kind of action needs to be taken. Such a promise must be reasonable and reliable.
  • Reliance: Aggrieved party’s reliance on the promise made must be displayed clearly and because of which the aggrieved party took some action.
  • Damage: The aggrieved party who relied upon the promise made by the other party must suffer some sort of damage or loss which ultimately lands the other party in the worst position.
  • Unconscionability: It must be clearly demonstrated that it was unjust for the promisor to break the promise.

If all of the above-mentioned components are present then most of the courts will apply the doctrine to the situation. Though, some courts may still apply the doctrine only if the situations that precisely give rise to the concept. And such an example of the precise situation is the one regarding real property.

Promissory Estoppel in India

Sometime before the doctrine of promissory estoppel was defined, the Calcutta High Court perceived that the principle of estoppel was not kept distinctly to the law of evidence, however, that an individual might be estopped from doing acts or depending on specific contentions or contention. In a later case, the Bombay High Court empowered the municipality to oppose the case of the Secretary of State to be launched out starting from the earliest stage the municipality had levelled, and raised versatile claims, in the conviction that they had a flat outright which should not be turned out except if other reasonable ground was outfitted, a conviction which was preferable to a desire made by the administrative authority which the legislature realized that the municipality would act upon.

Much later, the Supreme Court connected the standard (with one judge really utilizing the term promissory estoppel) to block the administration from evaluating land income in connection to a market site, when it had prior settled not to charge any lease on business sectors for business sectors would resemble other open buildings.

The court in UOI vs Anglo Afghan Agencies ruled that the doctrine of promissory estoppel discovered its most articulate exposition. For this situation, the writ-applicant had depended on the fare advancement plot issued by the Central Government which had sent out woollen products, and after that guaranteed the import qualification authentication for the full an incentive under the plan. The solicitor put together its case with respect to dependence, and the administration argued official need.

The Supreme Court negatived the protection of official need, and brought up that it didn’t discharge the legislature from its commitment to respect the guarantee made by it, if the native acting in dependence on the guarantee, had adjusted his position, and that as well, despite that the guarantee was not recorded in the structure required by article 299 of the Constitution.

Afterwards, in Century spinning and manufacturing Co Ltd vs Ulhasnagar Municipality, the doctrine was connected to implement a guarantee of exception from the instalment of octroi obligation given by a metropolitan organisation. The court drew the refinement between the portrayal of the current actuality and description that something would be done in future was spelt out, and it was thus carefully observed.

At last, in, the Supreme Court managed the doctrine of promissory estoppel at the incredible length and held that it afforded a reason for the activity. For this situation in MotilalPadampat Sugar Mills vs. State of UP, wherein the Government of Uttar Pradesh proclaimed a plan exempting all new modern units from deals charge for a long time in the paper. The appealing party sugar organisation got the portrayal affirmed from the Secretary, Industries Department, the Director of Industries, and the Chief Secretary, expressing that in perspective on the business charge exception declared by the administration, is expected to set up a hydrogenation plant for Vanaspati.

It was held that the all-out portrayal contained in the letters for the benefit of the Government of Uttar Pradesh, based on which the appealing party acquired cash from money related organizations and set up a plant, conjured the doctrine of promissory estoppel and the administration will undoubtedly complete the portrayal and excluded the litigant from the instalment of offers charge in regard to produced merchandise for a time of three years.

The Supreme Court has seen that the doctrine of promissory estoppel is a guideline developed by value to keep away from foul play, and however generally named promissory estoppel, it is neither in the domain of agreement nor in the realm of estoppel, yet it is a doctrine advanced by value so as to avert lousy form where guarantee is made by an individual realizing that it would be followed up on by the individual to whom it is made and in actuality it is so followed up on and it is inequitable to permit the gathering making the guarantee to return upon it.

 

 

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