Consideration - Part 3 (Contract Formation)-FS Flashcards
(8 cards)
What is the equitable doctrine of promissory estoppel?
It prevents a creditor from going back on a clear promise to waive legal rights (such as full payment), even without consideration, if it would be unfair in the circumstances.
What conditions must be met for promissory estoppel to apply?
1) A clear and unequivocal promise to waive strict legal rights.
(2) The promisee must have relied on the promise.
(3) It must be inequitable for the promisor to renege on the promise.
What is the Shield, Not a Sword Principle
Promissory estoppel can only be used as a defence to a claim; it cannot be used to bring a new claim. It acts as a shield, not a sword.
What is the legal effect of promissory estoppel on a creditor’s rights?
It suspends the creditor’s rights, preventing enforcement during the concessionary period. Rights may be resumed with reasonable notice but arrears during the period cannot be reclaimed.
How does promissory estoppel relate to the rule that part payment is not good consideration?
Although part payment is not good consideration at common law, promissory estoppel may still apply in equity to prevent recovery of the full amount during the agreed period.
What is the Clean Hands Doctrine
A party seeking to rely on promissory estoppel must act equitably. If they have behaved unfairly or taken advantage of the other party, the court may refuse to apply the doctrine.
Does promissory estoppel extinguish or merely suspend legal rights?
It suspends legal rights. The creditor can reinstate them with reasonable notice but cannot recover sums waived during the concessionary period.
A landlord agreed to halve rent during lockdown. Can they later demand the arrears?
No. As long as the tenant relied on the promise, the landlord is estopped from recovering the unpaid portion. Full rent can resume only after giving notice.
