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Promissory Doctrine in Australia: History and Expansion

Promissory Doctrine in Australia

Introduction

One of the most commonly referred to concepts in the contract law is the subject of promissory estoppels. In cases where the promise of one individual creates an impression in the mind of another leading to the modification of the promisee’s behavior, and which has a subsequent detrimental effect on the promissee due to the failure of the promissor to deliver, the doctrine of promissory can be invoked.[1] Previously, the application of the doctrine of promissory relied wholly on common law. However, the application of this doctrine to various cases over time has resulted in the expansion of the doctrine to include other occurrences that influence the well being of individuals. The application of the doctrine of promissory depends on four conditions.

First there must have been a promise made by one individual to another especially with the implication that there is the potential of a contract being formed. Following the promise, the promise must have modified his actions in a way to adapt to the conditions of the promised contract. Following the behavior modification, the person promised must have incurred damages which would not have resulted if the promise had not been made. The role of the doctrine of promissory is to prevent unjust outcomes that may arise in a situation where the common law is applied strictly. This paper focuses on the promissory doctrine in Australia, with the hypothesis that the expansion in the promissory doctrine as a result of tried cases has led to the dismissal of the importance of consideration in the doctrine.[2]

History of Promissory doctrine in Australia

In the early 19th century, the equitable doctrine was commonly applied under common law in cases related to a breach of promises. It was then referred to as the common law estoppels or estoppels by representation. The cases under estoppels by representation involved the issuance of representation by a promissor, which results in positional change in the promised individual. The equitable doctrine in the early 19th century had features such as the plaintiff’s entitlement to compel the defendant to give a good representation, a consideration was not require to support the representation and the representation could either be a present one or a promissory representation.[3]

In the late 19th century, equitable doctrine shifted into a new stand whereby consideration was required as a mandatory condition for the confirmation of an existing binding promise. Previously, the enforcement of estoppels did not require a consideration. This led to the decision in a case of Jorden v Money (1854)[4], where only the represented facts were considered without confirmation of the existence of a future orientation (promise). Following the decision on this case, the doctrine took a new stand with regards to consideration, leading to the development of the mandatory consideration law. This was the first major expansion with respect to the promissory doctrine.

After Jorden v Money, another case that led to a revolution in the promissory doctrine is the case of Central London Pty Trust Ltd v High Trees House Ltd (1947).[5] During this case a doctrine was formulated for the enforcement of a promise. However, this enforcement was directed to be subject to representation of a promise whose initial intention was to influence the legal relationship between the parties involved in the case. This case formed an essential foundation for the principles of the enforcement of promissory estoppels. In deciding this case, High Court endorsed a proposition of principles that form the basis of the promissory doctrine. The principles proposed include: pre-existence of contractual relations between the parties, clarity of a promissory statement made by one of the parties, the presenter relies on the promise of the presenter to their own detriment. In enforcing the promissory estoppels, the representer is to be stopped from reneging on his/ her promises. This case therefore formed a strong foundation for the determination of the need to invoke promissory estoppel. It is on this foundation that the Legione v Hateley case was later decided. Following these two cases, the promissory doctrine gained full recognition by the high court and its legitimacy was no longer questionable. However, the possibility of using this doctrine independently was not ascertained until after later cases.[6]

Due to the recognition of the legitimacy of the promissory doctrine in the decision of cases, the Australian courts upheld the application of the doctrine. However, the application of this doctrine during trials still faced two major limitations. The first limitation was that the promise must have been made within the context of a pre-existing legal relationship. This implied that for promises made in the absence of a prior existing legal relationship the representee could not be accorded damages even after confirmation that it is the failure of the representer to keep his/ her promise that resulted in the detrimental effect to the victim. An instance in which this proved to be a challenge was in the case of Combe v Combe [1951].[7] A second limitation was that the doctrine could only be used as defense in a case where the promissor was the plaintiff and the promisee the defendant. These limitations were only resolved later during subsequent applications of the promissory doctrine.[8]

The evolution of the promissory doctrine has followed a long path in Australia, its scope expanding with every new case that poses a challenge to its enforcement. In the wake of the promissory, doctrine, one case that has had tremendous impact on the doctrine of promissory estoppels is the case of Walton’s v Maher. The case brought about a major revolution in the promissory doctrine in which three major models of the doctrine were proposed. In the decision of the case, a standard approach to the application of the promissory doctrine in appellate courts was recognized. Following this case, the models of restraint on rights, independent sources of rights and the legal relationship model were brought forward.[9]

The restraint of rights model was explained as alluding to the proposition that promissory estoppels can only be operational where there is need to restrain the legal rights of a given individual where it is correlated to a given legal duty. This model is said to be in operation where the holder of a given right promises not to enforce it. The doctrine of promissory estoppel can only be applied then to restrain the promissor from not exercising his/ her legal right. In this essence, the promissory is compelled by the court not to exercise his/ her legal right due to the belief that exercising this right has detrimental effects on the promisee.[10] The Waltons v Maher case[11] forms an important barrier in the enforcement of the promissory doctrine in relation to the restraint of rights model. This is by virtue of the decision in which the court decides to confer legal and equitable rights due to the non-existence of previous legal relations between the parties. This decision formed an important milestone in the application of the promissory doctrine in that it was possible to apply the doctrine in a case where there were previously no legal relations. This was particularly a milestone since the application of promissory estoppels was previously restricted to cases where the parties had an existing legal relationship prior to the case.

Apart from this, in the consideration of the promissory estoppels as a way of restraining legal rights, the misconception was dispelled by the case of Hughes v Metropolitan Highway Co.[12] In this case, no restraint to the exercise of a legal or equitable right was compelled. On the contrary, the decision was based on the landlord’s power to terminate the tenants residence rather than on the landlord’s right to maintain possession of his property. Consequently, this case helped to dispel the belief that that the doctrine serves to restrain the rights of the promissor.[13]

The independent source of rights model on the other hand, is in reference to a case involving the promise of the representer to adopt a certain mode of behavior. In this case, the court compels the promissor to keep the promise considering the fact that the promisee may have also adopted a certain behavior to his own detriment.[14] The promissor is thus compelled to stick to the promised code of conduct. This model was applied during the Waltons’ case where a new set of legal and equitable rights was awarded based on the non-existence of previous relationships. This made progress in the implementation of promissory estoppel since it showed that even without legal rights; it is possible to invoke the provisions of the promissory doctrine.[15]

In addition to the two models, the legal relationship model was also confirmed to be inapplicable through various cases after the decision of the Waltons case. This is because from this case, it was determined that the application of promissory estoppels does not depend on the presence of a legal relationship between the parties prior to the case. This was confirmed through the judge’s decision to enforce promissory estoppel in the Waltons case even in the absence of such a relationship through the incorporation of a set of equitable rights on this basis.

The Waltons case was therefore instrumental in the Australian promissory doctrine application on various forms. The three models of the doctrine were initially applied with various limitations which began to be dissipated after the Waltons case. First, the case enabled the promissory doctrine to be seen as capable of being applied even in the absence of legal or equitable rights which need to be restrained. This is through the awarding of a set of rights where non- existed before as is mostly the case in a situation where the parties involved in the case had no prior legal relationship.[16] In addition to this, the case enabled the promissory doctrine to be considered as relevant, not only to the defense by a promissor but also to the complainant, where it could be sought by a promisee seeking the enforcement of a promise that has the potential of a detrimental effect on the promisee. Following these advancements, a major decision was made to be able to use the promissory doctrine independently. Previously, the promissory doctrine could not be applied to cases as a standalone law in Australia.[17]

Further advancements in the promissory doctrine have taken place over the years, with changes in 1990, and thereafter. The revolutions have led to the existence of the current promissory doctrine in Australia. This doctrine is continuously being used in Australia as an adjunct to the contract law.[18]

Promissory Doctrine in Australia Today

Currently, the promissory doctrine in Australia is applied to cases only after confirmation of various factors. First, it must be confirmed that the promissor had a duty to protect the promisee from potential harm that may arise due to the induced assumptions caused by the promise. The parties involved in a case often posses either primary or secondary duties with respect to the promise. Prior to the development of the case, there must have been assumptions induced in the mind of the promisee in relation to the promises made. The promissor must have in this case acted or spoken in a manner to induce a certain perception/ assumption in the mind of the promisee. Since the promissor in the case induces the assumption in the mind of the promisee, it is the responsibility of the formed to protect the latter from experiencing any harm. Harm in this case refers to any detrimental effect that may occur on the victim as a direct result of the promise made. The detrimental effect in a case of a breach of promise must leave the victim worse that he/ she was prior to the promise. On this basis, the promissor is to be held responsible for the harm caused to the victim. With respect to the enforcement of the promissory doctrine, it is necessary for the existence of the duty to be confirmed.[19]

In order to confirm that the induced assumptions in the case are reliable for use in deciding the case, it is necessary to ascertain the circumstances in which the duty is most likely to arise and the difference between this duty and the duty to tell the truth with respect to making the promise. In ascertaining the instances in which the duty is to arise, two justifications have to be affirmed.[20] First, the dealings between the inducing party and the party developing the assumptions prior to the promise must be reviewed. This includes a consideration of the extent of harm that these dealings could have resulted in. Secondly, the relationship between the parties involved in the dealings should also be reviewed since some form of behavior can only be guided by moral and ethical considerations based on the relationship between individuals.

In considering the dealings that led to the induction of the assumptions, our aspects have to be considered. The aspects include: the mode of induction of the assumption (either through behavior or words), the contents of the assumption in relation to the context of the case, the knowledge of the parties as to the implications of the assumptions and the potential of the assumptions to result in detrimental effects on the promisee. Furthermore, it is also necessary to confirm the parties independent interest on the range of activities that arise from the assumptions made based on the induction.

Following the confirmation of the circumstances under which the duty arose and the affirmation that the circumstances were not influenced in any way by the party developing the assumptions, it is then necessary to confirm the nature of the duty possessed by the individual inducing the assumptions.[21] In this case, the difference between the duty to avoid lying and the duty to keep the promise must be clarified. The major challenge involved in the confirmation of the need to apply the promissory doctrine in Australia comes about in the determination of whether it would be unconscionable for one party to failing accomplishing his/ her duty with respect to the case. However, this is often confirmed through the judges own consideration of a range of factors. Since this confirmation is mainly personalized, the outcome is often difficult to predict. The application of the law is therefore only justified after a confirmation of these factors.[22]

Conclusion

The promissory doctrine in Australia has undergone various modifications since the initiation of its use in the early 19th century. From application as the common law estoppel, the promissory estoppel has undergone revolutions which have seen it being applied as a standalone law in the determination of cases. Cases such as Waltons have contributed immensely to its revolution. Currently, the application of the doctrine depends on the confirmation of its relevance with regards to the duties of the parties involved, the nature of relationship between the parties involved prior to the induction of the assumption that led to the case and the confirmation that the harm caused was conscionable.

Bibliography

Spence, Michael, ‘Australian estoppel and the protection of reliance’, (1997) Journal of Contract Law, 11.

Robertson, Andrew, ‘Three models of promissory estoppel’, (2013) Journal of Equity, 7.

Radan and Stewart, Principles of Australian Equity and Trusts (LexisNexis, 2nd Ed, 2011)

Talaat, Wan, ‘The threats to the limitations outlining the present parameters of promissory estoppel: A Comparative study’, (2012) Journal of International Business and Social Science, 3(6).

Taylor & Francis Group and Edwards, Kirsten, Australian essential equity and trusts (Cavendish Publishing, 2000)

Weitzenbock, Emily, ‘English law of contract: promissory estoppel’(2012) Nowergian Research Center for Computer & Law.


[1] Emily Weitzenbock, ‘English law of contract: promissory estoppel’ (2012) Nowergian Research Center for Computer & Law.

[2] Taylor & Francis Group and Kirsten Edwards, Australian essential equity and trusts (Cavendish Publishing, 2000).

[3] Taylor &Francis Group and Edwards, above n 2, 9.

[4] Taylor &Francis Group and Edwards, above n 2, 9.

[5] Radan and Stewart, Principles of Australian Equity and Trusts (LexisNexis, 2nd Ed, 2011).

[6] Radan and Stewart, above n 5, 269.

[7] Radan and Stewart, above n 7, 269.

[8] Spi-Radan and Stewart, above n 7, 270.

[9]Andrew, Robertson, Three models of promissory estoppel, (2013) Journal of Equity,7.

[10] Robertson, above n 9, 226.

[11]  Waltons v Maher (1988) 164 HCA 387.

[12] Robertson, above n 9, 228.

[13] Robertson, above n 9, 228.

[14] Robertson, above n 9, 233.

[15] Robertson, above n 9, 236.

[16] Robertson, above n 9, 238

[17] Michael Spence, ‘Australian estoppel and the protection of reliance’, (1997) Journal of Contract Law, 11.

[18] Michael Spence, above n 17, 203.

[19] Michael Spence, above n 17, 204.

[20] Wan Taalat, The threats to the limitations outlining the present parameters of promissory estoppel: A comparative study, (2012) Journal of International Business and Social Science, 3(6).

[21]Michael Spence, above n 17, 206.

[22] Michael Spence, above n 17, 206.