Promissory Estoppel Contract Law

The doctrine derived from the case of Huges v Metropolitan Railway Co (1877), involving a landlord and his tenants. Under the lease the tenants were obliged to keep the premises in good repair, and in October 1874, they landlord gave them 6 months’ notice to do some repairs, stating that if they were not done in that time, the lease would be forfeited. In November, the two parties began to negotiate the possibility of the tenants buying the lease, the tenants stating that in the mean time they would not carry out the repairs.

By December, the negotiations had broken down, and at the end of the six month notice period, the landlord claimed that the lease was forfeited because the tenants had not done the repairs. The House of Lords held, that the landlords conduct was an implied promise to the tenants that he would not enforce the forfeiture at the end of the notice period, and in not doing the repairs the tenants had been relying on the promise – the six month notice period had started again from the date when the negotiations broke down.

The promise was held to be binding.

These principles were applied 70 years later by Lord Denning in Central London Property Trust Ltd v High Trees House Ltd (1947). The case involved a block of flats owned by the plaintiffs. In September 1939, the plaintiffs had leased the block to the defendants, who planned to rent out the individual flats, use to income to cover their payments on the lease, and make a profit on top.

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Unfortunately, their plans were spoiled by the fact that the Second World War had just broken out, and many people left London, making it difficult to find tenants. As a result, many of the flats were left empty.

The plaintiffs therefore agreed that the tenants could pay just half could pay just half the ground rent stipulated in the lease. By 1945, the flats were full again, and the plaintiffs claimed the full ground rent for the last two quarters of 1945. The plaintiffs stated that the agreement was only ever intended to last until the war was over, or the flats fully let, whichever was the sooner. Both events had happened by the time payment for the last two quarters of 1945 were due, and so they believed they were entitled to full payment for that period.

What Is Estoppel In Contract Law

The court accepted this agreement, holding that full rent was payable for the last two quarters in question, and from then on. Of more importance is the fact that Lord Denning went onto state that the plaintiffs would not have been entitled to recover the rent for the period 1940-1945, even though there was no consideration for the promise to accept the reduced rent, because of the equitable principle laid down in Huges. By accepting the reduced rent for the wartime period, they lost their right to claim for arrears of rent. Defined by Lord Cairnes:

If parties who have entered into definite and distinct terms involving certain legal results (suing if terms are not met/breaches) – certain penalties or legal forfeiture – after wards by their own act or with their own consent enter upon a course of negotiations (negotiating for the tenants to possibly buy the lease) which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced (the promise to forfeit the lease), or will be kept in suspense, or held in abeyance, the person who might otherwise have enforced those rights (the landlord) 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 (the negotiating period).