Equitable doctrine of promissory estoppel Essay

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Introduction

Under the equitable doctrine of promissory estoppels, promises that are made in bad faith in an agreement can be prosecuted in the court of law. Specifically, promissory estoppel allows other parties in the agreement to seek justice when the initial promises made were done in bad faith. Thus, this reflective treatise attempts to explicitly explain how the equitable doctrine of promissory estoppel is unjustifiable.

Why the equitable doctrine of Promissory Estoppel is Unjustifiable

In the famous ruling in the case Waltons Stores (interstate) Ltd v Maher, the verdict gave the applicant a relief based on the defendant’s promise in the business contract. Reflectively, “the essence of the principle is that it requires a defendant to make fair and just compensation derived at the expense of a claimant” (Doctrine of Promissory Estoppel 2012).

This is brought out in the case of Pavey & Mathews Pty Ltd v Paul. The principle can form the basis for which a claimant can seek relief. However, action based upon unjust enrichment is not based on the contract but independent of it (Turner 2005).

As opined by Turner (2005), “restrictive covenants may, if certain conditions are satisfied, run with the land and bind purchasers of it to observe the covenants for the benefits of adjoining owners” (Tuner 2005, p. 43). An example is the Tulk v Moxhay 1848. In this particular case, the claimant had a listing of several real estate properties in Leicester square which he sold to the defendant based on an unwritten promise of safety standard guarantee.

The defendant Elms pledged as a good will to the claimant, he would ensure that the railings and the gardens of the said properties would be maintained in their present condition and he will allow individuals tenants to till the gardens. The fact of the agreement was that the defendant had a prior knowledge of restrictions stipulated in the agreement with the claimant. Unfortunately, the defendant did not honor the said agreement made in form of a promise.

The “defendant announced that he was going to build on the land, and the claimant; who still owned several adjacent houses, sought an injunction to restrain him from doing so from the court. It was held that the covenant would be enforced in equity against all subsequent purchasers with notice” (Doctrine of Promissory Estoppel 2012, par. 15).

State laws expressly grant exceptions. This is though the various acts. For example, the Insurance Contract Act 1985, Bills of Exchange Act 1909, Cheques Act 1986, and Motor vehicle (Third party Insurance) Act 1942. For instance, “under the law of insurance, the exception to the principle of equitable doctrine of promissory estoppel has been applied to insurance policies are effected for the benefit of an upset party.

Where a policy of insurance is affected by the assured for his own life, and the policy is expressed to be for the benefit of his wife” (Doctrine of Promissory Estoppel 2012, par. 15). However, she cannot sue the insurance company on the policy unless it is assigned in writing or a trust has been declared by assured (Stone 2008).

Therefore, a stranger to the contact cannot sue even if the contract is avowedly made for his benefit. Thus, “a stranger to the consideration cannot enforce an action on the promise made between two persons unless has in some way intervened in the agreement” (Doctrine of Promissory Estoppel 2012, par. 17).

In the case, the person making the claims was due to get married to G’s daughter. The two parties allegedly made a written agreement in form of a promise note. The parties to the contract agreed to pay the claimant some money. Upon failing to honor the agreement, G was sued by the claimant. Though the sole object of the contract was to secure benefit to the claimant, he was not allowed to sue (Doctrine of Promissory Estoppel 2012). This is because the contract existed with the father and not with him.

Besides, businesses often get into informal agreements with other businesses. The aim of these agreements is to facilitate smooth flow of work. Transactions resulting from such agreements need to be recorded in the books accounts in accordance with the accounting principle despite being informal. Therefore, an extension of liability ruling will frustrate informal agreements that determine success of the formal business contracts (Keenan & Riches 2002).

Aiders and abettors are parties to an offense. They share crime intent with the person who commits the crime. They may be liable as a principal, an accessory before or after the fact. Aiders and accomplices are liable for fraudulent misrepresentation when they execute some overt act, or give advice or encouragement to commit a crime.

The claimant bears the burden of proof. He must prove that there is a material misstatement or deceptive conduct, wrongful state of mind, a connection with the purchase or sale of a security, reliance, economic loss, and loss causation. Unfortunately, the equitable doctrine of promissory estoppels is silent on the fate aiders and abettors in a contract.

This implies that when a trader has material information that is not known to the other party and he carries out trade with it, then the gains from the trade are unfair prima facie. However, there is no blanket court rule that declares trading with material insider information as illegal. The court handles cases arising from unfair trade in isolation. Therefore, it emerges that trading with material nonpublic information is unethical but may not be essentially against the law (August 2008).

From the above reflection, it is apparent that the equitable doctrine of promissory estoppels may not be justifiable in the face of ethics in business contracts.

References

August, R. (2008). International Business Law: Text Cases and Readings. New York: Routledge.

Keenan, D, & Riches, S. (2002). Business Law. New York: Pearson/Longman.

Doctrine of Promissory Estoppel. (2012). Web.

Stone, R. (2008). The Modern Law of Contract. New York: Routledge.

Turner, C. (2005). The Comprehensive Guide to all the facts Contract Law. Hodder: Oxon.

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IvyPanda. 2018. "Equitable doctrine of promissory estoppel." December 11, 2018. https://ivypanda.com/essays/equitable-doctrine-of-promissory-estoppel/.

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