In the case of Bracken v Billinghurst (2003) a builder was personally
liable for debts. They were paid off by his company by sending a cheque
for a lesser amount ‘in full and final settlement’ of the debt. The creditor
then tried to enforce payment of balance, but like the moneylender in
Temple was unsuccessful.
Promissory estoppel
The above exceptions to the rule in Pinnel’s Case are all examples of
accord and satisfaction. That is where agreement is reached over the
discharge of the contract, both sides having provided consideration. A
further, very important, exception to the principle is the doctrine of
promissory estoppel. Estoppel is a procedure by which a court estops (or
prevents) a person from saying something which they would otherwise be
allowed to say. Promissory estoppel applies this procedure where a
promise is made to excuse a party from contractual obligations, and where
applying the law strictly may cause obvious injustice. The principle stems
from the case of High Trees, where it was decided that where a promise
was made to excuse a party from contractual obligations, with legal intent,
and where it was both intended to be acted upon and was in fact acted
upon, the promisor will be prevented from bringing evidence that there
was no consideration.
Consideration 59Central London Property Trust v High Trees House (1947)
The plaintiff owners of a block of flats in London leased it to the
defendant in 1937 for £2,500 per year, and the defendant in turn let out
the property as individual flats to tenants. During the period of World
War II it became increasingly difficult to find tenants, so the defendant
was going to end the arrangements. Rather than do this, the plaintiffs
agreed to reduce the payment due under the lease to £1,250 per year.
As a result the defendant was able to continue with a reduced number
of tenants. At the end of 1945 people were returning to London, and the
flats were again full. The plaintiffs then decided to go back to the
original full payment under the lease, and to test their case, sued for the
full payment for the last half of 1945. It was held that the full amount
should be paid for this six-month period, since the flats were fully
occupied. However, Denning J also took the opportunity to make the
following points (obiter):- The plaintiffs were entitled to request full payment from now on.
- On the other hand, if the plaintiffs should sue for payment for the war
years (up to 1945), then they would be estopped from enforcing
payment. It would be inequitable to allow them to go back on a promise
on which the defendant had relied in continuing with the contract.