SupplierPLC promised “not to charge you this month”. That degree of protection ensures B is not disadvantaged if it relies on the representation made by A.ĭuring the long period of lockdown, you negotiated with key suppliers to defer payments. If established, promissory estoppel provides a complete defence for B, preventing A from brining a claim to enforce its contractual right or claim damages for B’s failure to perform in accordance with the contract.
That will generally be the case if B would suffer a detriment if A was permitted to resile from the representation it made. Whilst the representation can be expressed or implied, for the doctrine to apply A must have intended for the representation to have affected the legal relationship with B.ī must then have relied on A’s promise to such an extent that it would be inequitable for A to renege. Where there is an existing contractual relationship, promissory estoppel can be used to prevent A from enforcing a contractual right against B in circumstances where A made a clear and unequivocal representation that it wouldn’t do so. For businesses finding that an apparent spirit of co-operation during difficult times does not carry over to the harsh realities of the post-lockdown commercial world, it’s worth focusing on two areas which are most likely to prove helpful when holding parties to account: On the face of it, the different forms of estoppel may appear confusing. As an equitable doctrine, written contracts do not have to include a right to claim estoppel it is a right which exists as a matter of law. The doctrine is based on the concept that it would be unjust to force an innocent party to perform an obligation when it relied on a representation that it wouldn’t have to perform that obligation. Reliance means that B will have changed its position as a result of A’s promise, statement or conduct. If B has relied on A’s representation, then A may be prevented (estopped) from going back on its representation by seeking to enforce the obligation concerned. There are different forms of the doctrine, but there are some common requirements.īroadly, the starting point is to assess whether party A has represented to party B that A will not insist on performance of some obligation by B or will not enforce rights which A has under a contract – such as not requiring B to make payments, deferring a deadline or relaxing contractual formalities. Estoppel – not all is fair in love and warĮstoppel refers to a legal doctrine which means that in certain circumstances, a court will not allow a party to resile from a statement or promises made to another. The good news for the innocent party is that in certain circumstances the law may come to their aid. However, problems may arise as we emerge from lockdown and pressure begins to ease when statements and promises are not honoured, and one party seeks to ignore what was said and enforce the terms of the original contract.
These informal arrangements often alter the performance of contractual obligations – “I promise not to charge you this month” – “I’m not going to enforce that term during lockdown” – “I’m happy to reduce services until staff are back from furlough” – some parties will be content to trust longstanding relationships and a spirit of cooperation to ensure statements and promises made during uncertain economic times continue to be honoured as business operations recommence. As restrictions ease, those businesses may have cause to reconsider arrangements which they felt compelled to accept to survive the lockdown. The need to mitigate the financial impact of Government restrictions and the pace at which the economic world changed has meant many businesses sacrificed certainty for practicality during the pandemic and relied on arrangements not recorded in written contracts. The coronavirus pandemic and the periods of enforced lockdown have meant that business operations have been far from normal for over a year.