1. Consideration requirement and alteration promises

Should it be necessary to establish consideration to support alteration promises? Compare the different approaches to avoid it and their legal credentials, e.g. the pragmatism behind Roffey and promissory estoppel:

Chen-Wishart, ‘Consideration, Practical Benefit and the Emperor’s New Clothes’ in Beatson and Friedmann (eds.), Good Faith and Fault in Contract Law (Oxford University Press, 1995).

Chen-Wishart, ‘A Bird in the Hand: Consideration and Contract Modification’ in Burrows and Peel (eds.), Contract Formation and Parties (Oxford University Press, 2010).

There is also the difficulty presented by the absence of coherent principle surrounding the factual benefit concept in the alteration context:

Shaw-Mellors, ‘Contractual Variations and Promises to Accept Less: Pragmatism in the Court of Appeal’ (2016) 8 JBL 696.

Shaw-Mellors and Poole, ‘Recession, Changed Circumstances, and Renegotiations: The Inadequacy of Principle in English Law’ (2018) 2 JBL 101.

Should consideration be replaced by ‘reliance’ in this context? Reliance-focused remedial approaches include:

•     Atiyah’s arguments on reliance (Atiyah v Treitel).

•     Atiyah, ‘Consideration in Contracts: A Fundamental Restatement’ in Essays in Contract Law (Oxford University Press, 1990).

•     Treitel, ‘Consideration: A Critical Analysis of Professor Atiyah’s Fundamental Restatement’ (1976) 50 Australian LJ 439.

•     § 90 of the American Restatement of Contract (2d):

(1)           A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

Although this is based on reliance, the remedy may not equate to full enforcement of the promise:

•     Antons Trawling Co. Ltd v Smith (2003) (Court of Appeal of New Zealand): alteration promise had been acted upon (reliance) and was enforceable on that basis.

2. The limitations and future of promissory estoppel in English law—and the link to perceived deficiencies with Roffey

Limitations of promissory estoppel in English law:

•     It operates only in the context of alteration promises (however, this is not as controversial as the other two limitations).

•     It operates only as a defence and does not create fresh rights (in contrast to promises made under the distinct doctrine of proprietary estoppel).

•     The exact meaning of its suspensory effect is unclear.

Waltons Stores (Interstate) Ltd v Maher (1988) (High Court of Australia)

The Australian approach: avoiding unconscionability.

FACTS: The plaintiff sought specific performance of a lease on the basis that it had been encouraged by the defendant to believe the lease would be executed and so had acted to its detriment in demolishing an existing structure on the land.

HELD: It was unconscionable to have adopted a course of action encouraging this detrimental conduct and therefore the defendant was estopped from denying that it was bound.

This estoppel therefore operated although there was no pre-existing contractual relationship between the parties and it also operated as a cause of action enabling the plaintiff to enforce the promise, thereby creating fresh rights for the plaintiff.

This principle has far greater flexibility than the English doctrine of promissory estoppel since:

•     It uses a general category of estoppel.

•     It enables the courts to take ‘sufficient action’ to prevent the detriment resulting from the unconscionable conduct. (Compare with consideration, the existence of which allows for full and direct enforcement of a promise.)

•     It was applied in Walton Stores to enable direct enforcement of a promise rather than as a defence but also to create liability where there was no existing relationship between the parties (i.e. formation issue).

The Walton Stores argument—i.e. general category of estoppel and no limitation that estoppel cannot create new rights for the promisee—was attempted (unsuccessfully) before the CA in Baird Textiles v Marks & Spencer. However, the CA left open the question for consideration by the HL (or SC) in a future case.

Arguments based on extending estoppel appear to be favoured due to the questions which arise when Roffey is subjected to scrutiny. While that decision might be greeted favourably as a pragmatic solution to the enforceability of alteration promises, it can be criticized as ‘invented consideration’ (i.e. the consideration does not move from the promisee and it is not easily reconciled with Stilk v Myrick).