Doctrine of Promissory Estoppel - CLAT PDF Download

Introduction

The doctrine of promissory estoppel is an equitable principle developed to prevent injustice. It applies when one party, through clear and unequivocal words or conduct, makes a promise intended to create or affect legal relations, knowing it will be relied upon by the other party. If the promisee acts upon this promise to their detriment, the promisor is bound and cannot retract. Originating from courts of equity in England, estoppel is considered a rule of equity, while in India, it is primarily a rule of evidence. In India, this doctrine applies equally to private individuals and the government. The Law Commission of India, in its 108th Report (1984), proposed the inclusion of Section 25A in the Indian Contract Act, 1872, to address promissory estoppel.

Key Elements of Promissory Estoppel

1. Representation or Promise:

   • A promise or representation is made between two parties concerning future actions.
   • The promise is intended to influence the legal relationship of the parties.

2. Action in Reliance:

   • The other party acts in reliance on the promise or refrains from doing something they otherwise would have done.
   • The reliance must result in a disadvantage or prejudice to the promisee.

Evolution of Promissory Estoppel

• India:
  The doctrine was first applied in the 1880 Calcutta High Court case Ganges Mfg. Co. v. Soorujmull. The court held that a promise, even without consideration, could be enforced if acted upon.

• England:
  The doctrine was introduced by the House of Lords in Thomas Hughes v. Metropolitan Railway Co. (1877). It was later recognized in Central London Properties Ltd. v. High Trees House Ltd. (1947), where Lord Denning established that a promise, if intended and acted upon, is binding.

Promissory estoppel has since evolved and is widely accepted in legal systems worldwide, including India and England.

Legal Provisions Related to Promissory Estoppel

Under the Indian Contract Act, 1872:

• Section 25: Addresses contracts made without consideration, which overlaps with aspects of promissory estoppel.
• Proposed Section 25A: Suggested by the Law Commission to formally recognize promissory estoppel in Indian law.

Under Other Indian Laws:

1. Section 115 of the Indian Evidence Act, 1872:

   • Establishes the principle of estoppel for representations about existing facts.
   • Promissory estoppel, however, deals with future promises and is not covered by Section 115.

2. Article 299 of the Constitution of India:

   • Protects government officials from personal liability for promises made under official capacity.
   • Application of promissory estoppel must align with constitutional provisions.

Landmark Cases

1. Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. (1979):

   • Recognized promissory estoppel against the government.
   • Expanded the doctrine to create actionable rights based on promises.

2. Union of India v. Indo-Afghan Agencies Ltd. (1968):

   • The government was held accountable for its promises.
   • Rejected the defense of executive necessity.

3. Delhi Cloth & General Mills Ltd. v. Union of India (1987):

   • Established that the promisee must have altered their position based on the promise.

4. Pournami Oil Mills v. State of Kerala (1987):

   • The government was barred from reneging on promises of tax exemptions, which had been relied upon by industries.

Limitations of Promissory Estoppel

1. Pre-existing Legal Relationship:

   • It applies only when an existing legal relationship is altered or varied.
   • A new contract must be supported by consideration.

2. Reliance and Alteration of Position:

   • The promisee must show that they relied on the promise and changed their position to their detriment.

3. Equity:

   • The doctrine is grounded in equity and applies only when it would be unjust for the promisor to retract the promise.

4. Defensive Nature:

   • Promissory estoppel can be used only as a shield, not as a sword. It cannot create a cause of action but only serves as a defense.

5. Suspensory Effect:

   • It suspends obligations but does not extinguish them under the original contract.

Minors and Promissory Estoppel

Minors cannot be held liable under promissory estoppel due to the statutory protection they enjoy under contract law. The doctrine cannot override the legal principle that protects minors from contractual liabilities.

Conclusion

Promissory estoppel ensures fairness by preventing a promisor from reneging on promises that have been relied upon to the promisee's detriment. In India, it holds both individuals and government entities accountable, even in the absence of consideration. By promoting equity and justice, the doctrine prevents promissory retraction, ensuring that promises, whether implied or explicit, are legally upheld.