Promissory Estoppel

Estoppel is a rule whereby one party is prevented from denying the existence of
facts which he had previously agreed upon and on which the other party has reason
to believe upon. The doctrine of promissory estoppel has been evolved by courts,
on the principles of equity in order to avoid injustice.

Doctrine of Promissory Estoppel is a theory on the conduct of the party making a

representation to the other so as to enable him to arrange his affairs in such a
manner as if the said representation would be acted upon. The core of the doctrine
is ‘faith of the people’ in governance which has assumed tremendous importance
in this era of global economy.

The doctrine of promissory estoppel is primarily concerned with the modification

of existing contracts. The position under the classical common law of contract was
that such modification would only be binding if consideration was supplied. Thus
in a contract to supply 50 tons of grain per month at £100 per ton for 5 years, if the
buyer wanted to negotiate a reduction in the price to £90 per ton, because of falling
grain prices, this could only be made binding if the buyer gave something in
exchange (for example, agreeing to contribute to the costs of transportation).
Alternatively the two parties could agree to terminate their original agreement
entirely, and enter into a new one. The giving up of rights under the first agreement
by both sides would have sufficient mutuality about it to satisfy the doctrine of
consideration.

These procedures are a cumbersome way of dealing with the not uncommon
situation where the parties to a continuing contract wish to modify their obligations
in the light of changed circumstances. It is not surprising, therefore, that the
equitable doctrine of promissory estoppel has developed to supplement the
common law rules. This allows, in certain circumstances, promises to accept a
modified performance of a contract to be binding, even in the absence of
consideration.

Doctrine of promissory estoppel applies also to Government and public authorities

however it would yield where equity so demands. The principle of promissory
estoppel is that where one party has by his words or conduct made to the other, a
clear and unequivocal promise or representation which is intended to create legal
solutions or affect a legal relationship to arise in the future, knowing or intending
that it would be acted upon by the other party to whom the promise or
representation is made and it in fact so acted upon by the other party, the promise
or representation would be binding on the party making it and he would not be
entitled to go back upon it, if it would be inequitable to allow him to do so, having
regard to the dealings which have taken place between the parties.

It is equally settled that this doctrine cannot be used to compel the government or
public authority to carry out a representation or promise which is prohibited by law
or which was beyond the power of the officer making it. It will not apply to
government or public authority if larger public interest so demands. Judicial
behavior clearly indicated that, in India, estoppel would not be available against
the government in violation of a statute.

For attracting the doctrine of promissory estoppel what is necessary is only that the
promisee should have altered his position in relying on the promise. It is not
necessary that he should suffer any detriment as well. The law of consideration as
applicable in contracts cannot be attracted in this area.

As the doctrine of promissory estoppel is an equitable doctrine, it must yield when

equity so requires. If it can be shown by the government that, as they have
transpired, it would be inequitable to hold the government to the promise made by
it, the court will not raise equity in favour of the promise and enforce the promise
against the government. Therefore, if the promise is statutorily prohibited or is
against public policy the Court will not enforce it against the Government. Thus
the doctrine of Promissory Estoppel cannot be invoked to enforce a promise
contrary to law. If representation made by the government though bonafide but it
not legally enforceable, the court would not enforce it.