Law of Contract - Promissory Estoppel

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LAW OF CONTRACT – PROMISSORY ESTOPPEL

Kajai, a café proprietor hired a dish washing machine from Long for use in the café at a rental of $10 per week. In January 1991, the local council began extensive roadworks outside the café which made it difficult for people to get to the café and Kajai’s business was seriously affected. At Kajai’s request Long agreed to reduce the rental to $1 per week for 3 months.

By the end of the 3 months, the roadworks had been completed but Kajai’s café now needed redecorating because of all the dust created by the roadwork.

Kajai told Long that he was on the verge of bankruptcy and begged him to leave the rental for the dish washing at $1 per week for a further 6 months. Reluctantly, Long agreed.

In June a fire occurred at a rival café across the road from Kajai’s and it was forced to close, so that Kajai now enjoys greatly increased business and is making handsome profits. Long on the other hand, is very short of money and needs every penny he can get.

Kajai insists that Long is still only entitled to $1 per week rental.

Advise Long.

ANSWER 

In advising Long, one must firstly, consider whether there is an existence of a contract, which is an agreement between two parties giving rise to rights and liabilities. From the facts given, there is an existence of a contract for the rental of the dish washing machine at a rent of $10 per week.

The issues now that need to be resolved is whether Long can claim the money due to him from January to September and also the possibility of Kajai relying on the doctrine of promissory estoppel as a defence when Long wants to claim for the money due.

In dealing with the first issues, that is the reduced rental of $1, whether any consideration has been given by Kajai, enabling him to enforce Long’s promise of receiving $1 rental instead of $10. Consideration, here means according to the case of Currie v Misa to encompass the elements of benefit to the promisor or detriment to the promisee, of which the consideration must move from the promise and forbearance.

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In deciding this issue, the general rule is to be taken into account as stated in Pinnel’s case and Foakes v Beer whereby the part payment of $1 is not considered to be  full satisfaction of the $10 rental. This would in effect mean that Kajai is still liable to pay the balance of $9 because he has not provided consideration for the promise made by Long. Furthermore, under Foakes v Beer, it can be stated that if Kajai is under an existing obligation to pay a larger amount, he cannot at law discharge that liability by paying a smaller amount. ...

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