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Law of Contract - Promissory Estoppel

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Introduction

LAW OF CONTRACT - PROMISSORY ESTOPPEL Kajai, a caf� proprietor hired a dish washing machine from Long for use in the caf� at a rental of $10 per week. In January 1991, the local council began extensive roadworks outside the caf� which made it difficult for people to get to the caf� 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 caf� 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 caf� 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. ...read more.

Middle

The law says that the promise must be unequivocal and clear (Woodhouse v Israel Cocoa v Nigerian Produce Marketing). On the facts given, Long did make a promise to Kajai on the $1 rental after Kajai requested it and one may say that it is made unequivocally, as long as Long's promise was made due to the conditions that Kajai suffered loss of business for the first three months and because of this he was on the verge of bankruptcy later. This shows the seriousness of intention when the promise was made. It is because of Long's promise that Kajai paid $1 per week instead of $10. Thus a clear and unequivocal promise have been made by Long. In order for the defence to be in favour of Kajai, there has to be a contractual or any other legal relationship as required by Ajayi v Briscoe and the case of Durham Fancy Goods v Michael Jackson Fancy Goods where Lord Donaldson stated that an existing contractual relationship was not necessary providing there was a pre existing legal relationship which could give rise to rights and liabilities. Applying this to the facts of the question, it seems that this requirement is satisfied, as Kajai and Long already have a business relationship with regards to the rental of the washing machine and due to this pre existing contractual relationship there was some reliance on the part of Kajai for Long's promise. ...read more.

Conclusion

Considering the duration between March to June, if Kajai actually came to equity with clean hands its submitted that this doctrine is extinctive too,which will disable Long to claim for the $9 per week. Finally, for the duration of Jun to September, it can be established from the facts that Kajai is now in a better position as he is making handsome profits due to the closing down of a rival's business. Therefore, applying the case of Ajayi v Briscoe and Tool Manufacturing v Tungsten Electric, Long's rights is only suspended. This would allow him to resume the full payment of $10 per week from June onwards upon giving Kajai reasonable notice that he intends to resume his strict rights, though the 6 months period has not ended. This is only fair and just, since the doctrine itself is a creature of equity. Furthermore, Long now is in financial difficulties and requires finance. In conclusion, since there is a conflict between common law's part payment rule and the equitable principle of promissory estoppel, Long is advised that from the period of January to June his rights to claim the balance $9 is extinguised, as equity prevails over the common law when a conflict arises. This would only be possible if promissory estoppel is made out. However, the resumption of full payment from June onwards will be available to Long after giving reasonable notice. ?? ?? ?? ?? 1 ...read more.

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