Question

1. Alan owes Brian HK$5,000, which is due on 31 March. On 15 March, he sought Brian’s consent to accept a lesser sum of US$600 on 24 March (i.e., one week in advance of the due date) to discharge the whole debt. Brian agreed to this arrangement. Alan then made a bank loan of US$600 at an annual interest rate of 5% with a view to paying Brian. Today is 24 March, Brian has now changed his mind. He insists to revert to the previous position of full payment HK$5,000 to be paid on 31 March. Advise Alan if his part payment is able to discharge the whole debt in such case. [ Discuss the doctrine of promissory estoppel.]

Answer 1

DOCTRINE OF PROMISSORY ESTOPPEL:-

Promisory Estoppel is a doctrine in a contract law that stops a person from going back of a promise even if legal contract does not exist. An aggrieved party can recover damages from promisor if the damages incurred were the result of a promise made by the promisor, where the receiver of the promise relied on his subsequent detriment.

The doctrine of prommissory estoppel is that when one individual with an intention of creating or affecting lawful relationship make a promise with another individual and that individual acts on it,that promise must be binding for the individual who is making it, it would not be allowable and justifiable to go back from its words because reverting from the words shall be against equality

Principle of Promissory Estoppel doctrine is based on the principles of justice,fair play as well as a good conscience.

This principle is intended to stop the promisor from arguing that an underlying promise should not be legally upheld or enforced.

In above case, Alan offers new term of accepting lesser sum of $600 to which Brian agrees. After mutual arrangement, Alan arranges bank loan at an interest rate 5% but later on Brian changed his mind. In such case, the principle of promissory estoppel can be applied and Alan can recover damages (if any) occurred to him due to his cancellation of revised arrangement and Brian is bound to pay him the damages which happened to Alan due to his actions.