- Maher owned property with buildings on it in Nowra, New South Wales.
- Maher was negotiating with Waltons Stores for a lease, where Waltons Stores wanted an existing building be demolished and new one erected.
- Maher, relying on these representations (though no contract signed) demolished the building and begun building a new one.
- No contract ended up being signed between the parties due to difficulties in negotiations.
- Waltons Stores instructed its lawyers to slow the deal but allowed Maher to continue to believe that a deal would be struck.
- Waltons Stores eventually called off the deal, even though Maher had continued constructing the new building. Maher sought to enforce the agreement.
- Was Maher entitled to rely on Waltons Stores’ representations in order to enforce an agreement between the parties, even though no written contract had been completed?
- The majority of the High Court held that, even though no formal contract had been completed between the parties, Maher was permitted to believe that any formal contracts were formalities.
- Maher could rely on “promissory estoppel”.
- In Australia, promissory estoppel can be used as both a “sword and shield”.
Elements of Promissory Estoppel
- The elements of equitable estoppel (including promissory estoppel) are:
- A promisor makes a promise;
- Promisor creates or allows an assumption that the promise will be kept or a contract will be created based on this promise;
- The promisee relies on this to their detriment; and
- It is unconscionable for the promisor to ignore the promise.
“…the doctrine extends to the enforcement of voluntary promises on the footing that a departure from the basic assumptions underlying the transaction between the parties must be unconscionable. As failure to fulfil a promise does not of itself amount to unconscionable conduct, mere reliance on an executory promise to do something, resulting in the promise changing his position or suffering detriment, does not bring promissory estoppel into play. Something more would be required …this may be found, if at all, in the creation or encouragement by the party estopped in the other party of an assumption that a contract will come into existence or a promise will be performed and that the other party relied on that assumption to his detriment to the knowledge of the first party…”
(Mason CJ, Wilson J at 406)
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