Promises and Contract Law
You can ask our solicitors for advice on promises and contracts using the question box on the front of our website or the following article may answer your questions.
In many everyday situations there may be occasions when promises are made without the people involved really thinking about the implications of what they promise. In an informal situation, a promise will be made without forming any sort of legal contract, but in others there will be an intention to create a legal contract and it will be at the discretion of the court to determine whether this was the case.
There is a term called promissory estoppel that can be used in court which was created by the courts of equity. This would be used in a situation whereby an individual who entered into promises and contracts, genuinely believes that they did so based on a promise made by another party. A promise will only become final and irrevocable if the person who entered into the promise cannot be returned to their original position.
If the court is to enforce a promises and contracts created through promissory estoppel, they will need to establish firstly whether there was what they call detrimental reliance. This means that if the promise is to be enforced, there must have been some intention to create a contract and a reliance was placed upon conduct or words to such a degree that the person who was made the promise relied upon this in some way.
An example of promissory estoppel:
A farmer has two dult children one goes off to seek his fortune in the city and the other stays on the farm. The farmer says to the one remaining on the farm if you stay and help me with the farm, Instead of going to seek your fortune in the city, on my death all this will be yours. So the child works his fingers to the bone, morning noon and night, only to discover on the father’s death that he has actually left the farm to the child who went to seek his fortune in the city.
Because the remaining child, to his detriment, stayed on the farm and helped and his father regnaged on a promise the courts would look at this and award him what was promised.
Promises in Relation to Debt
If for example, a debtor made an offer to settle part of a debt that they owed and the creditor accepts this offer based on the fact that they relied on the acceptance to only pay part of the debt, promissory estoppel could come into play for the creditor.
After a certain amount of the debt has been paid, the creditor must accept this as the final amount and accept that the debt is cleared in full. This will be because they made an earlier promise to accept part payment to clear the debt and resolve the issue.
Legal Relations and Intention
As well as there being an offer and acceptance of this offer, intention to create legal relations must also be present for a contract to be legally enforceable. In a domestic situation, it is assumed that legal relations are absent. As an example, in a marriage or divorce or even when a couple are cohabiting, it is assumed that legal relations are not there.
The situation will be entirely different when a couple are either not living together or are separated. It is in scenarios such as these that bargaining becomes an important element. Therefore, the intention to create legal relations is deemed necessary to form a legally binding agreement.
In a commercial context on the other hand, there is always an assumption that the parties entering into a contract will have the intention to establish some kind of legal relation. The parties involved in a business contract may request that an exemption clause is included to invalidate the presumption that legal relations are needed.
If this exemption clause is to be included in the contract, it will need to be meticulously worded so the courts can, if needed evaluate the legal merit of the contract