Doctrine of Pomissory Estoppel Case Study

Summary of Facts

Company Business Savvy (BS) was the subcontractor of Company City Construction (CC) in a construction work. Company All Magic (AM) was contracted to do certain painting work for BS within 3 months. It would get 400,000HKD.

One month after AM started work, CC suddenly made alteration to the original design. AM requested additional payment $100,000HKD, BS refused since it understood AM was in financial difficulties, thus AM could not reject the job and had to agree to accept the original amount (400,000HKD). AM sued BS for the $100,000HKD after the project.

Legal Issues

1. Whether AM is entitled to additional $100,000HKD.

There are four exceptions that allow discharging of contract. One of them is Discharge By Agreement. When parties have agreed at the outset of the contract, both parties must either provide fresh consideration, or the agreement must be drawn up in the form of deed. Otherwise, the contract is discharged by the subsequent agreement.

Consideration is something of value in the eyes of the law. It can be money or others things have economic value. Both parties to a contract must promise some benefit to each other. A contract is identified in terms of a benefit and burden gained and suffered by both parties.

2. Can The Doctrine of Pomissory Estoppel appy.

The doctrine of promissory estoppel stops a person from going back on a promise which was not supported by consideration. Once a party has made a promise to affect the legal relations between him and the other party, and the other party has taken him at his word and acted on it, he cannot afterwards revert to the previous legal relation. However, there must be a true accord between them. The two parties have to be free to reach the agreement for the doctrine to be applied. Besides, there has to be an existing contract and the language of promise has to be definite.

Reasoning Process

AM carried out certain painting work for BS based on the original design, and the payment is discussed as 400,000HKD. Both parties gave consideration. However, when there was extra works caused by the change of original design, BS refused to gave a fresh consideration, $100,000HKD and AM received no benefit from the subsequent agreement. It is not a legally binding contract unless AM was entitled to an additional wages.

Moreover, there are several qualifications of the Doctrine of Pomissory Estoppel. Firstly, true accord is needed between the AM and BS. However, AM was forced to accept the original amount of 400,000HKD because of the finanical difficulities of AM.Therefore, there were no true accord between them.