What is meant by 'concluded contract’? Can the rule of ‘promissory estoppel’ apply to a concluded, contract?

Question: What is meant by ‘concluded contract’? Can the rule of ‘promissory estoppel’ apply to a concluded, contract? [HJS 2007]

Find the answer to the mains question of the Law of Contract only on Legal Bites. [What is meant by ‘concluded contract’? Can the rule of ‘promissory estoppel’ apply to a concluded, contract?]

Answer

A "concluded contract" refers to a legally binding agreement between two or more parties. It is an agreement that has been formed and accepted, where all essential elements such as offer, acceptance, consideration, and intention to create legal relations are present.

The rule of "promissory estoppel" is a legal principle that may apply to a concluded contract in certain circumstances. Promissory estoppel is a doctrine that allows a party to enforce a promise even if there is no valid contract or consideration. It serves as an exception to the general rule that requires consideration for a contract to be enforceable.

To understand how promissory estoppel can apply to a concluded contract, let's consider the following example:

Suppose Party A makes a clear and unequivocal promise to Party B, who relies on that promise and takes some action or refrains from doing something they would otherwise have done. Party B's reliance on Party A's promise is reasonable and foreseeable, and Party B suffers a detriment as a result. However, there is no formal contract between Party A and Party B.

In this scenario, the doctrine of promissory estoppel may be invoked to enforce Party A's promise, even though there is no consideration or formal contract. The courts may enforce the promise to prevent Party A from unfairly going back on their word and causing Party B harm.

Promissory estoppel requires certain elements to be satisfied:

• Clear and Definite Promise: The promise made by Party A must be clear, unequivocal, and sufficiently specific.
  
• Reliance: Party B must have reasonably relied on Party A's promise and taken action or refrained from taking action based on that promise.
  
• Detriment: Party B must have suffered a detriment or incurred a loss as a result of their reliance on Party A's promise.
  
• Inequitable to allow a withdrawal: It must be deemed unfair or unjust for Party A to go back on their promise, considering the reliance and detriment suffered by Party B.
  

When these elements are established, promissory estoppel can operate to prevent a party from reneging on their promise and can be used as a basis for enforcing the promise, even though a formal contract may be absent.

The doctrine of promissory estoppel as laid down by the Supreme Court in Motilal Padampat Sugar Mills Co. (P.) Ltd. v. State of U. P., 1979 AIR 621, is as follows:

"The true principle of, promissory estoppel therefore, seems to be that where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties, and this would be so irrespective of whether there is any pre-existing relationship between the parties or not."

As it is observed in the case of C.V. Enterprises v. Braithwaite & Co. Ltd. And Ors, AIR 1984 Cal 306 there is no question of any promissory estoppel in respect of a contract which stands concluded. It applies only in the case where there is no concluded contract, but a promise has been made by one party intending to create legal relations or affect the legal relationship to arise in the future and the other party has acted upon and changed its position. Thus, where the contractual relationships between the parties have been established under a completed contract, there is no scope for the application of the principle of promissory estoppel. The rule of promissory estoppel is a rule of equity, while the contractual relationship between the parties is governed by the law of contract.