The Extinctive Effect of Promissory Estoppel

Abstract

It is said that promissory estoppel has merely a suspensory effect on a payment obligation. In the context of periodic payments this makes sense. The payer pays less or nothing at all for a period of time or while a set of circumstances exist and when this time or those circumstances end the obligation to pay in full is reinstated. In the context of liquidated debts promissory estoppel is said to give only time to pay because any ‘forgiveness' of the debt would be incompatible with the decision of the House of Lords in Foakes v Beer. In late 2007 the Court of Appeal gave some support to the notion that a creditor's promise to accept part of a liquidated debt, followed by the debtor's actual payment of that amount, would of itself discharge the original debt. This article argues that this goes too far but supports the Court of Appeal to the extent that where all the elements of promissory estoppel are satisfied a liquidated debt is extinguished and the right to receive payment not merely suspended. Some suggestions are also made about the wider implications of this thesis for contractual renegotiations in general.