Law

The case of Central London Property Trust Ltd v High Trees House Ltd is a pioneering case-law in the history of British contract law inasmuch as it recognized the principle that certain equitable promises made after a contract had been entered into, and which alters substantially certain provisions of the contract (in favor of the promisee) would not estop the promisor from seeking enforcement of the contractual terms in certain situations.

Briefly the facts of the case were as follows The plaintiffs had granted to the defendants a tenancy of a block of flats for a term of 99 years under a leasehold agreement, commencing from September 29, 1937 at a ground rent of 2,500 a year. However, owing to wartime conditions prevailing at that time, the defendants found it difficult to obtain tenants for the flats and subsequently, by virtue of a written arrangement on January 3, 1940, the plaintiffs and defendants agreed that the ground rent would be paid at a reduced rate of 1,250 a year. The defendants, accordingly paid rent at the reduced rate from 1941 till the beginning of 1945, by which time the war was ending and the flats were all fully let. Yet, despite this, the defendants continued to pay rent at the reduced rate prompting the plaintiffs to write to the defendants asking them to pay rent at the full rate and claimed 625 as back arrears, for the quarters ending September 29 and December 25, 1945.

The defence, quite naturally, relied on the principle of promissory estoppel pleading that the plaintiffs were debarred from asking arrears of rent for the simple reason that they had already agreed, in the form of a written arrangement to that effect, to accept rent at a reduced rate from the year 1941. To elucidate their contention, the defence furthermore brought the attention of the Honble Court to the principles laid down in Fenner v. Blake and Buttery v. Pickard wherein it was clearly stated that promises made with the intention to create legal relations and which, to the knowledge of the person making the promise, was going to be acted upon by the promisee, and who has subsequently acted on it, must be honoured by the promisor. In this regard, even though in common law parlance, it was not possible to vary the terms of a contract, (which, in this case, is the leasehold agreement) unless such variation was recognized in the form of a second written contract, Courts had given effect to equitable agreements, not embodied in the form of a written contract in some cases.  So, if one were to analyze the present case in that light, the plaintiffs were estopped from asking arrears of rent.

However, after due consideration to the facts and circumstances of the case, the Honble Denning J, distinguished this case from the aforementioned ones and while he accepted the general principle that promises made to enter into legal relations, that significantly altered the provisions of a previous contract, must be honored irrespective of whether there had been any new consideration for the new agreement, he held that in the present case the agreement to reduce rent was intended only for the period during which wartime conditions prevailed (and accordingly it had been difficult to procure tenants for the said flats) and not for the entire duration of the lease period, as contended by the defendants. In His Lordships esteemed opinion, the only manner in which the plaintiff could be said to have committed promissory estoppel is if they had done any act inconsistent with the subsequent arrangement and by no other way  accordingly His Lordship held that the plaintiff company was entitled to receive 625 as arrears of rent for the quarters ending September 29, 1945 and December 25, 1945 simply because the circumstances (which in this case, is the exigency of war) for which the second arrangement had been entered into on January 3, 1940 had expired and consequently the first agreement must again come into effect.

Despite the aforementioned reasoning, the decision rendered in this case and the ratio of the judgment by the Honble Denning J, the above principle cannot be said to constitute a general rule of contracts. In this context, it may be mentioned that even in countries following the common law tradition, (and which have consequently been influenced by the English jurisprudence on contracts) it is highly unlikely that a court would permit any party to revert back to the original written contract after a written arrangement in equity had been mutually agreed upon by the parties subsequently, simply because a court would be loath to intervene in a contract when both parties had agreed upon its terms, whether statutorily or in equity (unless of course, the contract is tainted by fraud, coercion etc.).(Indeed it is difficult to imagine any arrangement made without consideration, even being considered for construal by a court  as statutorily such an agreement would be void.)Perhaps it is only because English jurisprudence places strong emphasis on harmoniously fusing common law with equity, that the ratio in this case has been cited with approval in Ledingham v Bermejo Estancia Co Ltd (as regards waiver) and Smith v Lawson (as regards the correlation between agreements made in common law and those made in equity). And yet, if one were to go by the reasoning laid down by the Honble Asquith J in Combe v. Combe, it seems that just as a promisor cannot derogate from his obligation that he made in a latter contract, even if it is one made in equity or without consideration, in favour of the former agreement, the promisee, too, cannot bring about an action on grounds of promissory estoppel.
In a nutshell, therefore, this case embodies an exception made to the general rule of promissory estoppel in contractual law, but this discretion must always be carefully exercised when a dispute arises in a court, in this regard. At any rate, it is hard to see it being practiced as a rule.