Business Corporation - Legislation

Running Head: BUSINESS AND CORPORATION LAW
0
Australian Commercial Law
1/7/2020
Student’s Name

“LAWS20058” 1
Part A
Question 1
Issue
Whether an enforceable agreement existed between Tom and Wing? How the court would
determine the same.
Rules
A contract does not seem valid if a consideration does not exist between parties; nevertheless,
there is an exception of this rule under the common law of contract, which is promissory
estoppel. The doctrine of promissory estoppel states that in some of the situations, parties can
make a promise to each other without including an element of consideration and parties can rely
on such promise and act accordingly1. This doctrine can be treated as an exception of general
rule as a promise can be enforced through the same even when the requirements of a valid
contract are not fulfilled. Here this is necessary to inform that for the application of promissory
estoppel, some requirement needs to be satisfied.
The very first requirement demands that there must be a preexisting relationship between the
parties. This requirement was confirmed in the case of Combe v Combe2 Court of Appeal where
the husband promised his wife to make a certain payment but later on failed to do. Court held
1 Etiennelawyers.com, 5 Elements of Promissory Estoppel in Contract Law and Legal Agreements (etiennelawyers,
3 July, 2014) < https://etiennelawyers.com/5-elements-of-promissory-estoppel-in-contract-law-and-legal-
agreements/>.
2 Combe v Combe [1951] 2 KB 215 Court of Appeal

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that the wife could not rely on this promise as no legal relationship existed between the parties
i.e. husband and wife3. The second requirement states that the assumption needs to be induced by
the promisor him/herself. The third requirement demands that promisee must be relied on the
promise made by the promisor and must do the act accordingly. In other words, this can be stated
that there must be a change in the position of the promisee as given in the case of Alan v El
Nasr4.
The fourth requirement states that the promisor must be aware of the fact that the promisee relied
on the promise made by him/her (promisor). It means if the promisor does not know reliance on
the promisee then he cannot be held liable to fulfill the promise. Another requirement state that it
is a must for promisee to suffer from a loss. If no loss happens to promisee due to breach of
promise by promisor then there will be no question of the validity of promise or remedy. This
requirement believes that for allowing promissory estoppel, it should be inequitable for the
promisor to go back to his/her promise and promisee must be in a position of loss due to the
same. The last requirement of promissory estoppel demands that the promisor must act
unconscionably. Here unconscionability refers to against good conscience. If all the above-
mentioned situation is satisfied, then the court held the existence of a valid contract between the
parties.
Application
The case provided hereby highlight the matter of promissory estoppel as all the requirement of
the same are seems satisfied here. Firstly applying the decision of Combe v Combe, a legal
relationship between employer and employee existed between the parties. Secondly, Tom, being
an employer induced this promise by himself stating that next year, the salary of the wing would
3 Ewan McKendrick, Contract Law (Macmillan International Higher Education 2015)
4 Alan v El Nasr [1972] 2 WLR 800

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be revised to be double, and the same will be making an equal partner in the business. Relying on
this promise, Wing dropped his plan to leave the company and decided to continue with Tom
whereas Tom was aware of this fact. The issue of the case started when Tom denied increasing
salary of Wing unconscionably and due to the same, wing suffered from a loss as he missed the
opportunity Jerry's Computers.
Conclusion
As all the conditions of promissory estoppel are satisfied here, it is clear that a legally
enforceable contract existed between Wing and Tom irrespective of further consideration from
the side of Wing.
Question 2
Issue
What legal remedies, Wing can ask for if the case constituted a breach of contract by Tom.
Rules
Breach of contract leads to some obligations and rights to the parties. The common law of
contract stipulates many of the remedies that one can get if the other party breaches terms of the
contract. These remedies are equally applicable to the breach of promises made according to the
doctrine of promissory estoppel as the same also counts as an enforceable agreement. Damage is
one of the important remedies that compensate the innocent party for the loss of money out of a
contract breach. Under this remedy, the innocent party can recover the money lost from the liable
party. In the case of Addis v Gramophone5, it was given that the lead purpose of damages in
contract law is to put the parties in the same situation they would have been if the contract would
5 Addis v Gramophone [1909] AC 488