Waiver and Promissory Estoppel

• Author: John D. McCamus
• Pages: 283-302

283

CHAP TER 8

WAIVER AND

PROMISSORY ESTOPPEL

A. INTRODUCTION

The doctrine of consideration holds that, apart f rom promises given

under seal, promises will not be enforceable unless they are given as

pa rt o f a b arg ain or e xch ang e. A s we hav e se en i n Ch apt er 7, t he d oct ri ne

of consideration usefully identif‌ies a category of promises that ought

indeed to be enforced. However, the opposite side of the consideration

coin, the doctrine that gratuitous promises are general ly unenforceable,

is a rule t hat is c apable of creat ing considerable inconvenience. Thus,

for example, promises to vary existing contractual obligations will be

unenforceable unless paid for by the promisee. Parties to ag reements

will often give gratuitous undert akings of this k ind, however, and ex-

pect them to be enforceable and to be relied upon. In Gilbert Steel Ltd . v.

University Construction Ltd.,1 for example, a supplier of steel was unable

to enforce the purchaser’s promise to adjust the contr act price upwards

as the supplier’s performance of the pre-ex isting duty to supply the steel

was not good consideration. Similarly, in the leading decision in Foakes

v. Be er,2 a creditor’s promise to discharge a debt in retur n for partial pay-

ment of the obligation was held to be unenforceable. The debtor’s pay-

ment of a sum less than that required by the pre-existing contractual

1 (1976), 12 O.R. (2d) 1967 (C.A.) [Gilbert Steel].

2 (1884), 9 App. Cas. 605 (H.L.). For a disc ussion of this case, see C hapter 7, Sec-

tion B(4).

THE LAW OF CONTR ACTS284

duty was held not to be good consideration. Decisions of this ki nd frus-

trate the reasonable expectations of the parties. Accordingly, a number

of Canadian provi nces reacted to the holding in Fo ake s v. Beer by enact-

ing legislation that speci f‌ically and narrowly overr uled it.3

Gratuitous promises to enter into contracts in t he future may also

give rise to hard ship. In the context of building contracts, for exa mple,

a general contractor will normally rely on the quoted prices of sub-

contractors in calculating its bid. If the bid is successful and a subcon-

tractor then refuses to enter into a subcontr act at the quoted price, the

contractor may suffer a loss. If the general contractor cannot obtain an

equivalent price from another supplier, it will have relied to its detri-

ment on the subcontractor’s gratuitous promise. The failure of the doc-

trine of consideration to address adequately problems of this kind is a

frequent source of criticism of the doctrine.

In this chapter we examine the doctrines of waiver and promiss ory

estoppel and attempt to determine whether they provide a solution to

these diff‌iculties. Our conclusion will be that these doctrines provide,

at best, only a parti al solution to them. In this respect, they will be

compared unfavourably to the America n version of promissor y estoppel

doctrine that has been set out in the American Restatement of Contracts

2d in the following terms:

90(1) A promise which the promisor should reason ably expect to

induce action or forbearance on the pa rt of the promisee or a th ird

person and which doe s induce such action or forbearance i s binding

if injustice can b e avoided only by enforcement of the promise. The

remedy granted for breach ma y be limited as just ice requires.4

Section 90 thus sets out a rule for the recogn ition of the enforceability of

promises that is an alternative to the doctr ine of consideration. Under

American law, then, a promise would be enforceable if it is either given

for good consideration or given under the circumst ances described in

section 90. In examining the development of the Anglo-Canadian doc-

trine of promissor y estoppel, it will be helpful to compare it s develop-

ment with the model provided by the America n rule.

The Anglo-Canadian version of promissory estoppel doctr ine f‌irst

appeared i n its mode rn form in 1947 w ith the de cision of Denni ng J. in

3 See Chapter 7, Section B(4).

4 American L aw Institute, Restatemen t (Second) of the Law of Cont racts (St. Paul:

American L aw Institute, 1979) [Restatement of Contracts 2d]. For discuss ion,

see P.N. Pham, “The Waning of Promissor y Estoppel” (1994) 79 Cornell L . Rev.

1263; and R.A. Hillman, “Questioning the ‘New Consensus’ on Promissory Es-

toppel: An Empiric al and Theoretical Study” (1998) 98 Colum. L. Rev. 580.