Waiver and Promissory Estoppel

• Author: John D. McCamus
• Pages: 303-325

303

CHA PTER 8

WAIVER AND

PROMISSORY ESTOPPEL

A. INTRODUC TION

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

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

part of a bargain or exchange. As we have seen in Chapter 7, the doc-

trine of consideration usefully identif‌ies a category of promises that

ought indeed to be enforced. However, the opposite side of the con-

sideration coin, the doctrine th at gratu itou s promises are generally

unenforceable, is a rule that is capable of creating considerable incon-

venience. Thus, for example, promises to vary exi sting contractual

obligations will be unenforceable unless paid for by the promisee. Par-

ties to agreements will often give gratuitous undertakings of this kind,

however, and expect 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 t he

contract price upwards as the supplier’s perform ance of the pre-exist-

ing duty to supply the steel was not good consideration. Similarly, in

the leading decision in Foakes v Beer,2 a creditor’s promise to discharge

a debt in return for partial payment of the obligation was held to be

unenforceable. The debtor’s payment of a sum less than that required

1 (1976), 12 OR (2d) 1967 (CA) [Gilbert Steel].

2 (1884), 9 App Cas 605 (HL). For a discussion of this ca se, see Chapter 7, Section

B(4).

THE LAW OF CONTR ACTS304

by the pre-existing contr actual duty was held not to be good consid-

eration. Decisions of this k ind frustrate the reasonable expectations of

the parties. Accordingly, a number of Canadian provinces reacted to

the holding in Foakes v Beer by enacting legi slation that specif‌ically and

narrowly over ruled it.3

Gratuitous promises to enter into contracts in the future may also

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

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 subcontract at the quoted price, the

contractor may suffer a loss. If the general contractor ca nnot obtain

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

riment on the subcontractor’s gratuitous promise. The failure of t he

doctrine of consideration to address adequately problems of this kind

is a frequent source of criticism of the doctrine.

In this chapter we exa mine the doctrines of waiver and promissory

estoppel and attempt to determine whether they provide a solution to

these diff‌icult ies. Our conclusion will be that the se doctrines provide,

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

compared unfavourably to the American version of promissory estop-

pel doctrine that has been set out in the American Restatement of Con-

tracts 2d in the following terms:

90(1) A promise which the promisor should reasonably e xpect to

induce action or forbearance on the p art of the promisee or a th ird

person and which does i nduce such action or forbearance is bind ing

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

remedy granted for breach m ay be limited as justice require s.4

Section 90 thus sets out a rule for the recognit ion of the enforceability of

promises that is a n alternative to the doctrine of consideration. Under

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

for good consideration or given under the circumstances de scribed in

section 90. In examini ng the development of the Anglo-Canadian doc-

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

ment with the model provided by the Amer ican rule.

3 See Chapter 7, Section B(4).

4 American L aw Institute, Restateme nt (Second) of the Law of Contracts (St Paul:

American L aw Institute, 1979) [Restatement of Contracts 2d]. For discus sion, see

PN Pham, “The Waning of Promi ssory Estoppel” (1994) 79 Cornell L Rev 1263;

and RA Hil lman, “Questioning th e ‘New Consensus’ on Promis sory Estoppel:

An Empirica l and Theoretical Study” (1998) 98 Colum L Rev 580.