Legal Principles and Key Points
- In the case of Baird Textile Holdings Ltd v Marks & Spencer  E.W.C.A. Civ 274, it was held that promissory estoppel was not a cause of action. It can only be applied where there is an existing contractual relationship between the parties or an intention to maintain such. It can, however, assist in a cause of action.
Facts of the Case
- C had supplied garments to D for 30 years when D, with no warning, ended all supply arrangements between them on 19th October 1999.
- D would periodically make orders, but there was no written agreement governing the long-term relationship of the parties.
- C brought action against D on 2 grounds. First, that there was an ongoing contract with an implied term of giving reasonable notice in order to terminate that contract. D was therefore in breach of contract.
- Alternatively, D was estopped from terminating the contract without reasonable notice. C argued that a reasonable period was 3 years. Both arguments were dismissed.
- C appealed and D cross-appealed for a summary judgment. D argued that there was no ongoing relationship, and the contract terminated upon completion.
- Could a court find an implied contractual obligation requiring reasonable notice?
- Could a court find that D was estopped from terminating without reasonable notice?
Held by the Court of Appeal (Civil Division)
- Finding for D, that C’s implied ongoing contract was too uncertain to be enforced. There was no objective way of determining what the parties had agreed to regarding quality and prices. This indicated that there was no intention for an ongoing legal relationship.
- Even if there was estoppel in this case, it would not help C. C needed to establish D was bound to keep purchasing from them, and promissory estoppel cannot establish positive obligations on a party.
- For a contract to exist, there must be both an agreement on essentials with sufficient certainty to be enforceable and an intention to create legal relations. Both requirements are normally judged objectively, but the former can exist without the latter. An express agreement that satisfies the former will lead to the latter being presumed.
- Objectively, the sensible analysis of this case is that the parties had an extremely good long-term commercial relationship, but not one which they sought to express in terms of long-term contractual obligations.
- The lack of any agreement on essentials, such as the quality and prices of C’s products, is particularly detrimental. It indicates that there was never an intention to create a legally binding commitment long-term. They instead employed individual, seasonal agreements with great flexibility that allowed the other to contract with third parties.
- C has argued that D should be estopped for failing to honour mutual understandings or assurances D gave to C. However, this only amounts to a purely gratuitous promise on D’s part. It is a general principle that these will not be enforced, and as such do not give rise to an estoppel.
- It is an established feature of estoppel that there must be an objective intention to make, affect or confirm a binding legal relationship. As this has been disproved in this case, estoppel cannot take effect.
- “There is also in this court binding authority that the scope of proprietary estoppel (leaving aside cases of mistaken belief as to the existence of current rights) does not extend beyond cases where A to the knowledge of B acts to his detriment in expectation, encouraged by B, of acquiring a right over B’s land or (probably) other property, such expectation arising from what B has said or done (established in Western Fish Products v Penwith D.C. )…The present case is not a case of encouragement of C to act to its detriment in respect of its own land or other property. It is also not a case of mistaken belief as to existing rights” .