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THE BROWN PAPERS

Beware of Making Promises you Can't Keep

March 2018


One of the first things that law students learn in Law School is that, as a matter of public policy, the "authorities" (usually the Courts) will, one way or another, enforce promises for value in exchange for other promises (also made for value).  In other words, promises made in a "commercial setting", usually in the form of a contract.  So if I promise you that I will pay you $1,000.00 in exchange for you promising me that you will provide or transfer goods or services to me, and I pay you (or "tender" or offer to pay you), but you fail to provide me with the goods and/or services you undertook to give me (or you provide shoddy goods or services to me), I will, generally speaking, have the right to ask a Court to either order you to fulfill your part of our deal, or compensate me for my loss resulting from my failure to get what I bargained for.  But in addition to enforcing promises made in a "commercial setting", our legal system has for many years also enforced certain promises made either in a non-commercial setting, or in a commercial setting where the person receiving the benefit of the promise (the "promisee") does not provide any immediate or direct benefit (ie, "value") to the party making the promise (the "promisor").


Generally, when a Court enforces a promise, it orders the recalcitrant promisor either to do what it originally promised to do, or orders the recalcitrant promisor to pay damages to the party who suffers (sustains a loss) by reason of the promisor's failure to fulfill.  In a non-commercial or an "indirect" commercial setting where a Court must adjudicate the unsatisfied promisee's complaint regarding the promisor's failure to fulfill its promise, the Court will, generally, not directly order the promisor to fulfill its promise (or pay damages to the promisee), but rather will order or restrain the promisor from going back - or continuing to go back - on its previously made promise.  In legal jargon, the promisor is said to have been "estopped" from going back (or continuing to go back) on its promise.  The legal doctrine concerning under what circumstances a promisor is held back from breaking its promise is known as "estoppel".  The "policy" behind why a Court will sanction a promisor who breaks its promise arises out of the perceived unfairness that occurs where the promisee, relying on the promise, acts - or fails to take certain action - and the promissee then suffers loss or other hardship which it wouldn't have suffered if the promisor had kept its promise.


In a recent case (Cowper-Smith v Morgan, Supreme Court of Canada, judgment given December, 2017, hereinafter, the "Cowper Case"), the Court dealt with a promise made in a non-commercial setting.  The promisor was the daughter of a deceased mother and the promisee was one of the deceased's sons.  The promisee was induced by his sister to move his family from Ireland to Canada where he then commenced to look after his and his sister's ailing and aged mother.  The promisee was so induced by the promisor assuring him that on the mother's death, he would acquire ownership of the family home.  Prior to his mother's death, the promisee learned that title to the family home had been transferred from his mother's name to his sister's (the promisor's name), but when questioned about this arrangement, the promisor assured the promisee that the title change had been arranged solely for the purpose of facilitating administration of the mother's estate.  After the mother's death, the promisor changed her "story" and took the position that the property had been transferred to her by the mother in the form of a gift, so that the promisor alone was entitled to ownership of the home. 


The promisee challenged the promisor's position in Court, thus the Cowper Case.  At the trial Court level, the Court held that the promisor was estopped from going back on her promise, and that accordingly, the promisee was entitled to acquire the interest in the home which he would have been entitled to acquire had the promisor not broken her promise.  At the initial appellate Court level, the Court held that, under the "traditional" legal concept of promissory estoppel, the promisee was not entitled to hold the promisor to her promise, because at the time she made the promise, she did not then hold any interest in the property (title was transferred from the mother to the daughter only after she made her promise to her brother).  The Supreme Court of Canada reversed the lower appellate Court and held that the promisor's promise was legally enforceable against her, notwithstanding that she held no interest in the property when she induced her brother to come back to Canada to look after the ailing mother.


Arguably, the Supreme Court's holding in the Cowper Case broadens the area in which non-commercial setting promises - when relied upon by the promisee to its detriment - will be enforced.  If one believes that, as a matter of public policy (or "morality"), those who make promises should be required to fulfil them (or suffer the consequences), this holding should be considered a positive development.


Going beyond the particular facts in the Cowper Case, counsel should be aware generally of the fact that their clients may be required to uphold their promises even though a promisor may not have strictly or clearly received "value" in exchange for a promise. Or where it is difficult to establish that "value" was received by the promisor. 

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