Contract Law

Central London Property Trust Ltd. v. High Trees House Ltd.

[1947] KB 130

Facts

Central London Property Trust leased a block of flats to High Trees House at an annual rent of £2,500.
During the Second World War, occupancy fell sharply because many people left London.
The tenant faced difficulty paying the full rent.
In 1940, the landlord agreed to reduce the rent to £1,250 per year.
The agreement did not clearly state how long the reduction would last.
The tenant paid the reduced rent during the war.
By 1945, the flats were again fully occupied.
The landlord claimed the full rent from that point onward.
The landlord did not seek to recover the difference for the earlier wartime period in the particular action, but the court considered whether it could have done so.

Whether the landlord was bound by its promise to accept reduced rent despite the absence of fresh consideration.
Whether the landlord could later restore the original rent when wartime conditions ended.

Where one party makes a clear promise not to enforce strict contractual rights;
intending that the promise be relied upon;
and the other party actually relies on it;
the promisor may be prevented from acting inconsistently with the promise.
This principle is called promissory estoppel.
Promissory estoppel generally:
operates as a shield, not a cause of action;
suspends rights rather than permanently extinguishing them where circumstances are temporary;
requires reliance and equity.

The original lease required payment of £2,500 annually.
The reduced rent agreement lacked fresh consideration from the tenant.
Under traditional consideration doctrine, the landlord might therefore have retained its strict legal right to the full rent.
However, the landlord had clearly represented that it would accept half rent during the exceptional wartime conditions.
The tenant relied on that representation and paid the reduced amount.
It would have been inequitable for the landlord to later demand the unpaid balance for the same period after encouraging the tenant to believe that half rent was sufficient.
The Court therefore said the landlord would have been estopped from recovering the wartime difference.
However, the promise was understood in context.
The reduction was linked to low wartime occupancy.
Once the flats became fully occupied, the circumstances underlying the concession disappeared.
The landlord could therefore restore the original rent prospectively.
The estoppel suspended the right to full rent during the abnormal period; it did not permanently alter the lease.
The case revived the equitable principle that strict legal rights may sometimes be restricted where a promise has been relied upon.

The Court held that the full contractual rent became payable again once the flats were fully occupied.
The landlord could not, however, have recovered the waived portion for the wartime period.
The case established the modern doctrine of promissory estoppel.
Use this case for: a clear promise intended to affect legal relations may prevent strict enforcement where it has been relied upon.