136 the enforceabilit y of promises

of a creditor (art. 349 of the Civil Code) and the depositary’s liability for the furniture will be limited (art. 343 of the Civil Code).

The depositary will also be entitled to deposit the object with a public body if the object can be deposited according to art. 427 of the Civil Code.52 Furthermore, if the provisions regulating the default of the debtor are being applied, then the depositor will have to compensate the depositary on the basis of art. 343 of the Civil Code.53

In Case 5(d), it does not matter if Charles could have stored the furniture with Jean. In Greek law contractual liability requires one to pay the positive or expectation interest and not the negative or reliance interest.54 In Case 5(e), for the same reason, if Otto has had to pay any more than originally agreed to have his furniture stored, Charles will be liable for the

extra amount.

scotland

The basis of the law applicable to this problem is once again contained in s. 1(2) of the Requirements of Writing (Scotland) Act 1995, which provides that a gratuitous unilateral obligation will only be enforceable if constituted in writing.55 The promise is binding in the terms in which it is expressed, and so the point at which Charles breaks it is likely to be relevant only to the quantification of damages.

If Charles is a friend of Otto, it is likely to lead to a presumption that there was no intention to create legal obligations, but merely a social arrangement. This can be shown by the case of Heslop v. Burns,56 in which an agreement between friends on contributions to car maintenance was held not to amount to a contract but to be binding in honour only. Obviously, if Otto has the written promise of Charles, that is likely to rebut the presumption. On the other hand, if Charles is a professional storer of furniture, the exemption from the requirements of writing for gratuitous unilateral obligations incurred in the course of business may apply, and Otto may only require to prove the promise by parole evidence: s. 1(2)(a)(ii).

Charles’ reasons for breaking his promise are irrelevant. Scots law has a strict doctrine of frustration which requires that the event be unforeseen and the fault of neither party. Therefore, Charles is in breach of his promise.

The circumstances presented in Cases 5(d) and 5(e) are again likely to give rise to reliance upon s. 1(3) and (4) of the 1995 Act, so that the gratuitous unilateral promise can be enforced even if it is not in writing. The

138 the enforceabilit y of promises

A court might suggest, for example, that Charles received some benefit in exchange for storing the goods (perhaps he could use them?). If so, then an ordinary contract (albeit a contract to establish a bailment relationship) would exist, and Charles would be bound to store the goods. Judicial manoeuvres of this sort were more common in the past than they are in contemporary decisions, where the clear orthodox law – that gratuitous promises are unenforceable – has been upheld.61

Once a bailment relationship has been established by the delivery and taking possession of goods, it is less certain whether and to what extent ordinary contractual rules apply. Clearly, the bailee has certain duties vis- à-vis the care of the goods, and the bailor similarly has certain duties, none of which appear founded in contract.62 It is clear, however, that a bailment relationship is in principle terminable at will, that is, that a bailee can demand that the bailor take back the goods. So as not to be in breach of his duty as a bailee to take care of the goods, Charles would need to give Otto reasonable notice of a decision to hand back Otto’s goods, but if this is done then Charles is under no general obligation to continue storing the goods. This rule, however, may not apply where, as here, the bailee has promised to store the goods for a certain period – although predictions here are difficult as the law is unsettled and there do not appear to be any cases directly in point. An initial observation is that delivery does not alter the fact that there was no consideration for Charles’ promise, so, as explained above, the promise is not enforceable on ordinary contractual principles. There is, nevertheless, some judicial authority for enforcing promises ancillary to a bailment relationship, that is, promises made in connection with the goods which impose duties greater than those imposed by the bailment relationship itself. In the case of Mitchell v. Ealing London Borough Council,63 a local council was held strictly liable for the breach of its gratuitous promise to redeliver goods, that it was holding as a bailee, to a tenant bailor at a particular time and place. If this case were extended, it might cover Charles’ promise. It must be stressed, however, that the law in this area is not clear: there is, for example, no consensus amongst commentators as to the basis of liability in Mitchell, that is, whether the Council’s liability was in contract, tort, or sui generis. More importantly, the absence of other cases means it is unclear how far this novel decision would be followed.64

64Some support can be derived from older cases, such as Trefitz & Sons Ltd v. Canelli [1872] LRCP 4, where the Privy Council upheld a bailee’s promise to release goods only to certain persons without examining the question of consideration for the promise.

The possibility that Charles might be liable on the basis of estoppel or tort must also be considered. Liability here would not be liability to keep the promise to store the goods, but rather liability to make good any loss arising from the breach of that promise. As explained in Case 1, in certain circumstances a promisor may be ‘estopped’ from going back on his or her word where the promisee has detrimentally relied on the promise. Estoppel cannot, however, be raised by Otto in this case because the parties did not have pre-existing legal relations. As explained in the discussion of Case 1, estoppel may be used in English law only as a defence to a cause of action. It may not be used, as it would be used here, to create legal rights where none existed before.65

The possibility of liability in tort is more promising, but also more complex. The relevant area of tort law is in a state of flux, and has not yet been applied to bailment situations (though as noted earlier, some commentators suggest that bailment law itself is at least partly derived from tort principles); thus, it is difficult in the extreme to say confidently how such a case would be decided. Any loss that Otto suffers will presumably be economic loss rather than physical harm to the property itself. Recovery for economic loss in tort is allowed only in a limited range of situations in English law,66 but one situation where it is allowed is in respect of the negligent provision of services.67 If the plaintiff suffers harm as a result of relying on the defendant providing the service, the plaintiff can recover for that loss in certain circumstances. In particular, for a claim to succeed on this basis the plaintiff must establish that he or she had a ‘special relationship’ with the defendant.68 Exactly what constitutes a ‘special relationship’ is a notoriously complex and unsettled area of contemporary English tort law, and any brief account of the law here will necessarily be incomplete.69 That proviso in mind, the most commonly cited tests for establishing a special relationship ask whether the relationship was ‘close to contract’ or whether the defendant ‘assumed responsibility’ for the plaintiff’s economic welfare.70 Making a promise does of course

Against this can be raised more recent cases, such as the Australian case (Australian law is thought to be consistent with English law in this area) of Parastatidis v. Kotaridis [1978] VR 449, where it was stated at 454–5 that promissory terms in bailments are unenforceable unless supported by consideration. See generally Palmer, Bailment, 572–7.

65See Palmer, Bailment, 574.

66See generally P. Cane, Economic Interests and the Law of Tort, 2nd edn (1997).

67See Henderson v. Merrett Syndicates Ltd [1995] 2 AC 145, which involved the provision of

69See generally D. Howarth, Textbook on Tort (1995), 267–99.

70See, e.g., Lord Devlin’s judgment in Hedley Byrne v. Heller [1964] AC 465 and Lord Goff’s judgment in Henderson v. Merrett Syndicates Ltd [1995] 2 AC 145.

140 the enforceabilit y of promises

bring a relationship ‘close to contract’ (there is a contract save for the needed consideration); equally it is strong evidence of an assumption of responsibility.71 It is clear, however, that the fact of a mere promise is not enough to satisfy the requirement of a special relationship. In particular, nearly every case in this area has emphasized the importance of the defendant fulfilling a professional role, such as that of a solicitor or a banker.72 In the recent decision in Henderson v. Merrett Syndicates Ltd,73 it was stated explicitly that there is no liability in respect of services rendered on ‘an informal occasion’. For this reason, it is suggested that in the scenario where Charles is merely a friend, he is unlikely to be liable in tort. But where Charles is a professional storer of furniture, or an antiques dealer from whom the furniture was recently purchased, the ‘close relationship’ requirement would likely be satisfied (assuming that the promise was made seriously, and it was understood that it would be acted upon).

A further hurdle to establishing tort liability is that Charles’ refusal to store the furniture, while it may have been ‘unreasonable’, was not negligent. It was nonfeasance, rather than misfeasance, and, in the traditional view, there is no liability for the former in tort law.74 That a promise has been made is traditionally thought not to change this rule. As one court noted, if a promisor were liable outside of contract for completely failing to perform a promise, this would amount to holding ‘that the law of England recognizes the enforceability of a gratuitous promise’.75 This is not quite correct, since damages in tort would compensate only for detrimental reliance rather than for the value of the promise. But allowing an action for non-performance of a gratuitous promise would, at a minimum, amount to allowing estoppel to be used to support a cause of action, which, as we have seen, is not permitted under the orthodox understanding of estoppel (see Case 1). Consistent with this distinction, Treitel states that there is no liability in contract or tort for ‘a complete failure to pursue a promised course of action’,76 and two cases support this view.77 On the other hand, it seems counter-intuitive that Charles could be liable for negligently failing to keep his promise to store the goods, but not liable for completely refusing to store them, given that in the former

71Henderson v. Merrett Syndicates Ltd [1995] 2 AC 145.

72See, e.g., Hedley Byrne v. Heller [1964] AC 465; Smith v. Eric S. Bush [1990] 1 AC 831; White v.

77The Zephyr [1985] 2 Lloyd’s Rep. 529; Argy Trading Co. v. Lapid Developments [1977] 1 WLR 444.

case Charles’ liability would rest largely on the fact that he had assumed responsibility for the service. Thus, it is not surprising that other commentators have supported liability for nonfeasance in certain contexts,78 even if not calling for a general elimination of the sword/shield distinction in estoppel. Consistent with this view, a solicitor was held liable in tort for failing in his promise to register an option, with no distinction being drawn between liability for misfeasance and nonfeasance.79 It is difficult to predict, therefore, whether a court would find Charles liable in tort. The law is unsettled, and those cases in which liability has been found are not closely related to the case in question. It is suggested that were a court to find Charles liable, it would only be in the case where the goods had already been delivered. Though delivery does not, in itself, make a difference to a tort claim, it would probably influence a court’s view of how close the relationship was between the parties and how strong was the assumption of responsibility by Charles – factors which are relevant. Moreover, once delivery has occurred, it is easier for a court to present the question as one of liability for not providing a service, rather than as one of liability for not performing a promise. In short, delivery is a factor that a court wanting to limit the scope of potential liability in tort for failing to perform a promise is likely to fasten upon. That said, the paucity of authority in this area means that any predictions must be treated carefully.

As should be clear from the above, allowing Otto to recover not just for a negligent failure to keep his promise but also for deliberately refusing to keep his promise considerably weakens the force of the consideration requirement in contract. This is one reason why English law in this area is unsettled: tort appears to be intruding into contract. Tort liability for non-performance of promised services is limited (at present anyway) to professional defendants, but in principle promisees are being allowed to recover for losses incurred in reasonable reliance on a broken promise. And if recovery is allowed in respect of the failed provision of services, why not failed sales, and so on? It will be necessary for English law to decide in the near future whether it wishes wholeheartedly to allow recovery in tort for induced-by-promising detrimental reliance or whether it wishes to return to the orthodox position that promises are relevant only to liability in contract. At the moment, the law is unclear, though it appears to be moving in the direction of expanding liability. It is reasonably certain

78See, e.g., J. Fleming, The Law of Torts, 7th edn (1987), 138. See also Case 6.

79Midland Bank v. Hett [1979] Ch. 384. See also White v. Jones [1993] 3 WLR 730.