Hodgson & Anor v Lipson

A contractual variation is sufficiently certain for trial where commercial parties used an objective standard, such as a reasonable price for completed building work, even though they had not fixed an exact sum. The court may use objective evidence to give practical content to the bargain.

At the interlocutory stage, conflicting interpretations and factual disputes should not be resolved summarily where the claim has a realistic prospect of success. Consideration may exist where the variation confers real commercial advantages on the promisee. A promissory estoppel requires a clear and unequivocal promise or representation. If a representation is too uncertain to vary a contract, it is likewise too uncertain to found an estoppel. Forbearance may be withdrawn prospectively, although retrospective enforcement may be inequitable.

The claimants appealed an order made by District Judge Smith on 6 June 2009. The order struck out parts of the prayer to the amended Particulars of Claim but allowed the claim that the terms of a high-interest secured loan had been varied, waived by estoppel, or displaced by equitable forbearance.

The claimants alleged that, after substantial delay in completing a property conversion, they agreed with the lender’s associate that the amount payable would be what the completed work was reasonably worth, rather than the contractual interest-bearing loan balance. The central issues were whether that alleged substitute bargain was sufficiently certain, whether it was supported by consideration, and whether the alternative estoppel or forbearance claims had realistic prospects of success.

1. Appeal dismissed. The order of District Judge Smith was upheld. The claimants’ case had a realistic prospect of success and should proceed to trial.
2. The alleged agreement to pay what the completed building work was worth was capable of being sufficiently certain. In a commercial context the court seeks to give effect to the parties’ apparent bargain and may supply objective content. A reasonable price could potentially be established by evidence of labour, materials, carrying costs and a reasonable profit margin.
3. The allegation was not necessarily merely an agreement to agree. That was one possible interpretation, but the surrounding circumstances and evidence required determination at trial.
4. There was also a realistic prospect of establishing consideration. The lender and building contractor might have obtained real commercial advantages from completion of the work and payment of a reasonable price, including repayment of any advances and avoidance of vulnerability under section 139 of the Consumer Credit Act 1974.
5. The alternative promissory-estoppel claim required a clear and unequivocal promise or representation. Applying Woodhouse AC Israel Cocoa v Nigerian Produce Marketing Co. [1971] 2 QB 23 and [1971] AC 741, an undertaking too uncertain to found a contractual variation would also be too uncertain to found an estoppel.
6. A denial that a representation was ever made could have the same practical effect as withdrawal of an admitted forbearance if it clearly informed the promisee that reliance was no longer legitimate. Forbearance could be withdrawn prospectively. Whether retrospective recovery of interest would be inequitable depended on the circumstances and remained arguable.
7. The amended pleading required suitable amendment in light of the conclusions on equitable forbearance. No further order was made concerning the paragraphs already struck out, subject to submissions.

• High Court (Queen's Bench Division): On appeal from an order of District Judge Smith dated 6 June 2009, the appeal was dismissed and the order upheld.