Khela v Clarke 2021 BCSC 752 examined the criteria for a claim of promissory estoppel.
The law is clear that the doctrine of promissory operates in the context of an existing legal relationship between the parties: Illingworth v. Evergreen Medicinal Supply Inc., 2018 BCCA 444 [Illingworth]; Ecobase Enterprises Inc. v. Mass Enterprise Inc., 2017 BCCA 29 [Ecobase]; Remington Energy Ltd. v. British Columbia Hydro & Power Authority, 2005 BCCA 191, [Remington]; Kahle v. Ritter, 2002 BCSC 199 [Kahle].
The legal test for promissory estoppel was set out in Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 S.C.R. 50 at 57. The party relying on the doctrine must establish:
a) that the other party has, by words or conduct, made a promise that was intended to affect the parties’ legal relationship;
b) that, in reliance on the promise, the promisee has acted or in some way changed his or her position; and
c) allowing the promisor to insist on their strict legal rights between the parties would be unfair.
As set out in Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 S.C.R. 50 at 57, a party seeking to rely on promissory estoppel must establish four elements:
1. an existing legal relationship;
2. a promise or assurance made by the other party and intended to affect their legal relationship;
3. reliance on the promise or assurance; and
4. a change in position to the party’s detriment.
It is clear that in Canada, there must be a pre-existing legal relationship between parties for an estoppel to arise: Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 S.C.R. 50, 80 D.L.R. (4th) 652 at para. 13.
Fundamentally, promissory estoppel is a matter of contract law. As stated by G.H.L. Fridman in The Law of Contract in Canada, 4th ed. (Scarborough: Carswell, 1999) at p. 134:
The only true function of this doctrine is to affect existing contractual rights, not to manufacture contracts out of such ‘promises’ or ‘representations’ … this use of estoppel can be made only to affect accrued or inchoate rights, not to produce contractual relations where the essential ingredients of a contract, such as consideration or a clear and ascertained agreement as to terms, are lacking.
