WJ Alan & Company Ltd v El Nasr Export & Import Co [1972] EWCA Civ 12 (03 February 1972)

Coffee sellers accepted payment via a letter of credit in Sterling, despite the contract currency being Kenyan shillings. After Sterling was devalued, they claimed the shortfall. The court held they had permanently waived their right to the original currency by their conduct.

Facts

The sellers, W.J. Alan & Co. Ltd., contracted to sell coffee to the buyers, El Nasr Export & Import Co., an Egyptian state corporation. Two contracts from May 1967 stipulated the price as “Shs.262/-” per hundredweight (cwt), which was denominated in Kenyan shillings. Payment was to be made via an irrevocable letter of credit. The buyers opened a letter of credit in pounds sterling, not Kenyan shillings. The sellers did not object to this discrepancy and presented documents and drew funds in sterling for the first shipment. On 18th November 1967, the pound sterling was devalued, significantly reducing its value against the Kenyan shilling, which remained unchanged. For the second shipment, which occurred after the devaluation, the sellers claimed the contract price based on the original value in Kenyan shillings, demanding an additional payment to cover the shortfall caused by the devaluation. The buyers refused, arguing that payment in sterling had been accepted as full performance of the contract.

Issues

The key legal issues before the Court of Appeal were:

1. What was the money of account (the currency determining the debt) versus the money of payment (the currency in which the debt is to be discharged)?
2. Did the sellers, by accepting the sterling letter of credit and drawing on it without protest, waive their right to be paid an amount calculated in Kenyan shillings?
3. If a waiver occurred, was it irrevocable?
4. Is it a necessary requirement for the doctrine of waiver (or promissory estoppel) that the party relying on it must have acted to their detriment?

Judgment

The Court of Appeal unanimously allowed the buyers’ appeal, overturning the judgment of the High Court. The court held that the sellers had waived their right to insist on payment calculated in Kenyan shillings and were not entitled to the additional sum claimed.

Lord Denning M.R.

Lord Denning found that the money of account was Kenyan shillings, but the money of payment became sterling through the parties’ conduct. He focused on the doctrine of waiver, which he equated with promissory estoppel. He argued that the trial judge had erred in holding that the buyers needed to show they had acted to their detriment. He stated that the crucial element is that the party has acted on the belief induced by the other party’s representation.

The principle of waiver is simply this: If one party, by his conduct, leads another to believe that the strict rights arising under the contract will not be insisted upon, intending that the other should act on that belief, and he does act on it, then the first party will not afterwards be allowed to insist on the strict legal rights when it would be inequitable for him to do so.

He explicitly rejected the necessity of detriment:

I know that it has been suggested in some quarters that there must be a detriment. But I can find no support for it in the authorities cited by the judge… The nearest approach to it is the statement of Viscount Simonds in the Tool Metal case… that the other party must have been led ‘to alter his position’; which does not mean that he must have been led to his detriment in reliance on the promise.

Lord Denning concluded that by accepting the sterling letter of credit and drawing upon it, the sellers had given a clear representation that they were content to accept sterling in payment. This waiver was irrevocable because it was impossible to return to the original position, and it would be inequitable to allow the sellers to go back on their representation.

Megaw L.J.

Megaw L.J. agreed with the outcome, arriving at the same conclusion via a slightly different route. He held that the acceptance of the sterling letter of credit constituted a binding variation of the contract’s payment terms. When the sellers accepted the confirmed letter of credit, its terms became the agreed mode of contractual performance. Therefore, payment in sterling was not merely a concession but the fulfillment of the varied contract. He also addressed waiver, concurring with Lord Denning that detriment is not a required element, stating that it is sufficient for the party to have been led to act differently than they otherwise would have done.

Stephenson L.J.

Stephenson L.J. also agreed that the appeal should be allowed. He analysed the concepts of variation, waiver, and estoppel. He found that the sellers’ conduct in accepting the sterling letter of credit amounted to an acceptance of payment in sterling as performance of the contract. He firmly supported Lord Denning’s position on promissory estoppel, stating that the doctrine does not require the promisee to have suffered a loss or detriment.

I do not, for my part, think that it is a necessary ingredient of waiver or promissory estoppel that the party seeking to set it up must have been put to a disadvantage or prejudice, so long as he has ‘in some way’ ‘acted on the belief induced by the other party’.

He concluded that the buyers did act on the sellers’ acceptance by continuing with the contract on that basis, and it would be inequitable to permit the sellers to revert to the original terms.

Implications

The decision in W.J. Alan & Co. Ltd. v El Nasr Export & Import Co. is a significant authority in English contract law, particularly concerning the doctrine of promissory estoppel (or waiver). It clarified that for the doctrine to apply, the promisee does not need to demonstrate that they acted to their detriment in reliance on the promise. It is sufficient that they were led to act differently from how they would otherwise have acted. The case confirmed that a waiver of contractual rights can become permanent and irrevocable, especially where it would be inequitable for the promisor to rescind it. This widened the scope and flexibility of promissory estoppel as an equitable remedy.

Verdict: The Court of Appeal allowed the appeal by the buyers (El Nasr Export & Import Co), overturning the High Court’s decision and entering judgment in their favour.

Source: WJ Alan & Company Ltd v El Nasr Export & Import Co [1972] EWCA Civ 12 (03 February 1972)