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In the context of the COVID-19 crisis, and Australia’s economic recession, a Chilean restaurant in the city asked its landlord for a rental reduction. The landlord agreed to a 50% reduction in August 2020, and therefore the rent was reduced by 50% from September 2020. The Chilean restaurant, in reliance on the promise to reduce the rent, refurbished the landlord’s premises. A retractable front window, to provide for socially distanced tables on the street front, and a new take away food oven for preparing home deliveries, were also installed.In March 2022, the landlord notified the Chilean restaurant owner that the rent would be put back up to its original rate. The landlord also communicated that he wished to be reimbursed for the reduction in the rent between September 2020 and March 2022.Which of the following statements is CORRECT?Question 19Answera.The promise to reduce the rent is enforceable and cannot be modified without the assent of the Chilean restaurant: The landlord can neither put the rent back up again nor claim the past unpaid rent.b.According to the doctrine of promissory estoppel, the landlord has the right to put the rent back up again, but would be prevented from claiming back the past discounted rent.c.Provided that the promise to reduce the rent is in writing and is signed by the parties, the landlord can neither put the rent back up again nor claim the past unpaid rent.d.The promise to reduce the rent is not enforceable: The landlord can put the rent back up again and can also claim the past unpaid rent.

Question

In the context of the COVID-19 crisis, and Australia’s economic recession, a Chilean restaurant in the city asked its landlord for a rental reduction. The landlord agreed to a 50% reduction in August 2020, and therefore the rent was reduced by 50% from September 2020. The Chilean restaurant, in reliance on the promise to reduce the rent, refurbished the landlord’s premises. A retractable front window, to provide for socially distanced tables on the street front, and a new take away food oven for preparing home deliveries, were also installed.In March 2022, the landlord notified the Chilean restaurant owner that the rent would be put back up to its original rate. The landlord also communicated that he wished to be reimbursed for the reduction in the rent between September 2020 and March 2022.Which of the following statements is CORRECT?Question 19Answera.The promise to reduce the rent is enforceable and cannot be modified without the assent of the Chilean restaurant: The landlord can neither put the rent back up again nor claim the past unpaid rent.b.According to the doctrine of promissory estoppel, the landlord has the right to put the rent back up again, but would be prevented from claiming back the past discounted rent.c.Provided that the promise to reduce the rent is in writing and is signed by the parties, the landlord can neither put the rent back up again nor claim the past unpaid rent.d.The promise to reduce the rent is not enforceable: The landlord can put the rent back up again and can also claim the past unpaid rent.

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Solution

The correct answer is b. According to the doctrine of promissory estoppel, the landlord has the right to put the rent back up again, but would be prevented from claiming back the past discounted rent.

Promissory estoppel is a legal principle that a promise is enforceable by law, even if made without formal consideration, when a promisor has made a promise to a promisee who then relies on that promise to his subsequent detriment. In this case, the Chilean restaurant relied on the landlord's promise to reduce the rent and made significant investments in refurbishing the premises. Therefore, while the landlord can increase the rent moving forward, he cannot claim the past discounted rent due to the principle of promissory estoppel.

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