(I suspect this looks a bit like a homework question. Its not. I have tried to distill the question as much as possible). I'm interested in how this would typically be answered in countries based on English law (the events happened in New Zealand)

Scenario -

Mr Debtor asks Mr Creditor for a loan on the basis that Mr ThirdParty will pay Mr Debtor money within a month. Mr Creditor verifies this information with Mr ThirdParty and issues Mr Creditor a short term loan on the strength of this verification.

Mr Debtor defaults and it turns out that Mr ThirdParty did not pay Mr Debtor.

Does Mr Creditor have recourse against Mr ThirdParty and why ?

(I assume that there is no contract between Mr Creditor and Mr ThirdParty because no money remuneration was provided to Mr ThirdParty, but I'm not clear if Mr ThirdParty can misrepresent to Mr Creditor with impunity )

1 Answer 1


In contract: no

If ThirdParty was a guarantor for the loan, then they would be liable to Creditor for any amount unpaid by Debtor. However, in the absence of a guarantee deed there is no contractural liability on ThirdParty.

In equity: maybe

The relevant doctrine is promissory estoppel.

If law follows the precedent set in then the answer is a clear no because English promissory estoppel acts “as a shield, not a sword” - that is, it can be used to defend against a claim but cannot be used to initiate one.

Alternatively, if it follows precedent then it can be used to initiate a lawsuit. However, in general, if all you have is promissory estoppel, good luck! It’s a bastard to win unless you have clear and unequivocal evidence that ThirdParty:

  1. Made a clear and unequivocal promise to Creditor.
  2. Engaged in dishonest behaviour at the time or subsequently. Note that dishonest means more than getting things wrong. It means a deliberate deception of Creditor.
  3. There was a special relationship between ThirdParty and Creditor, (e.g., duty of information);
  4. irreversible change of position on the part of ThirdParty

There are soooooo many ways that this sort of claim fails. For example:

  • was there a promise? “Verif[ying] information” doesn’t sound like a promise to make a payment.
  • what was promised? Did they promise to pay $X or “what was owed” - if the latter then a dispute between Debtor and ThirdParty could legitimately reduce what was owed. Similarly, saying a payment is scheduled is not a promise to make that payment.
  • did they know that Creditor was relying on the promise to change their behaviour?

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