Estoppel
Encyclopedia
Estoppel in its broadest sense is a legal term referring to a series of legal and equitable doctrine
s that preclude "a person from denying or asserting anything to the contrary of that which has, in contemplation of law, been established as the truth, either by the acts of judicial or legislative officers, or by his own deed, acts, or representations, either express or implied."
This term appears to come from the Old French
estoupail (or variation), which meant "stopper plug", referring to placing a halt on the imbalance of the situation. The term is related to the verb "estop" which comes from the Old French term estopper, meaning "stop up, impede."
stated, "It is called an estoppel or conclusion, because a man's own act or acceptance stoppeth or closeth up his mouth to allege or plead the truth."
Because estoppel is so factually dependent, it is perhaps best understood by considering specific examples.
Estoppel is closely related to the doctrines of waiver, variation, and election and is applied in many areas of law, including insurance, banking, employment, international trade, etc. In English law
, the concept of legitimate expectation
in the realm of administrative law
and judicial review
is estoppel's counterpart in public law
, although subtle but important differences exist.
Both Halsbury's and Spencer Bower (see below) describe these three estoppels collectively as estoppels by representation. More simply, one party must say or do something and see the other party rely on what is said or done to change behavior.
All reliance-based estoppels require the victimised party to show both inducement and detrimental reliance, i.e.:
Simply put, promissory estoppel has four necessary elements which the plaintiff must prove:
Estoppel by representation of fact and promissory estoppel are mutually exclusive: the former is based on a representation of existing fact (or of mixed fact and law), while the latter is based on a promise not to enforce some pre-existing right (i.e. it expresses an intention as to the future). A proprietary estoppel operates only between parties who, at the time of the representation, were in an existing relationship, while this is not a requirement for estoppel by representation of fact.
The test for unconscionability
in the English and Australian courts takes many factors into account, including the behavior, state of mind and circumstances of the parties. Generally, the following eight factors are determinative (Michael Spence, Protecting Reliance: The Emergent Doctrine of Equitable Estoppel, Oxford: 1999, pp60–66):
But in Cobbe v Yeoman's Row [2008] UKHL 55, Lord Scott of Foscote stated the following:
In The Law relating to Estoppel by Representation, 4th edition, 2004 at para I.2.2, Spencer Bower defines estoppel by representation of fact as follows:
A second definition can be found at Wilken and Villiers, The Law of Waiver, Variation and Estoppel, 2nd ed, Oxford: 2003, at para 9.02:
A representation can be made by words or conduct. Although the representation must be clear and unambiguous, a representation can be inferred from silence where there is a duty to speak or from negligence where a duty of care has arisen. Under English law, estoppel by representation of fact usually acts as a defence, though it may act in support of a cause of action or counterclaim.
Although there is some debate as to whether "unconscionability" is an element that English courts need to take into account when considering estoppel by representation of fact, the Australian courts clearly do (see Wilken and Villiers, para 9-03; The Commonwealth v Verwayen (1990) 170 CLR 394 at 444 per Deane J.)
For example, in the case of Aspex Eyewear v. Clariti Eyewear, eyeglass frame maker Aspex sued competitor Clariti for patent infringement. Aspex waited three years without responding to a question asking it to list the infringed patent claims before asserting its patent in litigation. During this prolonged silence, Clariti expanded its marketing and sales of the accused eyeglass frames. The Federal Circuit found Aspex guilty of misleading conduct because it led Clariti to believe it would not enforce its patent, and thus Aspex was estopped and could not proceed with the suit.
The status of estoppel by representation of fact is less clear in Australia. Two seminal decisions purport to fuse common law and equitable estoppels into a single unified doctrine, but the New South Wales Court of Appeal continues to treat estoppel by representation at common law as distinct from equitable estoppel. This can be significant in deciding which court has jurisdiction to adjudicate on the issue.
Traditionally, proprietary estoppel arose in relation to rights to use the land of the owner, and possibly in connection with disputed transfers of ownership. Although proprietary estoppel was only traditionally available in disputes affecting title to real property, it has now gained limited acceptance in other areas of law. Proprietary estoppel is closely related to the doctrine of constructive trust.
J. Fry summarized the five elements for proprietary estoppel as:
Example: A father promised a house to his son who took possession and spent a large sum of money improving the property, but the father never actually transferred the house to the son. Upon the father's death, the son claimed to be the equitable owner. The court found the testamentary trustees (as representatives of the deceased father's estate) were estopped from denying the son's proprietary interest, and ordered them to convey the land to the son.
The decision of the Court of Appeal in "Collier v P & MJ Wright (Holdings)" Ltd 2008 1 WLR 643 suggests that the doctrine of promissory estoppel can now operate to mitigate the harshness of this common law rule. Moreover, Arden LJ held that allowing a creditor to renege on his promise to forebear seeking the balance of a debt in return for part payment would be, in and of itself, inequitable. Therefore, the only reliance that the promisee must demonstrate is the actual making of the part payment. This approach has been criticised as doing violence to the principle set down in Hughes and the extent to which the other members of the Court, namely Longmore LJ, agreed with it is uncertain.
The doctrine of promissory estoppel was adopted into Australia
n law in Legione v. Hateley (1983) 152 CLR 406; however, the plaintiffs were unsuccessful in that case because the reliance was unreasonable and the promise not unequivocal.
In fact, now Australian law has gone beyond the position espoused in the High Trees case; it has been extended successfully to cases where there is no pre-existing legal relationship between the two parties, and promissory estoppel can be wielded as a "sword", not just as a "shield". Mason CJ and Wilson J in Waltons Stores (Interstate) Ltd v. Maher (1988) 164 CLR 387 held that if estoppel is proven, it gives rise to an equity in favour of the plaintiff, and the court will do the minimum equity that is just in the circumstances. From this case, it is also possible for the promise to come from silence or inaction.
Stated by Brennan J in Waltons Stores: "To establish an equitable estoppel, it is necessary for the plaintiff to prove that 1) the plaintiff assumed that a particular legal relationship would exist between them (and in the latter case) that the defendant would not be free to withdraw from that expected legal relationship; 2) the defendant has induced the plaintiff to adopt that assumption or expectation; 3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; 4) the defendant knew or intended him to do so; 5) the plaintiff's action or inaction will occasion detriment if the assumption of expectation is not fulfilled; and 6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation of otherwise."
As noted above, in Australian law, there is an element of unconscionability, which is satisfied if one party encourages the other party to create assumptions that lead to reliance.
Today, the principle of estoppel may give birth to an enforceable obligation even without a consideration under the following conditions:
1. promise
2. dishonest behavior of the promittant
3. special relationship between the promittant and the beneficior (e.g.: duty of information)
4. irreversible changement of the situation of the beneficior of the promise
In the many jurisdictions of the United States
, promissory estoppel is generally an alternative to consideration as a basis for enforcing a promise. It is also sometimes referred to as detrimental reliance.
The American Law Institute
in 1932 included the principle of estoppel into § 90 of the Restatement of Contracts, stating:
The distinction between promissory estoppel and equitable estoppel should be noted:
Suppose that B goes to a store and sees a sign that the price of a radio is $10. B tells the shopkeeper that he will get the money and come back later that day to purchase it; there is no discussion of price. The shopkeeper says that when B returns, he will be happy to deal with B as he deals with all his customers but that, if he sells all the radios (he has three), he will not be able to help B. Hearing this, B goes and sells his watch for $10 (it was really worth $15, but since B wanted the money right away, he chose not to wait for the best price). When B returns, the sign says $11, and the owner tells B that he has raised the price. In Equity, can you argue that the shopkeeper is estopped by conduct? B relied upon the implied representation that a radio would be sold for $10 when he returned with the money; B has sold his watch at a price lower than the market price, and thus he has acted to his detriment. (Note that if B's watch was worth $10, and he received a fair price, there would be no detriment.) But the problem is that the shopkeeper did not guarantee to hold one of the radios against the possibility of B's return nor did they agree a fixed price. The shopkeeper's conscience might have been affected if he had known that B was going home to collect the money and would definitely return to buy one of the three radios. Indeed, in some common law jurisdictions, a promise by the shopkeeper to hold a specific radio would create a binding contract, even if B had to go for the money. A promise to pay the owner in the future is good consideration if it is made in exchange for a promise to sell a specific radio (one from three is probably sufficiently specific): one promise in exchange for a second promise creates equal value. So the shopkeeper's actual words and knowledge are critical to deciding whether either a contract or an estoppel arises.
For an example of promissory estoppel in the construction industry, suppose that B Ltd consolidates estimates from a number of subcontractors and quotes a single price on a competitive tender. The client accepts B Ltd's quote and construction begins. But one of the subcontractors then claims reimbursement above its original estimate and, because of this change, B Ltd cannot profit from the works. If both parties knew that the accuracy of the individual estimates was critical to the success of the tender and the profitability of the contract as a whole, a court might apply promissory estoppel and allow B Ltd to pay only what the subcontractor originally estimated rather than the new, higher price. But, if both parties hoped that there would be an opportunity to increase the contract prices to reflect additional expenditure, the subcontractor's conscience would not be as limited in seeking a higher payment and B Ltd might be penalised for not building an adequate contingency sum into the tendered price.
One contentious point during the drafting of the Restatement was how to calculate the amount of damages flowing from a promissory estoppel. During the deliberations, the following example was considered: a young man's uncle promises to give him $1,000 to buy a car. The young man buys a car for $500, but the uncle refuses to pay any money. One view was that the young man should be entitled to $1,000 (the amount promised), but many believed that the young man should only be entitled to $500 (the amount he actually lost). The language eventually adopted for the Second Restatement reads: "The remedy granted for breach may be limited as justice requires." — a formula which leaves quantification to the discretion of the court.
. If they share an assumption, belief or understanding of how the contract will be interpreted or what the legal effect will be, they are bound by that belief, assumption or understanding if:
Some say that estoppel by convention is not truly an estoppel in its own right, but merely an instance of reliance-based estoppel (estoppel by representation would be its most frequent form). Others see it as no more than an application of the rule of interpretation that, where words in a contract are ambiguous, one always interprets those words so as to give effect to the actual intentions of the parties even though that would not be the usual legal outcome.
Estoppel by convention is most commonly invoked if one party wishes to rely on pre-contract negotiation as an aid to construction of the contract, Chartbrook Ltd and another v Persimmon Homes Ltd and another [2009] UKHL 38.
may arise when one person gives a legal warning to another based on some clearly asserted facts or legal principle, and the other does not respond within "a reasonable period of time". By acquiescing, the other person is generally considered to have lost the legal right to assert the contrary.
As an example, suppose that Jill has been storing her car on Jack's land with no contract between them. Jack sends a registered letter to Jill's legal address, stating: "I am no longer willing to allow your car to stay here for free. Please come get your car, or make arrangements to pay me rent for storing it. If you do not do so, within 30 days, I will consider the car abandoned and will claim ownership of it. If you need more time to make arrangements, please contact me within 30 days, and we can work something out." If Jill does not respond, she may be said to have relinquished her ownership of the car, and estoppel by acquiescence may prevent any court from invalidating Jack's actions of registering the car in his name and using it as his own.
— such agreements, called deeds, are more strictly enforced than ordinary contracts and the parties are expected to take greater care to verify the contents before signing them. Hence, once signed, all statements of fact (usually found in the opening recital which sets out the reason(s) for making the deed) are conclusive evidence against the parties who are estopped from asserting otherwise.
saga, the House of Lords ruled in Hunter v. Chief Constable of the West Midlands Police (1982) that issue estoppel applied. Lord Diplock
said:
Doctrine
Doctrine is a codification of beliefs or a body of teachings or instructions, taught principles or positions, as the body of teachings in a branch of knowledge or belief system...
s that preclude "a person from denying or asserting anything to the contrary of that which has, in contemplation of law, been established as the truth, either by the acts of judicial or legislative officers, or by his own deed, acts, or representations, either express or implied."
This term appears to come from the Old French
Old French
Old French was the Romance dialect continuum spoken in territories that span roughly the northern half of modern France and parts of modern Belgium and Switzerland from the 9th century to the 14th century...
estoupail (or variation), which meant "stopper plug", referring to placing a halt on the imbalance of the situation. The term is related to the verb "estop" which comes from the Old French term estopper, meaning "stop up, impede."
Overview
Where a court finds that a party has done something warranting a form of estoppel, that party is said to be "estopped" from making certain related arguments or claiming certain related rights. The defendant is said to be "estopped" from presenting the related defence, or the plaintiff is said to be "estopped" from making the related argument against the defendant. Lord CokeEdward Coke
Sir Edward Coke SL PC was an English barrister, judge and politician considered to be the greatest jurist of the Elizabethan and Jacobean eras. Born into a middle class family, Coke was educated at Trinity College, Cambridge before leaving to study at the Inner Temple, where he was called to the...
stated, "It is called an estoppel or conclusion, because a man's own act or acceptance stoppeth or closeth up his mouth to allege or plead the truth."
Because estoppel is so factually dependent, it is perhaps best understood by considering specific examples.
- Example 1: A city entered into a contract with another party. The contract stated that it had been reviewed by the city's counsel and that the contract was proper. Promissory estoppel applied to estop the city from claiming the contract was invalid.
- Example 2: The creditorCreditorA creditor is a party that has a claim to the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption that the second party will return an equivalent property or...
unofficially informs the debtorDebtorA debtor is an entity that owes a debt to someone else. The entity may be an individual, a firm, a government, a company or other legal person. The counterparty is called a creditor...
that the creditor forgives the debtDebtA debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
. Even if such forgiveness is not formally documented, the creditor may be estopped from changing its mind and seeking to collect the debt, because that change would be unfair. - Example 3: A landlordLandlordA landlord is the owner of a house, apartment, condominium, or real estate which is rented or leased to an individual or business, who is called a tenant . When a juristic person is in this position, the term landlord is used. Other terms include lessor and owner...
informs a tenantLeasehold estateA leasehold estate is an ownership of a temporary right to land or property in which a lessee or a tenant holds rights of real property by some form of title from a lessor or landlord....
that rent has been reduced, for example, because there was construction or a lapse in utility services. If the tenant relies on this notice in choosing to remain in the premises, the landlord could be estopped from collecting the full rent.
Estoppel is closely related to the doctrines of waiver, variation, and election and is applied in many areas of law, including insurance, banking, employment, international trade, etc. In English law
English law
English law is the legal system of England and Wales, and is the basis of common law legal systems used in most Commonwealth countries and the United States except Louisiana...
, the concept of legitimate expectation
Legitimate expectation
In English law, the concept of legitimate expectation arises from administrative law, a branch of public law. In proceedings for judicial review, it applies the principles of fairness and reasonableness to the situation where a person has an expectation or interest in a public body retaining a...
in the realm of administrative law
Administrative law
Administrative law is the body of law that governs the activities of administrative agencies of government. Government agency action can include rulemaking, adjudication, or the enforcement of a specific regulatory agenda. Administrative law is considered a branch of public law...
and judicial review
Judicial review
Judicial review is the doctrine under which legislative and executive actions are subject to review by the judiciary. Specific courts with judicial review power must annul the acts of the state when it finds them incompatible with a higher authority...
is estoppel's counterpart in public law
Public law
Public law is a theory of law governing the relationship between individuals and the state. Under this theory, constitutional law, administrative law and criminal law are sub-divisions of public law...
, although subtle but important differences exist.
Major types
The main species of estoppel under English, Australian, and American laws are:- Reliance-based estoppels—These involve one party relying on something the other party has done or said. The party who performed/spoke is the one who is estopped. Under English law, this class includes estoppel by representation of fact, promissory estoppel and proprietary estoppel (see Halsbury's Laws of England, Vol 16(2), 2003). Although some authorities have used language to suggest reliance-based estoppels are mere rules of evidence, they are rules of substantive law.
- Estoppel by representation of fact (English law name), equitable estoppel (American law)
- Equitable estoppel (in English law), including
- Proprietary estoppel
- Promissory estoppel
- Estoppel by record—This frequently arises as issue/cause of action estoppel or judicial estoppel where the orders or judgments made in previous legal proceedings prevent the parties from relitigating the same issues or causes of action,
- Estoppel by deedEstoppel by deedEstoppel by deed is a doctrine where rules of evidence prevent a litigant from denying the truth of what was said or done.In the context of real property transfers, the grantor of a deed is estopped from denying the truth of the deed...
(often regarded as technical or formal estoppels)—Where rules of evidenceEvidence (law)The law of evidence encompasses the rules and legal principles that govern the proof of facts in a legal proceeding. These rules determine what evidence can be considered by the trier of fact in reaching its decision and, sometimes, the weight that may be given to that evidence...
prevent a litigant from denying the truth of what was said or done - Estoppel by silence—Estoppel that prevents a person from asserting something when he had the right and opportunity to do so earlier, and such silence put another person at a disadvantage.
- LachesLaches (equity)Laches is an "unreasonable delay pursuing a right or claim...in a way that prejudices the [opposing] party" When asserted in litigation, it is an equitable defense, or doctrine...
—estoppel in equity by delay. Laches has been considered both a reliance-based estoppel, and a sui generisSui generisSui generis is a Latin expression, literally meaning of its own kind/genus or unique in its characteristics. The expression is often used in analytic philosophy to indicate an idea, an entity, or a reality which cannot be included in a wider concept....
estoppel.
Reliance-based estoppels
Reliance-based estoppels (at English law) include:- by representation of fact, where one person asserts the truth of a set of facts to another;
- promissory estoppel, where one person makes a promise to another, but there is no enforceable contract; and
- proprietary estoppel, where the parties are litigating the title to land.
Both Halsbury's and Spencer Bower (see below) describe these three estoppels collectively as estoppels by representation. More simply, one party must say or do something and see the other party rely on what is said or done to change behavior.
All reliance-based estoppels require the victimised party to show both inducement and detrimental reliance, i.e.:
- there must be evidence to show that the representor actually intended the victim to act on the representation or promise, or
- the victim must satisfy the court that it was reasonable for him or her to act on the relevant representation or promise, and
- what the victim did must either have been reasonable, or
- the victim did what the representor intended, and
- the victim would suffer a loss or detriment if the representor was allowed to deny what was said or done — detriment is measured at the time when the representor proposes to deny the representation or withdraw the promise, not at the time when either was made, and
- in all the circumstances, the behavior of the representor is such that it would be "unconscionable" to allow him or her to resile.
Simply put, promissory estoppel has four necessary elements which the plaintiff must prove:
- there was a promise
- that was reasonably relied upon
- resulting legal detriment to the promisee
- justice requires enforcement of the promise
Estoppel by representation of fact and promissory estoppel are mutually exclusive: the former is based on a representation of existing fact (or of mixed fact and law), while the latter is based on a promise not to enforce some pre-existing right (i.e. it expresses an intention as to the future). A proprietary estoppel operates only between parties who, at the time of the representation, were in an existing relationship, while this is not a requirement for estoppel by representation of fact.
The test for unconscionability
Unconscionability
Unconscionability is a term used in contract law to describe a defense against the enforcement of a contract based on the presence of terms that are excessively unfair to one party...
in the English and Australian courts takes many factors into account, including the behavior, state of mind and circumstances of the parties. Generally, the following eight factors are determinative (Michael Spence, Protecting Reliance: The Emergent Doctrine of Equitable Estoppel, Oxford: 1999, pp60–66):
- how the promise/representation and reliance upon it were induced;
- the content of the promise/representation;
- the relative knowledge of the parties;
- the parties' relative interest in the relevant activities in reliance;
- the nature and context of the parties' relationship;
- the parties' relative strength of position;
- the history of the parties' relationship; and
- the steps, if any, taken by the promisor/representor to ensure he has not caused preventable harm.
But in Cobbe v Yeoman's Row [2008] UKHL 55, Lord Scott of Foscote stated the following:
Estoppel by representation of fact (English law)
In English law, estoppel by representation of fact is a term coined by Spencer Bower. This species of estoppel is also referred to as "common law estoppel by representation" in Halsbury's Laws of England, vol 16(2), 2003 reissue.In The Law relating to Estoppel by Representation, 4th edition, 2004 at para I.2.2, Spencer Bower defines estoppel by representation of fact as follows:
A second definition can be found at Wilken and Villiers, The Law of Waiver, Variation and Estoppel, 2nd ed, Oxford: 2003, at para 9.02:
A representation can be made by words or conduct. Although the representation must be clear and unambiguous, a representation can be inferred from silence where there is a duty to speak or from negligence where a duty of care has arisen. Under English law, estoppel by representation of fact usually acts as a defence, though it may act in support of a cause of action or counterclaim.
Although there is some debate as to whether "unconscionability" is an element that English courts need to take into account when considering estoppel by representation of fact, the Australian courts clearly do (see Wilken and Villiers, para 9-03; The Commonwealth v Verwayen (1990) 170 CLR 394 at 444 per Deane J.)
Equitable estoppel (American law)
American equitable estoppel is the counterpart to estoppel by representation, and its elements are summarized as:- facts misrepresented or concealed
- knowledge of true facts
- fraudulent intent
- inducement and reliance
- injury to complainant
- clear, concise, unequivocal proof of actus (not by implication)
For example, in the case of Aspex Eyewear v. Clariti Eyewear, eyeglass frame maker Aspex sued competitor Clariti for patent infringement. Aspex waited three years without responding to a question asking it to list the infringed patent claims before asserting its patent in litigation. During this prolonged silence, Clariti expanded its marketing and sales of the accused eyeglass frames. The Federal Circuit found Aspex guilty of misleading conduct because it led Clariti to believe it would not enforce its patent, and thus Aspex was estopped and could not proceed with the suit.
Equitable estoppel (English law)
Under English and Australian legal systems, estoppels in equity include promissory and proprietary estoppels. (Contrast with estoppel by representation, which is a claim (under the English system) at law.) For more information, see Promissory estoppel and Proprietary estoppel below.The status of estoppel by representation of fact is less clear in Australia. Two seminal decisions purport to fuse common law and equitable estoppels into a single unified doctrine, but the New South Wales Court of Appeal continues to treat estoppel by representation at common law as distinct from equitable estoppel. This can be significant in deciding which court has jurisdiction to adjudicate on the issue.
Proprietary estoppel
In English law, proprietary estoppel is distinct from promissory estoppel. Proprietary Estoppel is not a concept in American law, but a similar result is often reached under the general doctrine of promissory estoppel.Traditionally, proprietary estoppel arose in relation to rights to use the land of the owner, and possibly in connection with disputed transfers of ownership. Although proprietary estoppel was only traditionally available in disputes affecting title to real property, it has now gained limited acceptance in other areas of law. Proprietary estoppel is closely related to the doctrine of constructive trust.
J. Fry summarized the five elements for proprietary estoppel as:
- the claimant...
- ...made a mistake as to his legal rights (typically because the actual owner attempted to convey the property, but the transfer is invalid or ineffective for some reason);
- ...did some act of reliance;
- the defendant...
- ...knows of the existence of a legal right which he (the defendant) possesses, and which is inconsistent with the right claimed by the claimant;
- ...knows of the claimant's mistaken belief; and,
- ...encouraged the claimant in his act of reliance.
Example: A father promised a house to his son who took possession and spent a large sum of money improving the property, but the father never actually transferred the house to the son. Upon the father's death, the son claimed to be the equitable owner. The court found the testamentary trustees (as representatives of the deceased father's estate) were estopped from denying the son's proprietary interest, and ordered them to convey the land to the son.
The decision of the Court of Appeal in "Collier v P & MJ Wright (Holdings)" Ltd 2008 1 WLR 643 suggests that the doctrine of promissory estoppel can now operate to mitigate the harshness of this common law rule. Moreover, Arden LJ held that allowing a creditor to renege on his promise to forebear seeking the balance of a debt in return for part payment would be, in and of itself, inequitable. Therefore, the only reliance that the promisee must demonstrate is the actual making of the part payment. This approach has been criticised as doing violence to the principle set down in Hughes and the extent to which the other members of the Court, namely Longmore LJ, agreed with it is uncertain.
Australian law
The doctrine of promissory estoppel was adopted into Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
n law in Legione v. Hateley (1983) 152 CLR 406; however, the plaintiffs were unsuccessful in that case because the reliance was unreasonable and the promise not unequivocal.
In fact, now Australian law has gone beyond the position espoused in the High Trees case; it has been extended successfully to cases where there is no pre-existing legal relationship between the two parties, and promissory estoppel can be wielded as a "sword", not just as a "shield". Mason CJ and Wilson J in Waltons Stores (Interstate) Ltd v. Maher (1988) 164 CLR 387 held that if estoppel is proven, it gives rise to an equity in favour of the plaintiff, and the court will do the minimum equity that is just in the circumstances. From this case, it is also possible for the promise to come from silence or inaction.
Stated by Brennan J in Waltons Stores: "To establish an equitable estoppel, it is necessary for the plaintiff to prove that 1) the plaintiff assumed that a particular legal relationship would exist between them (and in the latter case) that the defendant would not be free to withdraw from that expected legal relationship; 2) the defendant has induced the plaintiff to adopt that assumption or expectation; 3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; 4) the defendant knew or intended him to do so; 5) the plaintiff's action or inaction will occasion detriment if the assumption of expectation is not fulfilled; and 6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation of otherwise."
As noted above, in Australian law, there is an element of unconscionability, which is satisfied if one party encourages the other party to create assumptions that lead to reliance.
Today, the principle of estoppel may give birth to an enforceable obligation even without a consideration under the following conditions:
1. promise
2. dishonest behavior of the promittant
3. special relationship between the promittant and the beneficior (e.g.: duty of information)
4. irreversible changement of the situation of the beneficior of the promise
American law
In the many jurisdictions of the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, promissory estoppel is generally an alternative to consideration as a basis for enforcing a promise. It is also sometimes referred to as detrimental reliance.
The American Law Institute
American Law Institute
The American Law Institute was established in 1923 to promote the clarification and simplification of American common law and its adaptation to changing social needs. The ALI drafts, approves, and publishes Restatements of the Law, Principles of the Law, model codes, and other proposals for law...
in 1932 included the principle of estoppel into § 90 of the Restatement of Contracts, stating:
The distinction between promissory estoppel and equitable estoppel should be noted:
Suppose that B goes to a store and sees a sign that the price of a radio is $10. B tells the shopkeeper that he will get the money and come back later that day to purchase it; there is no discussion of price. The shopkeeper says that when B returns, he will be happy to deal with B as he deals with all his customers but that, if he sells all the radios (he has three), he will not be able to help B. Hearing this, B goes and sells his watch for $10 (it was really worth $15, but since B wanted the money right away, he chose not to wait for the best price). When B returns, the sign says $11, and the owner tells B that he has raised the price. In Equity, can you argue that the shopkeeper is estopped by conduct? B relied upon the implied representation that a radio would be sold for $10 when he returned with the money; B has sold his watch at a price lower than the market price, and thus he has acted to his detriment. (Note that if B's watch was worth $10, and he received a fair price, there would be no detriment.) But the problem is that the shopkeeper did not guarantee to hold one of the radios against the possibility of B's return nor did they agree a fixed price. The shopkeeper's conscience might have been affected if he had known that B was going home to collect the money and would definitely return to buy one of the three radios. Indeed, in some common law jurisdictions, a promise by the shopkeeper to hold a specific radio would create a binding contract, even if B had to go for the money. A promise to pay the owner in the future is good consideration if it is made in exchange for a promise to sell a specific radio (one from three is probably sufficiently specific): one promise in exchange for a second promise creates equal value. So the shopkeeper's actual words and knowledge are critical to deciding whether either a contract or an estoppel arises.
For an example of promissory estoppel in the construction industry, suppose that B Ltd consolidates estimates from a number of subcontractors and quotes a single price on a competitive tender. The client accepts B Ltd's quote and construction begins. But one of the subcontractors then claims reimbursement above its original estimate and, because of this change, B Ltd cannot profit from the works. If both parties knew that the accuracy of the individual estimates was critical to the success of the tender and the profitability of the contract as a whole, a court might apply promissory estoppel and allow B Ltd to pay only what the subcontractor originally estimated rather than the new, higher price. But, if both parties hoped that there would be an opportunity to increase the contract prices to reflect additional expenditure, the subcontractor's conscience would not be as limited in seeking a higher payment and B Ltd might be penalised for not building an adequate contingency sum into the tendered price.
One contentious point during the drafting of the Restatement was how to calculate the amount of damages flowing from a promissory estoppel. During the deliberations, the following example was considered: a young man's uncle promises to give him $1,000 to buy a car. The young man buys a car for $500, but the uncle refuses to pay any money. One view was that the young man should be entitled to $1,000 (the amount promised), but many believed that the young man should only be entitled to $500 (the amount he actually lost). The language eventually adopted for the Second Restatement reads: "The remedy granted for breach may be limited as justice requires." — a formula which leaves quantification to the discretion of the court.
Pais
Estoppel in pais (literally “by act of notoriety", or "solemn formal act”) is the historical root of common law estoppel by representation and equitable estoppel. The terms Estoppel in pais and equitable estoppel are used interchangeably in American law.Convention
Estoppel by convention in English law (also known as estoppel by agreement) occurs where two parties negotiate or operate a contract but make a mistakeMistake (contract law)
In contract law, a mistake is an erroneous belief, at contracting, that certain facts are true. It can be argued as a defence, and if raised successfully can lead to the agreement in question being found void ab initio or voidable, or alternatively an equitable remedy may be provided by the courts...
. If they share an assumption, belief or understanding of how the contract will be interpreted or what the legal effect will be, they are bound by that belief, assumption or understanding if:
- (i) they both knew the other had the same belief, and
- (ii) they both based their subsequent dealings on those beliefs.
Some say that estoppel by convention is not truly an estoppel in its own right, but merely an instance of reliance-based estoppel (estoppel by representation would be its most frequent form). Others see it as no more than an application of the rule of interpretation that, where words in a contract are ambiguous, one always interprets those words so as to give effect to the actual intentions of the parties even though that would not be the usual legal outcome.
Estoppel by convention is most commonly invoked if one party wishes to rely on pre-contract negotiation as an aid to construction of the contract, Chartbrook Ltd and another v Persimmon Homes Ltd and another [2009] UKHL 38.
Acquiescence
Estoppel by acquiescenceAcquiescence
Acquiescence is a legal term used to describe an act where a person knowingly stands by without raising any objection to the infringement of their rights, while someone else unknowingly and without malice aforethought makes a claim on their rights...
may arise when one person gives a legal warning to another based on some clearly asserted facts or legal principle, and the other does not respond within "a reasonable period of time". By acquiescing, the other person is generally considered to have lost the legal right to assert the contrary.
As an example, suppose that Jill has been storing her car on Jack's land with no contract between them. Jack sends a registered letter to Jill's legal address, stating: "I am no longer willing to allow your car to stay here for free. Please come get your car, or make arrangements to pay me rent for storing it. If you do not do so, within 30 days, I will consider the car abandoned and will claim ownership of it. If you need more time to make arrangements, please contact me within 30 days, and we can work something out." If Jill does not respond, she may be said to have relinquished her ownership of the car, and estoppel by acquiescence may prevent any court from invalidating Jack's actions of registering the car in his name and using it as his own.
Deed
Estoppel by deed is a rule of evidence arising from the status of a contract signed under sealDeed
A deed is any legal instrument in writing which passes, or affirms or confirms something which passes, an interest, right, or property and that is signed, attested, delivered, and in some jurisdictions sealed...
— such agreements, called deeds, are more strictly enforced than ordinary contracts and the parties are expected to take greater care to verify the contents before signing them. Hence, once signed, all statements of fact (usually found in the opening recital which sets out the reason(s) for making the deed) are conclusive evidence against the parties who are estopped from asserting otherwise.
Conflict Estoppel
“an inconsistent position, attitude or course of conduct may not be adopted to loss or injury of another” Brand v. Farmer’s Mut. Protective Assoc of Texas, Tex. App 95 S.W.2d 994, 997. For example, as between two or more claimants, a party that takes multiple and inconsistent legal positions is estopped to assert its positions against another consistent and certain claim, i.e. preferential treatment for certain over uncertain claims.Issue estoppel
Issue estoppel (more commonly known as issue preclusion) prevents, in some cases, an issue that has already been litigated and decided on the merits from being re-litigated, even when the parties are different. In the world of crime, some cases have achieved notoriety, e.g. in the Birmingham SixBirmingham Six
The Birmingham Six were six men—Hugh Callaghan, Patrick Joseph Hill, Gerard Hunter, Richard McIlkenny, William Power and John Walker—sentenced to life imprisonment in 1975 in the United Kingdom for the Birmingham pub bombings. Their convictions were declared unsafe and quashed by the Court of...
saga, the House of Lords ruled in Hunter v. Chief Constable of the West Midlands Police (1982) that issue estoppel applied. Lord Diplock
Kenneth Diplock, Baron Diplock
William John Kenneth Diplock, Baron Diplock, KC was an English judge and Law Lord.-Early life:Born the son of a Croydon solicitor, he attended Whitgift School and University College, Oxford, where he read chemistry and was later to become an Honorary Fellow.-Career:Diplock was called to the bar by...
said:
See also
- Judicial estoppelJudicial estoppelIn the practice of law, judicial estoppel is an estoppel which precludes a party from taking a position in a case which is contrary to a position they have taken in earlier legal proceedings...
- Assignor estoppelAssignor estoppelThe doctrine of assignor estoppel is a doctrine of United States patent law barring a patent's seller from attacking the patent's validity in subsequent patent infringement litigation. The doctrine is based on the doctrine of legal estoppel, which prohibits a grantor from challenging the validity...
- Licensee estoppelLicensee estoppelLicensee estoppel was a U.S. patent law doctrine, now overturned, that a licensee under a patent would not be permitted to challenge the validity of the patent. The Supreme Court, in Lear, Inc. v...
- Collateral estoppelCollateral estoppelCollateral estoppel , known in modern terminology as issue preclusion, is a common law estoppel doctrine that prevents a person from relitigating an issue. One summary is that "once a court has decided an issue of fact or law necessary to its judgment, that decision .....
(USA) - Direct estoppelDirect estoppelThe doctrine of direct estoppel prevents a party to a litigation from relitigating an issue that was decided against that party in that litigation, under certain circumstances. Specifically, direct estoppel applies where the issue was decided as part of a larger claim which was finally decided, and...
- Prosecution history estoppelProsecution history estoppelProsecution history estoppel, also known as file-wrapper estoppel, is a term used in United States patent law to indicate that a person who has filed a patent application, and then makes narrowing amendments to the application to accommodate the patent law, may be precluded from invoking the...
also known as file-wrapper estoppel (USA) - De facto corporation and corporation by estoppelDe facto corporation and corporation by estoppelDe facto corporation and corporation by estoppel are both terms that are used by courts in most common law jurisdictions to describe circumstances in which a business organization that has failed to become a de jure corporation will nonetheless be treated as a corporation, thereby shielding...
(USA) - Estoppel by deedEstoppel by deedEstoppel by deed is a doctrine where rules of evidence prevent a litigant from denying the truth of what was said or done.In the context of real property transfers, the grantor of a deed is estopped from denying the truth of the deed...
(USA) - AcquiescenceAcquiescenceAcquiescence is a legal term used to describe an act where a person knowingly stands by without raising any objection to the infringement of their rights, while someone else unknowingly and without malice aforethought makes a claim on their rights...
and Estoppel by acquiescence
External links
- proprietary estoppel
- Principle of venire contra factum proprium non valet in legal systems based on civil lawCivil law (legal system)Civil law is a legal system inspired by Roman law and whose primary feature is that laws are codified into collections, as compared to common law systems that gives great precedential weight to common law on the principle that it is unfair to treat similar facts differently on different...
- Tenant Estoppel Agreements
- Estoppel in WiktionaryWiktionaryWiktionary is a multilingual, web-based project to create a free content dictionary, available in 158 languages...
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