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estoppel

 
Dictionary: es·top·pel   (ĕ-stŏp'əl) pronunciation
n. Law
A bar preventing one from making an allegation or a denial that contradicts what one has previously stated as the truth.

[Obsolete French estouppail, from Old French estouper, to stop up, from Vulgar Latin *stuppāre. See stop.]


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Business Dictionary: Estoppel
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Restraint; a bar. Estoppel arises where a person has done some act that the policy of the law will not permit him to deny, or where circumstances are such that the law will not permit a certain argument because it would lead to an unjust result. In the context of contract law, for example, one is estopped from denying existence of a binding contract where one has done something intending that another rely on his conduct, and the result of the reliance is detrimental to that other person. See also Waiver.

A doctrine of law that stops one from later denying facts which that person once acknowledged were true and others accepted on Good Faith.
Example: Abel signs a certificate acknowledging that he owes $10,000 on a Mortgage as of a certain date. Later he contends that he owed only $5,000. Abel is prevented from asserting this new contention under estoppel.

Dental Dictionary: estoppel
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(es-top′əl)
n

A preclusion, in law, that prevents a person from alleging or denying a fact because of his or her own previous act or allegation.

Law Encyclopedia: Estoppel
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This entry contains information applicable to United States law only.

A legal principle that precludes a party from denying or alleging a certain fact owing to that party's previous conduct, allegation, or denial.

The rationale behind estoppel is to prevent injustice owing to inconsistency or fraud. There are two general types of estoppel: equitable and legal.

Equitable Estoppel

Equitable estoppel, sometimes known as estoppel in pais, protects a party who relies detrimentally on another's voluntary conduct — action, silence, acquiescence, or concealment of material facts. One example of equitable estoppel due to a party's acquiescence is found in Lambertini v. Lambertini, 655 So. 2d 142 (Fla. 3d Dist. Ct. App. 1995). In the late 1950s, Olga, who was married to another man, and Frank Lambertini met and began living together in Argentina. Olga and Frank hired an attorney in Buenos Aires, who purported to divorce Olga from her first husband and marry her to Frank pursuant to Mexican law. The Lambertinis began what they thought was a married life together, and soon produced two children. In 1968, they moved to the United States and became Florida residents.

In 1992, Olga sought a divorce from Frank. She petitioned the Florida court for sole possession of the marital home and temporary alimony, which the court granted. Frank sought a rehearing, arguing that the Mexican marriage was not a valid legal marriage and was therefore void. Though Frank won with this argument in the trial court, the appellate court reversed, holding that Frank was equitably estopped from arguing that the Mexican marriage was invalid. According to the appellate court, Frank and Olga had held themselves out as a married couple for more than thirty years, lived together, raised two children, and owned property jointly. Both Frank and Olga apparently believed all along that the Mexican marriage was legal, and it was only when Olga filed for divorce that Frank discovered and chose to rely on its invalidity. The appellate court granted Olga her divorce, the house, and the temporary alimony. Frank's acquiescence for three decades — holding himself out as being married to Olga — prevented him from denying the marriage's existence.

There are several specific types of equitable estoppel. Promissory estoppel is a contract law doctrine. It occurs when a party reasonably relies on the promise of another party, and because of the reliance is injured or damaged. For example, suppose a restaurant agrees to pay a bakery to make fifty pies. The bakery has only two employees. It takes them two days to make the pies, and they are unable to bake or sell anything else during that time. Then, the restaurant decides not to buy the pies, leaving the bakery with many more pies than it can sell and a loss of profit from the time spent baking them. A court will likely apply the promissory estoppel doctrine and require the restaurant to fulfill its promise and pay for the pies.

An estoppel certificate is a written declaration signed by a party who attests, for the benefit of another party, to the accuracy of certain facts described in the declaration. The estoppel certificate prevents the party who signs it from later challenging the validity of those facts. This type of document is perhaps most common in the context of mortgages, or home loans. If one bank seeks to purchase mortgages owned by another bank, the purchasing bank may request the borrowers, or homeowners, to sign an estoppel certificate establishing (1) that the mortgage is valid, (2) the amount of principal and interest due as of the date of the certificate, and (3) that no defenses exist that would affect the value of the mortgage. After signing this certificate, the borrower cannot dispute those facts.

Estoppel by laches precludes a party from bringing an action when the party knowingly failed to claim or enforce a legal right at the proper time. This doctrine is closely related to the concept of statutes of limitations, except that statutes of limitations set specific time limits for legal actions, whereas under laches, generally there is no prescribed time that courts consider "proper." A defendant seeking the protection of laches must demonstrate that the plaintiff's inaction, misrepresentation, or silence prejudiced the defendant or induced the defendant to change positions for the worse.

The court applied the doctrine of laches in People v. Heirens, 648 N.E.2d 260 (Ill. 1st Dist. Ct. App. 1995). William Heirens pleaded guilty in 1946 to three murders, for which he received three consecutive life terms in prison. Heirens sought court relief numerous times in the ensuing years. In 1989, forty-three years after his conviction, Heirens filed his second postconviction petition seeking, among other things, relief from his prison sentence due to ineffective counsel and the denial of due process at the time of his arrest. The court found that all the witnesses and attorneys involved in Heirens's case had since died. Laches precluded Heirens from bringing his action because, according to the court, it would be "difficult to imagine a case where the facts are more remote and where the state might be more prejudiced by the passage of time."

Legal Estoppel

Legal estoppel consists of estoppel by deed and estoppel by record. Under the doctrine of estoppel by deed, a party to a property deed is precluded from asserting, as against another party to the deed, any right or title in derogation of the deed, or from denying the truth of any material fact asserted in the deed. For example, suppose a father conveys a plot of land to his son by deed. Unbeknownst to the son, the father actually does not own the plot of land at the time of the conveyance; the father acquires title to the property only after the conveyance. Technically, the son is not the legal owner of the property because his father did not own and did not have the right to transfer the real estate at the time of the conveyance. But under the doctrine of estoppel by deed, the court may "make good" the imperfection of the poorly timed conveyance by finding the son to be the rightful owner of the plot of land (Zayka v. Giambro, 32 Mass. App. Ct. 748, 594 N.E.2d 894 [1992]).

The doctrine of estoppel by record precludes a party from denying the issues adjudicated by a court of competent jurisdiction (collateral estoppel) or any matter spelled out in a judicial record (judicial estoppel). Estoppel by record exists only between the same parties on the same issues. The doctrine prevents a party from relitigating a matter or from litigating what it might have litigated in a previous case.

Collateral estoppel, sometimes known as estoppel by judgment, prevents the reargument of a factual or legal issue that has already been determined by a valid judgment in a prior case involving the same parties. For example, suppose Ms. Jones, who owns a business next to Mr. Smith's, sues Mr. Smith for damage to her property caused by the digging of a hole. Mr. Smith defends by arguing that the hole is on his land. After considering all the evidence, the court determines that Mr. Smith owns the land. Later that year, after a late night at work, Mr. Smith cuts across the back lot, falls into the hole, and is injured. He then sues Ms. Jones for negligent maintenance of her property. In this situation, the court will apply collateral estoppel, preventing Mr. Smith from relitigating an issue that was already decided between the same parties in a prior proceeding — the issue of who owns the land.

The related doctrine of judicial estoppel binds a party to her or his judicial declarations, such as allegations contained in the lawsuit complaint or testimony given under oath at a previous trial. Judicial estoppel protects courts from litigants' using opposing theories in the attempt to prevail twice. For instance, a tenant trying to avoid liability to a property owner may not, in the tenant's bankruptcy case, successfully represent to a court that the property agreement is a lease and then later, when the property owner sues for nonpayment of rent, declare that the agreement is a mortgage rather than a lease (Port Authority v. Harstad, 531 N.W.2d 496 [Minn. Ct. App. 1995]).

Estoppel by record is frequently confused with the related doctrine of res judicata ("a matter adjudged"), which bars relitigation of the same cause of action between the same parties once there has been a judgment. For example, if Mr. Chen sues Ms. Lopez for breach of contract and the court returns a decision, Ms. Lopez cannot later sue Mr. Chen for breach of the same contract. Ms. Lopez has the right to appeal the first decision, but she cannot bring a new lawsuit that raises the same claim.

Obscure Words: estoppel
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a bar to alleging or denying a fact because of one's own previous contrary actions or words
Wikipedia: Estoppel
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Estoppel is a legal doctrine at common law, where a party is barred from claiming or denying an argument on an equitable ground. Estoppel complements the requirement of consideration in contract law.[citation needed] In general, estoppel protects an aggrieved party, if the counter-party induced an expectation from the aggrieved party, and the aggrieved party reasonably relied on the expectation and would suffer detriment if the expectation is not met.

While there are many types of estoppel, in simpler terms, most estoppels prohibit an individual or group from being harmed as a result of another's deeds, statements or promises, when later actions or statements contradict or undermine what was originally stated, promised, or inferred. In a case, estoppel is used as a defense and provides immunity to the defendant, by preventing the claimant or accuser from presenting statements of facts when such statements contradict earlier statements or when the party, by negligence, failed to present them earlier. Additionally, estoppel in a defense may also provide a legal basis for a claim, when proof exists that the undermined actions or false promises, or the negligence to present the facts, caused harm to the defendant. In limited cases where statements or promises were not made explicitly, a party's silence alone may alone prevent them from making a later claim or statement. See estoppel by silence.

So, "Where A has by his words OR conduct...[led]... B into believing that a certain state of facts exists, and B has acted upon such belief to his prejudice, A is not permitted to...[say to]..B that a different state of facts existed at the same time" (per Lord Birkenhead in Maclaine v Gathy (1921)

For an example of estoppel, consider the case of a debtor and a creditor. The creditor might unofficially inform the debtor that the creditor forgives the debt. 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. In the same way, a landlord might inform a tenant that rent has been reduced, for example, if there was construction or a lapse in utility services. If the tenant relies on this notice, 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, 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.

This term appears to come from the French estoupail (or a 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".

Contents

Overview

Major types

The main species of estoppel under English, Australian, and American laws are:

  • 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 deed
    Where rules of evidence (often regarded as technical or formal estoppels) 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.
  • Reliance-based estoppels
    These are the most important forms. 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 regard reliance-based estoppels as mere rules of evidence, they are in reality rules of substantive law.
    • Estoppel by representation of fact
      is known as equitable estoppel in American law.
    • Equitable estoppel
      as understood in English law, includes
      • promissory estoppel
      • proprietary estoppel
  • Laches
    is estoppel by delay. Laches has been considered both a reliance-based estoppel, and a sui generis estoppel.

Reliance-based estoppels

Under English law, estoppel may be:

  • 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.

These are regarded as reliance-based estoppels by Halsbury's Laws of England, Vol 16(2), 2003. Both Halsbury's and Spencer Bower (see below) describe all 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. So, suppose that:

  • D has the money to repay a debt,
  • but the creditor tells D that the debt is forgiven,
  • so, without doing anything else, D buys a car that he would not otherwise have been able to afford,
  • and the creditor is aware of this reaction.

D is a bare promisee/representee. The original contract is still valid because D has not given any value or consideration to make the termination of liability legally binding. Under normal circumstances, a court will not enforce a bare promise but D may be given a remedy if, and only if, the judge decides that it would be "unconscionable" for the creditor to renege on the promise or representation knowing that D would be penalized. Estoppel is, therefore, an exception to the normal operation of the law and gains its power from equity. Only proprietary estoppel can create a cause of action in English law (and, then, only in very limited circumstances), while the other two can support a defence and a counterclaim. Under Australian law, these estoppels can create both a cause of action and a defense. Under American law, equitable estoppel is available only as a defense, while promissory estoppel can be used as the basis of a cause of action.

To establish a reliance-based estoppel, the victimised party must be able 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.

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):

  • 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:

the ingredients for a proprietary estoppel should include, in principle, a proprietary claim made by a claimant and an answer to that claim based on some fact, or point of mixed fact and law, which the person against whom the claim was made could be estopped from asserting. To treat a “proprietary estoppel equity” as requiring simply unconscionable behaviour was a recipe for confusion. The remedy to which, on the facts as found by the judge, the claimant was entitled could be described neither as based on an estoppel nor as proprietary in character. His Lordship’s present view was that proprietary estoppel could not be prayed in aid to render enforceable an agreement declared by statute (s 2 of the Law Reform (Miscellaneous Provisions) Act 1989) to be void. A claim for the imposition of a constructive trust to provide a remedy for a disappointed expectation engendered by a representation made in the course of incomplete contractual negotiations was misconceived and could not be sustained by reliance on unconscionable behaviour. The claimant was, however, entitled to a quantum meruit payment for his services in obtaining the planning permission.

Representation of fact

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:

Where one person (‘the representor’) has made a representation of fact to another person (‘the representee’) in words or by acts or conduct, or (being under a duty to the representee to speak or act) by silence or inaction, with the intention (actual or presumptive) and with the result of inducing the representee on the faith of such representation to alter his position to his detriment, the representor, in any litigation which may afterwards take place between him and the representee, is estopped, as against the representee, from making, or attempting to establish by evidence, any averment substantially at variance with his former representation, if the representee at the proper time, and in proper manner, objects thereto.

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:

An estoppel by representation [of fact] will arise between A and B if the following elements are made out. First, A makes a false representation of fact to B or to a group of which B was a member. [It is not necessary to demonstrate A knew that the representation was untrue.] Second, in making the representation, A intended or [in the alternatively,] knew that it was likely to be acted upon. Third, B, believing the representation, acts to its detriment in reliance on the representation. [It must have been reasonable to rely on the representation.] Fourth, A subsequently seeks to deny the truth of the representation. Fifth, no defence to the estoppel can be raised by A.

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

As noted above, although both English and Australian laws treat promissory and proprietary estoppels as species of equitable estoppel, the status of estoppel by representation of fact is less clear in Australia. The decisions of Waltons Stores (Interstate) v Maher (1988) 164 CLR 387 and Commonwealth v Verwayen (1990) 170 CLR 394, both purport to fuse common law and equitable estoppels into a single unified doctrine, but the New South Wales Court of Appeal in Byron Shire Council v Vaughan [2002] NSWCA 158 continues to treat estoppel by representation at common law as distinct from equitable estoppel. (See Meagher, Gummow & Lehane's Equity: Doctrines & Remedies, 4th edition, Butterworth: 2002, Chapter 17 and Pakinson, The Principles of Equity, 2nd edition, LBC: 2003, Chapter 7). This can be significant in deciding which court has jurisdiction to adjudicate on the issue.

The American doctrine of equitable estoppel is the same as the English estoppel by representation of fact:

The most comprehensive definition of equitable estoppel or estoppel in pais is that it is the principle by which a party who knows or should know the truth is absolutely precluded, both at law and in equity, from denying, or asserting the contrary of, any material fact which, by his words or conduct, affirmative or negative, intentionally or through culpable negligence, he has induced another, who was excusably ignorant of the true facts and who had a right to rely upon such words or conduct, to believe and act upon them thereby, as a consequence reasonably to be anticipated, changing his position in such a way that he would suffer injury if such denial or contrary assertion was allowed. 28 Am Jur 2d Estoppel and Waiver § 28

Proprietary estoppel

The traditional version of proprietary estoppel arises in relation to rights to use the land of the owner, and may even be effective in connection with disputed transfers of ownership. So if:

  • one party represents that he or she is transferring an interest in land to another, but what is done has no legal effect, or
  • merely promises at some time in the future to transfer land or an interest in land to another, and
  • knows that the other party will spend money or otherwise act to his or her detriment in reliance on the supposed or promised transfer,

an estoppel may arise. Thus, in Dillwyn v Llewelyn (1862) 4 De G.F.& J. 517 C.A. a father promised a house to his son who took possession and spent a large sum of money improving the property. The father never actually transferred the house to the son. When his father died, the son claimed to be the equitable owner and the court ordered the testamentary trustees to convey the land to him. See also Inwards v Baker [1965] 2 Q.B. 29, C.A.

In Wilmott v Barber (1880) 15 Ch D 96, Fry J considered that five elements had to be established before proprietary estoppel could operate:

  • the claimant must have made a mistake as to his legal rights;
  • the claimant must have done some act of reliance;
  • the defendant, the possessor of a legal right, must know of the existence of his own right which is inconsistent with the right claimed by the claimant;
  • the defendant must know of the claimant's mistaken belief; and
  • the defendant must have encouraged the claimant in his act of reliance.

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 (see now Cobbe v Yeoman's Row [2008] UKHL 55).

The term "proprietary estoppel" is not used in American law, but is part and parcel of the general doctrine of promissory estoppel. In English law, proprietary estoppel is distinct from promissory estoppel.

Promissory estoppel

The doctrine of promissory estoppel prevents one party from withdrawing a promise made to a second party if the latter has reasonably relied on that promise. There is no need for the reliance to be to the detriment of the promisee.

English law

In English law, a promise made without consideration is generally not enforceable. It is known as a bare or gratuitous promise. Thus, if a car salesman promises not to sell a car over the weekend, but does so, the promise cannot be enforced. But should the car salesman accept even one penny in consideration for the promise, the promise will be binding and enforceable in court. Estoppel is not an exception to this rule.

The doctrine of promissory estoppel was first developed in Hughes v. Metropolitan Railway Co [1877] but was lost for some time until it was resurrected by Lord Denning in the controversial case of Central London Property Trust Ltd v. High Trees House Ltd [1947] K.B. 130.

In this case, the plaintiffs leased a block of flats to the defendants at an annual rent of £2500 - but, because the defendants were unable to find enough tenants while London was being bombed during WWII, they agreed to accept a reduction in rent to £1250. There was no consideration for this promise to accept a lower rent. At the end of the war the flats were again fully let, and the plaintiffs claimed the full rent for the remainder of the contract beginning the final half of that year, 1945. Denning J held that, in good conscience, they were entitled to the full rent from the end of the war, but noted that they were estopped from going back on their promise had they claimed rents from the wartime period as well.

Promissory estoppel requires

  1. an unequivocal promise by words or conduct
  2. evidence that there is a change in position of the promisee as a result of the promise (reliance but not necessarily to their detriment)
  3. inequity if the promisor were to go back on the promise

In general, estoppel is 'a shield not a sword' — it cannot be used as the basis of an action on its own. It also does not extinguish rights. In High Trees the plaintiff company was able to restore payment of full rent from early 1945, and could have restored the full rent at any time after the initial promise was made provided a suitable period of notice had been given. In this case, the estoppel was applied to a 'negative promise', that is, one where a party promises not to enforce full rights.

Estoppel is an equitable (as opposed to common law) construct and its application is therefore discretionary. In the case of D & C Builders v. Rees the courts refused to recognise a promise to accept a part payment of £300 on a debt of £482 on the basis that it was extracted by duress. In Combe v. Combe Denning elaborated on the equitable nature of estoppel by refusing to allow its use as a "sword" by an ex-wife to extract funds from the destitute husband.

The general rule is that when one party agrees to accept a lesser sum in full payment of a debt, the debtor has given no consideration, and so the creditor is still entitled to claim the debt in its entirety. This is not the case if the debtor offers payment at an earlier date than was previously agreed, because the benefit to the creditor of receiving payment early can be thought of as consideration for the promise to waive the rest of the debt. This is the rule formulated in Pinnel's Case (1602) 5 Co Rep 117a, and affirmed in Foakes v. Beer (1884) 9 App Cas 605.

Australian law

The doctrine of promissory estoppel was adopted into Australian 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 fufilled; and 6) the defendant has failed to act to avoid that detriment whether by fufilling 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 (eg: 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, 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:

A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.
Restatement (Second) removed the requirement that the detriment be "substantial".

The distinction between promissory estoppel and equitable estoppel should be noted:

Equitable estoppel is distinct from promissory estoppel. Promissory estoppel involves a clear and definite promise, while equitable estoppel involves only representations and inducements. The representations at issue in promissory estoppel go to future intent, while equitable estoppel involves statement of past or present fact. It is also said that equitable estoppel lies in tort, while promissory estoppel lies in contract. The major distinction between equitable estoppel and promissory estoppel is that the former is available only as a defense, while promissory estoppel can be used as the basis of a cause of action for damages.
28 Am Jur 2d Estoppel and Waiver § 35

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.

Other estoppels

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. it is a situation where the aggrieved party between each other and other the agreement some kind of transfer of possession of property is stimulated.

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 mistake. 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:[citation needed]

  • (i) they both knew the other had the same belief, and
  • (ii) they both based their subsequent dealings on those beliefs.

Some say[who?][by whom?] 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[who?][by whom?] see it as no more than an application of the rule of interpretation that, where words in a contract are ambiguous, you always interpret those words so as to give effect to the actual intentions of the parties even though that would not be the usual legal outcome.[citation needed]

Acquiescence

Estoppel by acquiescence 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 seal — 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.

Issue estoppel

Issue estoppel (issue preclusion) prevents, in some cases, an issue that has already been litigated and decided on 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 Six saga, the House of Lords ruled in Hunter v. Chief Constable of the West Midlands Police (1982) that issue estoppel applied. Lord Diplock said:

The inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people.
[1]

See also : Res judicata

See also

References

  1. ^ Judgments - Polanski (Appellant) v. Conde Nast Publications Limited (Respondents) UK Parliament publications > Business > Lords Publications > Judgment Index > Judgment. Paragraph 86

Further reading

External links


Wordsmith Words: estoppel
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(e-STOP-el)

noun
A bar preventing one from asserting a claim inconsistent with what was previously stated, especially when it has been relied upon by others.

Etymology
From Old French estoupail (bung, cork) from estouper (stopper).

Usage
"That makes the case for DeWitt being granted citizenship now even stronger because of the legal principle of estoppel which, Miller explains, says `once you've set out certain positions that other people have relied on over a period of time, you can't reverse those positions to their detriment.'" — Nancy Montgomery, Citizen Finds He Isn't One - 59-Year-Old Ex-marine is Victim of 1855 Law That Calls Him an Alien, The Seattle Times, Sep 14, 1991.


 
 

 

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