Contract Law - Estoppel

Front 1

What is Estoppel?

Back 1

Estoppel is hard to place or define in law, but the underlying principle is that when A does or says anything to B, B takes A at his conduct or word, relying on A's apparent position to him, then A cannot resile from or deny that position.

Front 2

Purpose of Estoppel

Back 2

Estoppel recognizes certain obligations as legally binding where consideration is absent and/or it would be inequitable not to be.

Therefore Estoppel is a court remedy and doctrine based on equity, that some argue serves to soften the harshness of the common law requirement for consideration.

Front 3

Types of Estoppel

Back 3

There are five types of Estoppel, of which we will only focus on the last type.

1) Estoppel by Record/Res Judicata

An issue decided in court proceedings to settle a dispute may not be challenged in future proceedings between the same parties.

2) Estoppel by Deed

A statement is a deed is evidentially conclusive and cannot be resiled from/denied.

3) Estoppel by Convention

Where parties act on an assumed state of facts shared by both or acquiesced in by the other, each is estopped from denying those facts.

4) Estoppel by Acquiescence

Where A, by silence or passive act, lets B unknowingly/unintentionally infringe on his rights, A may not sue B for this breach after a reasonable amount of time. This may be subsumed under re

5) Reliance-Based, consisting of:

i) Estoppel by Representation of Existing Fact

Where a rep. of existing fact is detrimentally relied on by the other party and turns out to be untrue, the representor is 'estopped' from denying it. Is often used as a rule of evidence, and served as springboard for development of promissory estoppel. It is mutually exclusive with promissory estoppel

ii) Promissory Estoppel

Where there is a clear and unambiguous representation not to enforce pre-existing legal rights, relied on by the representee, the representor is 'estopped' from denying its truth. Mutually exclusive with i). WIth proprietary estoppel, also called equitable estoppel. Created by Lord Denning in (High Trees) when he tapped into slender stream of authority from (Brogden v Metropolitan Railway) to distinguish (Jordan v Money).

(High Trees)
(Tool Metal Manufacturing v Tungsten)

(Collier v P&MJ Wright Holdings)

iii) Proprietary Estoppel

Where a landowner either actively induces or passively acquiesces in a claimant's mistaken belief that he has/will be given an interest of some kind in the former's land, he is estopped from denying it.

(Thorner v Major)

Front 4

Scope of Application of Reliance-Based Estoppel

Back 4

Scope of Application of Estoppel mainly relates to its applicability as a cause of action. This differs from diff types of reliance-based estoppels:

1) Proprietary Estoppel may found a cause of action.

(Thorner v Major)

(Crabb v Arun District Council)

(Gillett v Holt)

However, this depends on what courts think would be the most 'proportionate' way of achieving justice.

(Jenning v Rice)

2) Estoppel by Rep of Fact & Promissory Estoppel are confined to operation by way of defence and not a cause of action. This otherwise known as the 'shield not sword' principle.

(Combe v Combe)

(Baird Textiles v M&S)

Exceptions have been made against public authorities, though the precedence is almost solely founded by Denning J again.

(Robertson v Ministers of Pensions)

(Lever Finance v Westminster London Borough)

Followed by Etherton J in (Hearn v Younger)

Furthermore, while estoppel by rep of fact cannot found a cause of action, it can, when operating as a rule of evidence, support a cause of action that would otherwise fail.

(Amalgamated Investments v Texas Commercial Bank)

Front 5

Requirements for Application of Reliance-Based Estoppels

Back 5

There are 4 requirements of estoppel:

1) Representation/Promise must be clear and unambiguous.

(Central London Property Trust Ltd v High Trees)

This is judges by the equivalent test of certainty as is required for the formation of a contract.

(Baird Textiles v M&S)

(Woodhouse Cocoa Ltd v Nigerian Product Marketing Co Ltd)

2) The representation/promise must relate to existing legal rights.

This is because Estoppel cannot take the place of consideration in the formation of a contract, but only when the existing contractual rights are being varied. While Denning J did not emphasize this in (High Trees), it has been applied ever since.

Note that no such restriction applies for estoppel by rep of existing fact.

3) Representee must have relied on the representor's promise or representation.

That reliance is required for estoppel to operate is set in stone. Controversy arises as to the degree of reliance required, and it appears that diff types of Estoppel require diff degrees of reliance:

i) Estoppel by Rep of Fact requires detrimental reliance.

(Spencer, Bower and Turner)

ii) Promissory Estoppel, however, is not so strict. Even though such detrimental reliance was factually present in (Hughes v Metropolitan Railway Co.) only a change of position is required - the representee need only have acted differently than if the rep. was not made. If it were, it would be rarely beneficial since debtors let of the balance rarely spend it on something detrimental.

(Emmanuel Ayodeji Ajayi v R T Briscoe)

(Prince Jefri Bolkiah v State of Brunei)

This view of promissory estoppel has been particularly supported by Lord Denning.

(W J Alan v El Nasr Export and Import)

(Brikom Investments v Carr)

However, Lord Denning suggested extra-judicially that a distinction between express promises, which in his view is binding once acted upon by the representee, and conduct implying such promises, for which detrimental reliance is necessary, exists. Some support can be found for it in case law, although it has not been expressly recognized.

(Collier v P&MJ Wright Holdings)

4) It must be inequitable/unconscionable/unfair for the representor to resile from or deny the positions that he has promised/represented.

This essential element is what gives Estoppel judicial discretion and flexibility.

Per Lord Denning in (D & C Builders v Rees)

This concept is unclear and vague, nevertheless, case law has held that:

i) A debtor who seeks to persuade a creditor to accept less than what is owed only acts equitably when he fully discloses his financial position.

(Adams v Hanna & Son Ltd)
ii) Coercing a debtor to accept less than is owed is inequitable

(D & C Builders v Rees)

Front 6

Impact of Reliance-Based Estoppel

Back 6

The most common view in cases and commentary is that the effects of Estoppel are merely suspensory.

(Tool Metal Manufacturing v Tungsten Electric)

(Emmanuel Ayodeji Ajayi v R T Briscoe)

However, Denning J has emphatically been of the opinion that the doctrine works to extinguish the pre-existing rights of the representor.

(High Trees)
(D & C Builders v Rees)

This conflict can be resolved by purporting that it is part-extinctive and part-suspensory. With respect to future, executory obligations, the representor may resile from his current representation upon giving reasonable notice, but only where the representee has the opporunity to resume his original position (i.e. equitable). With respect to representation already made and relied upon, estoppel will have an extinctive effect.

This seems to be in line with other cases as well.

(JT Sydenham v Enichem)

(Collier v P&MJ Wright Holdings)