Doctrine of Equitable Estoppel

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Table of Contents

Introduction
Estoppel by Representation
Proprietary Estoppel
Promissory Estoppel
Estoppel by Acquiescence and Encouragement
References

Introduction

Equitable estoppel is a doctrine under the law of Equity that prevents a person from denying an earlier position he or she had made to another party. The second party relies on this position to execute other dealings. In most cases, these dealings entail monetary expenditure and it is for this reason that a dispute may arise between the parties. The primary party is prevented by the doctrine of equitable estoppel from denying the position—whether or not it emerged from a contract.

As distinguished from the common law estoppel, equitable estoppel does not rely on the actions of the primary party. It could emerge from the implied conduct of the party or a promise made to the secondary party. It could also arise out of the relationship between the parties. The doctrine of equitable estoppel acts as a rule of evidence where matters in contention can be proved by demonstrating to the court how the rule applies in the circumstances of the case. If the court is satisfied with the proof, it enables the person raising the estoppel point to claim an equitable interest in real or personal property.

Another distinction between common law estoppel and equitable estoppel lies in the fact that the former is only used as a defense mechanism while the latter can act as a defense mechanism and a cause of action. This contradicts the equitable maxim that equity ought to act as a shield and not as a sword. Just like all other rules, there are exceptions. Equitable estoppel is the exception to this maxim and its acceptance as a rule of evidence demonstrates its validity.

A further contradiction of to this maxim is that equitable estoppel is a rule of evidence. Maxims do not constitute rules or regulations. They act as guiding principles to the application of equity in courts. However, equitable estoppel forms both substantive and procedural law. It can be enforced by the courts and remedies can be awarded.

When equitable estoppel acts as a sword, it simply means that it can be used as a cause of action. The rule can be applied as a basis for beginning litigation in a court of law. This is yet another distinction of equitable estoppels from the principles of equity. Principles and doctrines are normally used to guide the court in the administration of justice. As such, they act as procedural rules. However, as far as equitable estoppel is concerned, it can also be used as substantive law. A party may rely on it solely to bring an action to court and petition for an award of damages.

As a shield, equitable estoppel acts can be used as a defense mechanism. A person who is accused of going contrary to a prior arrangement or one whom another party demands payment on basis of some interest in property, a promise or contractual obligation may defend his or her case by proving equitable estoppel. The courts will admit such kind of evidence in favor of the party relying on it and if proven to the satisfaction of the court, the party alleging it wins the case.

The development of the law of equity has led to the application of equitable estoppel in a number of doctrines that have gained universal application in common law jurisdictions. Estoppel at common law is used solely as a ‘shield.’ In contrast, equitable estoppel may be used as a ‘sword.’ If successful, it enables the person raising the estoppel point to claim an equitable interest in real or personal property. Estoppel at common law is used solely as a ‘shield.’ In contrast, equitable estoppel may be used as a ‘sword.’ If successful, it enables the person raising the estoppel point to claim an equitable interest in real or personal property.This paper shall examine the extent of the application of equitable estoppel as a shield or a sword while reflecting the principles of equity. It has been divided into four sections for ease of reference and reading.

Estoppel by Representation

This kind of estoppel exists under the common law and also under the law of equity. It refers to a situation where a person makes a representation to another and the secondary party acts on this representation—and sometimes even incurs expenses. The primary party will be stopped from denying the representation made to the secondary party. The representation may take the form of word—oral or written—or conduct—expressed or implied.

Estoppel by representation can only be used defensively and cannot form a cause of action. Thus a party who chooses to rely on this kind of estoppel can only apply it after being sued for his or her conduct. He or she cannot take it upon himself or herself to sue the other party. The law recognizes estoppel by representation as a defense mechanism. This is a limitation on the application of the doctrine as both a shield and a sword. In this instance, estoppel by representation is only a shield therefore the maxim that equity acts as a shield and not a sword applies wholly.

Another maxim that applies is that equity will not suffer a wrong without a remedy. This applies to the party relying on the doctrine in his defense. Where, for example, a primary party tells a secondary party that he shall extend a lease for a given number of years and the secondary party relies on this statement to invest in shelves and other fixtures; then the primary party will be stopped by the law from seeking the assistance of the law to evict the secondary party.

The maxim applies in this case because common law may not offer the appropriate remedy for the secondary party. The only recourse in common law is damages. But suppose the secondary party wishes to carry on his businesses for the period of extension promised by the primary party? He will have to seek the remedy of specific performance. But this remedy is not available under common law. if he invokes the doctrine of equitable estoppel, the remedy will be available to him. Therefore equity does not suffer a wrong without a remedy.

Furthermore, the principle that equity looks on that as done that which ought to be done will also be applicable when seeking the remedy of specific performance. The secondary party would be seeking enforcement of the contract—lease. The maxim would therefore be applicable to the secondary party.

This scenario brings into play another maxim that he who comes to equity must come with clean hands. It also invokes the principle of unconscionable conduct on the part of the primary party. Equity dictates that all persons seeking recourse in a court of equity must have performed their fair share of obligations. The primary party in this case failed to keep his word. He cannot therefore seek recourse in a court of equity due to his unconscionable character.

Even if the primary party were to seek assistance through other channels than the law of equity, he would still be in breach of his contractual terms. The secondary party—on the other hand—may still invoke the doctrine estoppel by representation. The doctrine will work in his favor as long as he too has kept his fair part of the bargain. He cannot invoke the equitable doctrine if he has not completed payment of his rent under the lease or if he has broken a contractual term. The doctrine requires that he must have clean hands if he intends to use it as a defense mechanism.

Proprietary Estoppel

Proprietary estoppel works in favor of a secondary party who invests on the property of a primary party. By his conduct, the primary party does not stop or attempt to stop the former party from construction on his land. He is aware of the construction and since he does not take any necessary steps to prevent the other party from building, he is stopped from being further action in court in regard to the same property.

The doctrine of proprietary estoppel works as a shield and a sword. The maxim—equity acts as a shield and not as a sword—does not wholly apply to this doctrine. The secondary party can move court to gain interests in the same property belonging to the primary party. If he proves the doctrine to the required standards, court will not hesitate to grant him his prayer.

Proprietary estoppel works as a shield in a suit instituted by the primary party for the recovery of his property. The court will allow the evidence of the secondary party on the basis of this principle and will award the secondary party damages and other reliefs available in equity—specific performance and injunctions.

This principle goes hand in hand with a number of maxims. Firstly, equity aids the vigilant and not the indolent. By watching silently the actions of the secondary party and not doing anything to stop him, the primary party waives his right to claim the property at a future date. He needed to have acted swiftly to stop the secondary party before any property was laid on his land. Equity will assume that the primary party waived his rights.

Secondly, delay defeats equity. The time taken for the secondary party to have constructed the buildings on the property of the primary party must have been long. The primary party had the opportunity to stop the secondary party butt he chose not to. He cannot then be heard at a later date to claim his proprietary interests.

Thirdly, equity follows the law. under the principle of prescription in common law and adverse possession—which is statutory—a secondary party acquires proprietary interests over the primary party’s land after continuous uninterrupted stay of 20 and 12 years on the land of the primary party. This is the law in all common law jurisdictions. A secondary party who intends to prove the doctrine of prescription or adverse possession may apply the principle of proprietary estoppel where he has constructed buildings on the suit land. If this claim is proved to the required standards, equity will prevail and the secondary party can claim proprietary interests in the primary party’s land.

Lastly, the principle was established to defeat any fraudulent actions of the owner of the property to try and benefit from a transaction to which he was not a party. The fraud principle under equity differs from that under common law in that no fraudulent intent needs to be proved in a court of law. This makes the principle easier to prove where proprietary estoppel is concerned.

A primary party who waits to benefit from the constructions and other property laid upon his land by a secondary party; on the basis that he is the true owner of the land acts in a fraudulent manner. Such behavior is unconscionable. It is unjust and unfair and clearlybreaches equitable principles. The court will not allow the primary party to succeed in such a cause. The secondary party can then invoke the doctrine of proprietary estoppel to defeat the claims of the primary party.

Promissory Estoppel

Promissory Estoppel works just like proprietary interest but instead of property, a promise is made. The primary party makes a promise to the secondary party to give property, money or some other benefit to the latter. When the debt is due, the former is stopped from denying that he made such a promise.

This principle only works where there is consideration given by the secondary party to warrant the promise by the primary party. Past consideration is not considered good unless it concerns a composite arrangement, benefit to a third party or a variation in the mode of delivery: time, place or amount.

The main maxim that comes into play is that equity will not imperfect a perfect gift. This entails the promise to a secondary party that cannot stand in law. Equity moves in to aid the secondary party and apply the maxim in such a way that the secondary party can claim his entitlement form the first. After all, equity will not suffer a wrong without a remedy.

Another maxim is that he who seeks equity must also do equity. In this regard, the secondary party ought to have given some form of consideration to warrant the promise. It could be an act of kindness that prompted the primary party to make the promise or it could be a sum of money forwarded to the primary party with the intention that the primary party will not enforce his right regarding the cash. The effect of this is to suspend the debt to a later date. Therefore the primary party will be stopped from demanding further payment as and when the debt is due. The maxim that guides this transaction is that equity will not imperfect a perfect gift.

Estoppel by Acquiescence and Encouragement

Estoppel by acquiescence takes place where a person allows another to till land that the secondary party mistook to be his. In this case, the true owner will be stopped from claiming any interests in his land under this principle.

Estoppel by encouragement may occur where the primary party encourages the secondary one to take up a piece of land and till or build on it. The parties then draw a document that is intended to convey the property to the secondary party but which in actual sense does not. Third parties who claim interests to that land will be stopped from claiming the same under the doctrine of estoppel by encouragement.

These principles act as a shield to litigation and therefore support the maxim that equity is a shield and not a sword. They also further the maxim that equity does not aid volunteers. Under equity by encouragement, the third parties are considered volunteers because they have no proprietary interests in the suit land. Consequently they have no business bringing any suit in regard to the same.

These maxims relate to the principle of equity that prevents undue influence. This is so because the volunteers could be persons of influence who can easily sway the benefactors into giving up their interests in the property. The principle against undue influence under the law of equity grants the secondary party a remedy that is not provided for under common law. The application of equity under these circumstances ensures fair administration of justice for the secondary party.

References

Campbell Jennifer & Howard Christopher, The Double Edged Sword of Judicial

Estoppel (2007) Schwabe.com. Web.

Evans Michael, Equity and Trust (Butterworths, 1^st ed, 1996) 90.

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