Estoppel is a legal doctrine that a party can be stopped from doing something that is inconsistent with a previously made judicial determination or with their previous actions. It prevents a party from going back on their word.

What is promissory estoppel?

The principle of estoppel may apply where there is a business contract in place (or a contractual relationship that is not formally a contract). A person or entity who is a party to this relationship (“the promisor”) makes an assurance or “promise” in the context of the agreement. The promisor subsequently fails to fulfil that promise and as a consequence the party to whom they made the promise (“the promisee”) suffers a detriment or loss. In certain circumstances, the promisor may be “estopped” from not fulfilling that promise. This is a type of estoppel known as promissory estoppel. A leading promissory estoppel case in Australia is Waltons Stores (Interstate) Ltd v Maher (1988) heard in the High Court of Australia.

Waltons

Waltons sought to lease premises from the Mahers. The Mahers completed demolition and other work on the property even though the parties had not signed a formal contract. They did this based on the behaviour of Waltons that indicated the contract was proceeding. Waltons later advised Mahers that they were not proceeding with the contract. As a result, the Mahers suffered a loss. The Mahers successfully won a court proceeding against Waltons based on the principle of promissory estoppel. The High Court held that Waltons were legally bound and could not deny the existence of a binding agreement despite no contract having been formally executed.

Another cornerstone Australian case about promissory estoppel is Commonwealth v Verwayen (1990).

Verwayen

Verwayen was an injured veteran who sought damages from the Commonwealth for injuries he sustained during his service. The Commonwealth relied on the defence that there was no duty of care and a defence relying on the statute of limitations. Two of the majority judges found that promissory estoppel applied. The Commonwealth was ordered to pay some of Verwayen’s legal costs to remedy the detriment caused by its failure to honour its promise.

Elements of promissory estoppel

The following elements need to be established to successfully make a case for promissory estoppel:-

1. Some form of legal relationship (whether or not contractual) existed between the parties;
2. The promisor gives an undertaking or assurance or promises that it will not strictly rely on its legal rights;
3. The promisee relied upon and  acted upon the promise on the understanding that it would be kept:
4. the promisee was made suffered a loss or detriment due to having acted upon it;
5. An element of unconscionability. The promisee needs to show that allowing the promisor to break their undertaking, assurance or promise would be unjust or inequitable.

What relief is available?

A court will not necessarily force the party giving an undertaking, assurance or promise to keep it. Rather the court will consider the detriment caused to the promisee and seek to have the promisor remedy that detriment. The relief may include promisor who broke the undertaking, assurance or paying legal costs, or awarding the promise damages. Where no other form of relief would ensure justice is done, the court may order the promisor to honour the promise.

Limitations of the doctrine

There are some limitations to the doctrine of estoppel.

Estoppel is not an independent cause of action

A party seeking to plead the principle of estoppel cannot do so as its sole cause of action against another party.

A promise need not be forever

Where promissory estoppel is found to apply to a situation, the promise does not have to stand forever. The promisor can withdraw its promise by ensuring that:

1. It gives notice to the promisee of its intention to withdraw the promise;
2. The notice to withdraw the promise must be reasonable but need not be formal;
3. the promisee must be able to return to the position it would have been in before the promise was made.

Other forms of estoppel

There are other forms of estoppel:-

Judicial estoppel

This prevents a party to a legal proceeding from arguing a position that is contrary to what they had previously argued.

Collateral estoppel

Collateral estoppel prevents a party from re-litigating an issue of fact or law that has already been determined in a prior proceeding.  It prevents someone from bringing the same civil action against someone.

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