Estoppel

The legal principal of estoppel keeps a party from alleging a fact or acting in a certain way, then attempting to claim something in opposition to that fact or action later in the proceeding to suit their purposes. In other words, a party cannot deny a fact that has already been settled as truth. The truth may have been determined by a judicial decision, legislative act, or by the party’s own acts, deeds, or representations. To explore this concept, consider the following estoppel definition.

Definition of Estoppel

Noun

  1. A legal principle that prevents, or “stops,” someone from asserting a fact that is contradictory to an already established truth.

Origin

1575-1585   Middle French estoupail

What is an Estoppel

When a court determines a party has done, or is attempting to do something, that should be prevented or “stopped,” it issues an order of estoppel. The party is then said to be “estopped” from taking that action, such as presenting the related evidence, or from making a particular argument.

Types of Estoppel

There are five primary types of estoppel relied upon in U.S. law:

  1. Reliance-Based Estoppel – involves the reliance of one party on something the other party said or did. This is also known as “promissory estoppel.”
  2. Estoppel by Record – occurs in a court action in which a judgment or order in a previous case or legal proceeding prevents the parties from reintroducing or re-litigating the same issue or cause of action. This is also known as “collateral estoppel.”
  3. Estoppel by Deed – applies when the rules of evidence prevent a party from denying the truth of what has already been said or done.
  4. Estoppel by Silence or Acquiescence – prevents a party from asserting or stating something that he had the right and opportunity to assert earlier, and where his silence put another party at a disadvantage.
  5. Laches – refers to an estoppel after a party deliberately and avoidably delays an action for the purpose of creating a disadvantage to an adversary.

Reliance-Based Estoppel

Reliance-based estoppel requires one party to have said or done something upon which the other party relied to decide an action or change a behavior. Such representations include:

  • Representations of fact, where one party asserts a set of facts to be true to another party
  • Promissory estoppel, in which one party makes a promise to another party, but without an enforceable contract
  • Proprietary estoppel, in which two or more parties engage in litigation to claim title to land

All reliance-based estoppels require the victimized party to show he was induced into the agreement, or took action based on the other party’s representations, and that he suffered damages as a result. To gain an order of reliance-based estoppel, five basic elements must be proven at court:

  1. Evidence must presented that proves the party making the representations had the intent to induce the victim to act on his representation or promise;
  2. The victim must show it was reasonable for him to act on the other party’s representation or promise;
  3. The action taken by the victim must be shown to be reasonable, or that the victim took the action intended by the party making the representation or promise;
  4. The victim must show he would suffer loss or damage if the party making the representation is allowed to deny what was said or done; and
  5. The victim must show that the representing party’s behavior is so egregious as to be “unconscionable” for the court to allow him to reverse his position.

Example of Promissory Estoppel

John’s uncle encouraged him to take a trip to Europe, promising to reimburse his expenses. John agreed, but when he returned from his trip, his uncle refused to pay. John sued his uncle in civil court. The court found that John had only taken the trip because of his uncle’s promise to pay for it, meaning he had relied on his uncle’s promise in deciding whether to take the trip. John’s uncle was ordered to pay the expenses as agreed, as promissory estoppel made the agreement enforceable.

Laches or Equitable Estoppel

Laches is a form of equitable estoppel in which one party claims the other has failed to assert its rights in the matter. The delay in such a case must be shown to have resulted in evidence or witnesses no longer being available, or circumstances to have changed during the delay making it unjust to grant the delaying party’s claim. Elements required to be proven to gain equitable estoppel include:

  • Facts were suppressed or misrepresented
  • The representing party had knowledge of the true facts
  • The representing party acted with fraudulent intent
  • The victim was induced by, and relied upon, the represented facts
  • The victim sustained injury or damages
  • Clear, unambiguous proof of the representing party’s acts

Examples of Estoppel

Maryann obtains a judgment of paternity in family court, showing that Steve is the father of her baby. Later, Maryann seeks an order for Steve to pay child support. Because the issue of paternity has already been established by the court, Steven is collaterally estopped (or “estopped by record”) from claiming he is not the father in an attempt to avoid his child support obligations.

Alternatively, if following the judgment of paternity, Steve requests custody of the baby, Maryann would be equitably estopped from claiming Steven could not have custody because he is not the father. In this case, equitable estoppel prevents Maryanne from changing her position from her earlier claim, because Steve would suffer harm, in being denied custody, by the change.

What is an Estoppel Certificate

An estoppel certificate is a legal document used to clarify certain facts as true when entering into an agreement, such as a mortgage or lease. In the certificate, one party certifies for the other party’s benefit, that certain facts are correct, such as that a lease exists, the rent has been paid through a specified date, and that no defaults exist. Having an estoppel certificate prevents the certifying party from later attempting to claim different facts.

Estoppel certificates are often used in the purchase of real property that is occupied by tenants to confirm the terms of existing lease obligations of the property. While questions asked in any estoppel certificate may vary, commonly requested information includes:

  • A copy of the existing lease
  • Confirmation of standard terms of the lease
  • Beginning and expiration dates of the existing lease
  • Tenant name
  • Amount of current monthly rent
  • Amount of security deposit
  • Whether the tenant is allotted parking spaces or storage space

Considerations Before Signing a Tenant Estoppel Certificate

Before signing a tenant estoppel certificate, a tenant should carefully review and understand all of the facts it contains. In signing a tenant estoppel certificate, the tenant may be giving up defenses important to future claims made by the landlord under the lease. For example, tenant Bob paid a deposit of $2,000 for his store space, and a monthly rental amount of $2,000. On the initial walk-through of the property, it was noted on the lease that there was some damage to a light fixture in the store. When a buyer of the property presents an estoppel certificate for Bob to confirm the terms of his lease, he signs after making a cursory scan of the document.

When Bob moves out of the space at the end of the lease term, he expects to receive his full deposit back. Bob receives a check for only $800, with a statement showing $700 was deducted from his deposit of $1,500 for repair of the light fixture. Because Bob did not bother to ensure the tenant estoppel certificate contained the correct deposit amount, as well as a record of the previously damaged light fixture, he is unlikely to be successful in a small claims action requesting his full deposit.

Estoppel Letter from Home Owners’ Association

Purchasing a property that is subject to the rules of a Home Owners’ Association (“HOA”) requires some special handling. In most states, an estoppel letter from the HOA is required to be included in the escrow documents. The estoppel letter states specific information regarding the financial standing of the property’s current owner with the HOA, including fees due, and fees and other assessments that have not been paid or are delinquent. The letter should also specify any future assessments that are projected or in progress. Because the HOA’s fees and assessments must be satisfied, whether by the current owner or the buyer, the information in an estoppel letter often holds a prominent place in negotiations between buyer and seller of the property.

Related Legal Terms and Issues

  • Acquiescence – agreement or consent through silence; acceptance by failing to object.
  • Egregious – extraordinarily bad.
  • Fraudulent Intent – a false statement or deceptive act made with the intent to deceive the victim.
  • Litigation – the process of taking legal action; the process of suing someone, or trying them for a criminal act.
  • Promissory – containing, implying, or having the nature of a promise.
  • Representation – a statement or account made to someone to influence their actions or opinion.
  • Unconscionable – shockingly unfair or unjust; shocking to the conscience; extremely wrong.

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