What is Estoppel?
Estoppel is a legal principle that prevents individuals from making contradictory claims or assertions that conflict with their previous statements or actions upheld by law. Simply put, estoppel stops a person from making statements or taking actions that counter what they have declared or agreed to before. A critical part of common law, estoppel exists to ensure fairness and consistency, preventing unjust harm caused by one party’s changing words or actions.
Key Takeaways
- Estoppel is vital in common law systems, including those of the U.S., U.K., and Canada.
- It ensures individuals live up to past statements or actions, safeguarding other parties from potential harm.
- Various estoppel doctrines exist internationally, adapting the core principle to local legal frameworks.
- Key estoppel types include collateral estoppel, equitable estoppel, and promissory estoppel.
- Estoppel certificates play a significant role in real estate transactions, certified by tenants when property owners seek transactions involving their property.
How Estoppel Works
Common law stems from judicial decisions and established precedents, instead of being laid down through legislative statutes. Originating from English common law, it significantly influenced the U.S. judicial system, which developed its own common law over time. Countries adopting common law principles like the U.K., U.S., and Canada have embedded various estoppel doctrines. Despite differing names and nuances, the overarching idea is maintaining consistency in words and actions.
As already mentioned, estoppel legally prohibits contradictory statements or actions against previous assertions. Essentially, it ensures that individuals stand by their commitments and do not unjustly disrupt others based on inconsistent behavior. So, if Person A makes a commitment to Person B, they must uphold it, being legally estopped from reneging. This principle manifests in several variants:
The action itself, called estop, targets the individual retracting their previous stance, rendering them estopped.
Types of Estoppel
Several kinds of estoppel are recognized legally:
- Collateral Estoppel: Prevents individuals from filing multiple lawsuits on the same issue, protecting against redundant legal actions and resource misuse.
- Estoppel by Deed: Stops individuals from disputing truths declared in a deed they signed.
- Equitable Estoppel: Thwarts parties from adopting new legal stances that conflict with their previous positions if it adversely affects the other party.
- Promissory Estoppel: Prevalent in contract law, it defends a party that relied on another’s reasonable promise and consequently faces substantial financial losses when that promise goes unfulfilled.
Lesser-known estoppel types include estoppel by record, estoppel by deed, laches, estoppel by silence, and reliance-based estoppel.
Estoppel Certificate Components
Estoppel certificates are critical in the mortgage and commercial real estate sectors. Lenders or third parties often require this document during property transactions or refinancing activities. Usually prepared and signed by tenants, this document validates claims made to third parties by property owners. Points typically covered in estoppel certificates include:
- Lease terms (start and end dates).
- Date of the last rent payment.
- Confirmation of lease currency or identification of any defaults.
- Statement of unmodified lease terms or disclosure of any modifications with corresponding dates.
Example of Estoppel
Promissory estoppel was central in an Iowa case where a farmer leased land from a neighbor who promised selling the farm at $3,000 per acre in the future. Betting on this promise, the farmer significantly improved the property but faced betrayal as the owner sold it to a third party. The farmer sued, asserting his right to purchase. A trial jury awarded $52,000 in damages for his improvements. The Appellate Court upheld that verbal promises, perceived legitimate in this context, required adherence, resulting in the farmer’s compensation.
Defining Estoppel\ldots Simply Put
Estoppel, anchored in common law, aims to maintain fairness by ensuring individuals abide by their previous declarations, consequently protecting others from undue harm. Legally, courts might prevent someone from rescinding a made promise.
What is an Estoppel Certificate?
In the mortgage and commercial real estate domain, estoppel often involves a written certificate, signed by tenants. This document verifies the landlord’s lease terms and can be crucial in property transactions, refinances, and lease assignments.
Types of Estoppel Unpacked
Estoppel takes various forms, from the more prominent equitable and promissory estoppel to the less-known collateral estoppel and estoppel by deed. Each serves to reinforce fairness by prioritizing previous factual assertions and commitments over contending scenarios.
The Bottom Line
Rooted in common law, estoppel is key in preventing individuals from reneging on their words and commitments. Ultimately, this doctrine fosters trust and minimizes unfair actions and miscommunications by holding everyone accountable to previously established truths and promises.
Related Terms: Common Law, Collateral, Promissory Note, Lease Agreement.
