Navigating the complexities of contract law, one often encounters the nuanced distinction between equitable estoppel and promissory estoppel. According to the American Bar Association, equitable estoppel serves as a shield, protecting a party who has relied on another's misrepresentation of facts. On the other hand, promissory estoppel, as explained by the Cornell Law School's Legal Information Institute, is akin to a sword, allowing a party to enforce a promise that led to their detrimental reliance, even in the absence of a formal contract. Understanding the key differences between equitable estoppel vs promissory estoppel is crucial for parties in contractual disputes to effectively assert their rights or defenses.
Estoppel itself is used to keep a party from promising one thing and then changing the circumstances after a second party has relied upon the promise. Promissory estoppel allows the party who was wronged by his or her reliance upon the specific promise or assertion to collect damages. In an issue of promissory estoppel, the promise must be definite.
A representation can be made either by words or conduct in equitable estoppel. A party who has a duty to make a statement but fails to make one is in effect making a statement by its silence. The party making the representation intends for the other party to rely upon such a representation.
After the first party makes a representation by word or deed, it may not contradict its representation. The second party states that the first party is estopped from changing its position based upon the first party’s initial representation to the second party. The second party’s claim of estoppel is a defense against whatever claim the first party is putting against the second party. Each of these claims must be factual in nature in order for the two parties to argue them.
The party who detrimentally relied upon the promise made by another party may use promissory estoppel to attempt to get relief for whatever problem the reliance has caused. The party requesting relief will have to prove to the court that the first party made a specific promise and that the second party took an action or actions based upon such a promise. In order to receive relief, the result of the actions taken by the second party must have resulted in some form of loss. Again, the actions taken and the loss incurred must be factual in nature, or there will be no relief granted to the requesting party.
The manner in which each of these forms of estoppel is argued varies by jurisdiction. Certain jurisdictions rarely permit the defense of equitable estoppel. Equitable estoppel is less precise and as such might be more difficult to prove. Promissory estoppel has certain specific elements that must be proven in order for the cause of action to exist; thus, it is permitted in all jurisdictions.
What Is Equitable Estoppel in Contract Law?
Equitable estoppel relating to a contract typically involves voluntary concealment of material facts, fraud, silence or omission of facts and acquiescence. If a contract is voluntarily entered into by the involved parties under false pretense, that situation may not be used to cause harm to one involved party by the other involved party's voluntary action. Equitable estoppel is typically used to protect a victim, and not as a means of legal attack.
An example of equitable estoppel involving a contract can be seen in marriage. Consider a situation in which two people enter into the contract of marriage, believing each other to be legally single, and live together for years as a married couple. If one person decides to file for divorce and during the process, the other person discovers that their marriage is not legally recognized, the courts may uphold that the other person cannot deny alimony based on an argument that their marriage never existed. If both parties believed they were married and carried out their lives in a way that supported that belief, it would fall under acquiescence within equitable estoppel. This would not allow the newly discovered fact that the marriage does not legally exist, to be used to harm the case made by the complaining party.
How To Produce an Effective Equitable Estoppel
A case for equitable estoppel requires certain events to occur for the claim to be effective. Evidence for a case asserting equitable estoppel will usually contain these three basic elements:
- One party has previously represented a material fact that contradicts a position that is later argues
- There is a reliance on the previously represented material fact
- The party claiming estoppel is harmed by the changed position due to reliance on the previously represented position and material fact
If the side asserting equitable estoppel cannot also prove prejudice, loss, injury or some form of detriment in addition to these attributes, the case for equitable estoppel is insufficient. There also needs to be clear proof that the side claiming estoppel fully believed the actions, speech, conduct, and ommissions of the side that the estoppel is claimed against.
The requirements for equitable estoppel vary from state to state and tend to be more effectively litigated by a lawyer or law firm experienced with state-specific requirements. An equitable estoppel plea may, in some states, require proof of intent that the accused intended to deceive. In other states, misleading someone by way of negligence is an acceptable reason to plead equitable estoppel. It is imperative to understand how equitable estoppel is evaluated and defined in the state where the case is being heard.
How To Plead Equitable Estoppel
Equitable estoppel is generally used as a defense tactic. Before pleading, evaluate with legal counsel if a case for equitable estoppel can be met. This would require that an inconsistent argument be made or denial of a previously asserted material fact by the opposing party. There could also be an inconsistent position or fact made in the current case based on the assertions made by one side in a separate but associated case.
How the equitable estoppel is pleaded will depend on the amount of evidence collected showing deception or inconsistencies and how willful the offending party was in committing the estoppel. The court will also consider the amount of belief in the misleading information or action and damage caused by that belief to the party claiming the estoppel. The state where the case is being tried will also dictate how the equitable estoppel is pleaded and what level of willfulness is required by the offending party to be held accountable.
What exactly is promissory estoppel?
Promissory estoppel is a legal notion that prevents one person from breaking a promise made to another, even if the promise is not backed up by a legally binding contract. This notion is used when the promisee relies on the promise to his or her harm and it would be unreasonable to enable the promisor to break the promise. In the absence of a contract, promisory estoppel empowers the promisee to enforce the promise against the promisor.
What exactly is equitable estoppel?
Equitable estoppel is a legal doctrine that prohibits a party from rejecting the validity of a previously declared statement or fact if such assertion was relied on by another party to his or her detriment. This doctrine is founded on the idea of fairness and is used in cases where allowing the party to reject the validity of the statement or fact would be unjust or inequitable.
What is the distinction between promissory and equitable estoppel?
The nature of the promise or statement on which the estoppel is founded is the main distinction between promissory and equitable estoppel. When a promise is not supported by a legally binding contract, it is referred to as promissory estoppel, whereas equitable estoppel arises when another party relies on a statement or fact. Additionally, promissory estoppel is focused with the enforcement of the promise, whereas equitable estoppel is concerned with preventing a party from disputing the truth of a statement or fact.
What is the practical use of promissory estoppel?
Promissory estoppel applies when one party makes a promise to another that is not supported by a legally binding contract, and the promisee relies on the promise to his or her detriment. To establish promissory estoppel, the promisee must demonstrate that the promisor made a clear and unambiguous promise, that the promisee relied on the promise to his or her disadvantage, and that it would be unfair to enable the promisor to back out of the promise.
When does equitable estoppel come into play?
Equitable estoppel is employed when one party makes a statement or declares a fact that another party relies on to his or her detriment. To establish equitable estoppel, the party asserting the estoppel must show that the other party made a clear and unequivocal statement or assertion, that the party asserting the estoppel relied on the statement or assertion to his or her detriment, and that allowing the other party to deny the truth of the statement or assertion would be unfair. Equitable estoppel is typically employed in the context of fraud, where one person makes a false statement that is relied on to the prejudice of another.
