What is an estoppel?

What does estoppel mean in legal documents?

Estoppel is a legal principle that prevents a person from arguing something contrary to a claim they have previously made, either through their actions or words, and upon which another person has relied to their detriment. In simple terms, it stops individuals from going back on their word when others have taken them at their word and acted upon it. It's a way to enforce consistency and to protect people from unfair harm due to others' inconsistencies.

An example of estoppel might occur in a landlord-tenant relationship. Suppose a landlord tells a tenant they can skip rent for a month without penalty due to ongoing repairs. If the tenant relies on this statement and does not pay for that month, the landlord cannot later demand the rent for that period citing the initial agreement. The tenant could claim estoppel, arguing that they acted based on the landlord's assurance.

In real estate, estoppel often comes into play with estoppel certificates. These certificates are used primarily in the transfer of lease properties to certify the terms and status of the lease. For example, a tenant may have to sign an estoppel certificate confirming the amount of rent, the absence of defaults by the landlord, and that the lease is in full effect. This protects the buyer from any claims by the tenant that the terms are different after the property is purchased.

To prove estoppel, there are generally a few elements that must be established. First, a representation or assurance must have been made to the claimant. Second, the claimant must have relied on this representation, and third, the claimant must have suffered some form of detriment as a result of their reliance. This could be financial, but it could also be a loss of legal rights or some other form of harm. The key is that there must be a direct link between the representation made and the detriment suffered. It must be clear that the claimant would not have suffered a loss had they not relied on the representation.

Understanding estoppel is important as it underpins the importance of consistency and reliability in statements and agreements, and it helps maintain fair dealings within various aspects of law, be it contracts, property, or even family law. It encourages parties to communicate clearly and stand by their words, knowing that there can be legal consequences for backing out of assurances given to others.

What are some examples of estoppel in legal contracts?

• Real Estate Purchase Agreement: "The buyer is estopped from claiming any defects in the property that were observable during the initial inspection and were not disclosed to the seller prior to closing."
• Employment Contract: "Due to the non-disclosure agreements previously signed, the employee is estopped from disclosing any confidential information related to the company's internal processes."
• Lease Agreement: "The lessee shall be estopped from denying the validity of the lease if they have taken possession and paid rent under its terms."
• Settlement Agreement: "The parties agree that they are mutually estopped from bringing further claims in relation to the incident dated January 1, 2020."
• Insurance Policy: "The insurer is estopped from denying coverage on the basis of any information that the insured had previously disclosed in the insurance application."
• Loan Agreement: "The borrower is hereby estopped from asserting any set-offs or counterclaims against the lender in respect of obligations under this agreement.