Equitable estoppel is a legal term that refers to a situation where one party is prevented from taking a legal position because they have already acted in a way that is contrary to that position. This principle applies in various areas of law, including contract law.
In contract law, equitable estoppel arises when one party relies on the conduct or words of the other party to their detriment. For instance, suppose Party A makes a promise to Party B, and Party B relies on that promise in such a way that they suffer a loss. In that case, Party A may be prevented from denying the promise`s existence due to the principle of equitable estoppel.
The four elements of equitable estoppel in contract law are:
1. A false representation or concealment of material facts by the party to be estopped.
2. The party to whom the misrepresentation was made must have been unaware of its falsity.
3. The party to whom the misrepresentation was made must have relied on it, and this reliance must have been reasonable.
4. The relying party must have suffered harm or incurred a loss as a result of their reliance.
An example of equitable estoppel in contract law occurred in the case of Central London Property Trust Ltd v. High Trees House Ltd. In this case, the defendant, High Trees House Ltd, leased a block of flats from the plaintiff, Central London Property Trust Ltd. Due to the effects of World War II, High Trees House Ltd was unable to pay the full rent, and Central London Property Trust Ltd agreed to reduce the rent for the duration of the war.
After the war ended, Central London Property Trust Ltd sued High Trees House Ltd for the full rent owed during the war period. However, the court ruled that Central London Property Trust Ltd was prevented from denying the rent reduction agreement due to the principle of equitable estoppel.
Equitable estoppel helps to promote fairness and prevent one party from taking an unfair advantage over the other in contract law. Parties should always be aware of their actions and words when dealing with each other to avoid creating a situation where they may be prevented from taking a legal position due to equitable estoppel.