What is the Doctrine of Estoppel and Other Equitable Defenses Available in Law

by

Estoppel is one of the Equitable defense tools available out there. Doctrine of Estoppel explains its scope of applicability. In most simplistic words, this is about how a defendant can take advantage of the lapses on the part of Plaintiff and turn around the outcome of ruling.

Internationally acknowledged equitable defenses that you might come across are: Mistake, fraud, illegality, failure of consideration, forum non conveniens, laches, Acquiescence, Waiver, Estoppel and Unclean hands.

Basically, equitable defenses are affirmative arguments asking the court to excuse an act because the party bringing the case (plaintiff) has acted in some inequitable (improper/unjust) way. UK and US have separate courts of equity to look after equity issues. However, now a days equitable defenses are maintainable in their court of law too. In India, Court of Justice is one integrated system to look into all the issues.

Having said that, major defense tools with most frequent applicability internationally are Estoppel, Laches & unclean hands.

Whereas, Estoppel relies on inconsistent claims or assertions, Laches rests on delay in making claims while unclean hands counts on plaintiff’s malafides and wrongdoing. Strangely enough, all are interrelated to each other and more than one apply together.

So, How Does Estoppel Come into Play ?

Estoppel is a legal instrument used to prevent a person intending to retract or go back from his/her own words.  The legal system might prevent, or “estop” a person from making assertions or from going back on his or her word in the interest of justice/ equity. Accordingly, the person being sanctioned is “estopped”. Estoppel may also prevent someone from bringing a particular claim.

There could be many different possibilities of estoppel having to come into play. However, the common element of all the circumstances is that a person is restrained from asserting a particular position in law where the assertion if allowed would make proceeding inequitable. Estoppel is an equitable doctrine. This also implies, any person wishing to assert an estoppel must come to the court with “clean hands”.

Section 115 of the Indian Evidence Act defines estoppel: “When one person has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing.”

Estoppel is applied in many areas of contract law, including insurance, banking, and employment. Promissory estoppel is often applied where there is a promise or an agreement made without consideration. When used as a defense by a defendant, it is sometimes called a “shield”, and when used affirmatively by a plaintiff it is sometimes called a “sword”. However, as per most commentators, it can only be used as a shield.

Examples Where Estoppel Would Apply

Essentially, the doctrine of estoppel is based on the proposition that consistency in word and action imparts certainty and honesty to human affairs. If a person makes a representation to another, on the faith of which the latter acts, to his prejudice, the former cannot recant the representation. Having said that, following example elucidates the concept further:

(I) If a landlord promises the tenant that he will not exercise his right to terminate a lease, and relying upon that promise the tenant spends money improving the premises, the doctrine of promissory estoppel may prevent the landlord from exercising a right to terminate, even though his promise might not otherwise have been legally binding as a contract. The landlord is precluded from asserting a specific right.

(ii) If a person brings legal proceedings in one country claiming that a second person negligently injured them and the courts of that country determine that there was no negligence, then under the doctrine of issue estoppel the first person will not normally be able to argue before the courts of another country that the second person was negligent (whether in respect of the same claim or a related claim). The first person is precluded from asserting a specific claim.

(iii) A city enters into a contract with another party. The contract stated that it had been reviewed by the city’s counsel and that the contract was proper. Estoppel is applied to estop the city from claiming the contract was invalid.

(iv) A creditor unofficially informs a debtor that the creditor forgives the debt between them. Even if such forgiveness is not formally documented, the creditor may be estopped from changing its mind and seeking to collect the debt, because that change would be unfair.

(v) A landlord informs a tenant that rent has been reduced, for example, because there was construction or a lapse in utility services. If the tenant relies on this statement in choosing to remain in the premises, the landlord could be estopped from collecting the full rent.

Overlapping Doctrines of Defense Yet Being Distinctive

The doctrine of estoppel (which may prevent a party from asserting a right) is often confused with the doctrine of waiver (which relates to relinquishing a right once it has arisen) because of certain common characteristics . Also, doctrine of estoppel overlaps with doctrine of laches but still it is distinct. In fact, interpretation wise Laches and Waiver lead to estoppel and hence Laches and Waiver could be preconditions of estoppel.

Laches is associated with the maxim of equity, “Equity aids the vigilant, not the sleeping ones (that is, those who sleep on their rights).” Put another way, failure to assert one’s rights in a timely manner can result in a claim being barred by laches.

When asserted in litigation, Laches makes an equity defense i.e, a defense to a claim for an equitable remedy. The person invoking laches is asserting that an opposing party has “slept on its rights”, and that, as a result of this delay, circumstances have changed, witnesses or evidence may have been lost or no longer available, etc., such that it is no longer a just resolution to grant the plaintiff’s claim.

Another mutually overlapping doctrine of defense is the doctrine of unclean hands which denies a party equitable relief when there is evidence of bad faith. The defendant can bring in this defense when the plaintiff has acted in some inequitable way. If the plaintiff in an equity claim is not innocent of any wrongdoing, risks dismissal of the case.

Dismissal of case on account of laches works a bit differently because of nuances of Doctrine of Laches.  It proposes that a plaintiff should not “sleep on his or her rights.” If a plaintiff knows of the defendant’s harmful actions but delays in bringing suit, and the delay works against the rights of the defendant, the plaintiff risks dismissal of the case. Under modern law, such defenses are available in any civil case.

How Could Acquiescence, Laches & Waiver Lead to Estoppel [Wider Application in Indian Law System] ?

# Acquiescence occurs when a person knowingly stands by without raising any objection to the infringement of his or her rights, while someone else unknowingly and without malice aforethought acts in a manner inconsistent with their rights. As a result of acquiescence, the person whose rights are infringed may lose the ability to make a legal claim against the infringer, or may be unable to obtain an injunction against continued infringement. The doctrine infers a form of “permission” that results from silence or passiveness over an extended period of time.

The silent permission sort of act by the person/ entity might enable the infringer to use the tool of estoppel.  When one party gives legal notice to a second party of a fact or claim, and the second party fails to challenge or refute that claim within a reasonable time may give rise a claim of estoppel. The second party may be said to have acquiesced to the claim, and thus to be estopped from later challenging it or making a counterclaim based upon the actions of the other party.

# Estoppel by acquiescence is different from estoppel by laches as acquiescence involves an intentional act [voluntary] of the party who is accused of acquiescence, while laches may result from conduct that might not be voluntary. Essentially, Laches refers to a lack of diligence and activity in making a legal claim. It is an unreasoned delay that can be viewed as prejudicing the opposing [defending] party. Failure to assert one’s rights in a timely manner can result in a claim being barred by laches.

# In equitable defense, Doctrine of Waiver [ Precisely, estoppel by waiver for infringement] refers to a situation where the plaintiff has made his/ her rights vulnerable to be infringed on their own. A “waiver” is basically the relinquishment of a right. In India, Fundamental rights [FR] cannot be relinquished as FR being a matter of Constitutional policy that guarantees enforcing of FR for one and all. But, you can relinquish many other statutory rights other than FR.

Yes, you can waive many other rights. You could “waive” the right to be free from unreasonable searches & seizures and allow the police to search your home without any warrant. Very commonly, you sign waivers, stating that you will not sue someone because it is your choice to engage in a dangerous activity with their help. When you sign an undertaking before embarking on scuba diving, a rock climbing, sky diving or any such activity involving risk to life and limb, you basically relinquish your rights.

In India, except FR you can forego/ relinquish any of your protected rights [ includes the ones enforceable through contract] and get waived/wipped of your rights. And, if such is the case, the respondent in litigation with you might at time resort invoking Doctrine of Waiver for estoppel to come into play.

Finer Distinctions Between Waiver and Estoppel

Although, none of the defense tools available can function in isolation and work in tandem for most part, there are distinctions that has to be kept in mind. Following are the observations of Court of Justice at different stage of time in Indian law system.

1)The Estoppel is a ‘rule of evidence’ and not a cause of action whereas, waiver is contractual and may constitute a cause of action.  Waiver is an agreement between the parties and a party fully knowing of its rights has agreed not to assert a right for a consideration.

2) Even though Waiver and Estoppel are two different concepts, still the essence of a Waiver is an estoppel and without Estoppel, there cannot be any Waiver. The court has also held “Estoppel and waiver are questions of conduct and must necessarily be determined on the facts of each case”.

3) A right can be waived subject to the condition that no public interest is involved therein. However, the scope of the Doctrine of Waiver with respect to Fundamental rights is a bit different. These fundamental rights have not been put in the Constitution merely for the individual benefit though ultimately, they come into operation in considering individual rights. They have been put there as a matter of public policy and the ‘doctrine of waiver’ can have no application to provisions of law which have been enacted as a matter of Constitutional policy.

4) Articles 15(1) 20, 21, makes the proposition quite plain. A citizen cannot get discrimination by telling the State ‘You can discriminate’, or get convicted by waiving the protection given under Articles 20 and 21.”

Black’s Law Dictionary defines Waiver as “the voluntary relinquishment or abandonment (express or implied) of a legal right or advantage”. It also says that the party alleged to have waived a right must have had both knowledge of the existing right and the intention of forgoing it.

The Doctrine of Waiver seems to be based on the premise that a person is his best judge and that he has the liberty to waive the enjoyment of such rights as are conferred on him by the state.

Definitions of Estoppel- Multitude of Narratives

Estoppel is sometimes said to be a rule of evidence whereby a person is barred from leading evidence of a fact that has already been settled.

Definitions of Estoppel from Legendary Luminaries

1.Legal Dictionary, Law.com defines estoppel as

“a bar or impediment (obstruction) which precludes a person from asserting a fact or a right or prevents one from denying a fact.”

2.Duhame’s Law Dictionary defines Estoppel as [Defn 2 to 6: Duhame’s ]

“A rule of law that when person A, by act or words, gives person B reason to believe a certain set of facts upon which person B takes action, person A cannot later, to his (or her) benefit, deny those facts or say that his (or her) earlier act was improper.”

And that “Estoppel is the law’s way of saying “you can’t have your cake and eat it.”

3) One British Judge in 1862

“A man shall not be allowed to blow hot and cold – to affirm at one time and deny at another – making a claim on those to whom he has deluded to their disadvantage, and founding that claim on the very matters of the delusion.”

4) As per William Blackstone

“An estoppel … happens where a man hath done some act or executed some deed which estops or precludes him from averring any thing to the contrary.”

5) A 1891 English court decision summarized estoppel as:

“… a rule of evidence which precludes a person from denying the truth of some statement previously made by himself”.

6) In 1923, Justice Idington of Canada’s Supreme Court (Mackay Co. v British American Assurance Co)

“… if a man, whatever his real meaning may be, so conducts himself that a reasonable man would take his conduct to mean a certain representation of facts, and that it was a true representation, and that the latter was intended to act upon it in a particular way, and he with such belief does act in that way to his damage, the first is estopped from denying that the facts were as represented.”

Reference to Judgements in India Where Doctrine of Estoppel has been Applied

1. Khoday Distilleries Limited vs. The scotch whisky association and others

2. Madras Institute of Development Studies v. K. Sivasubramaniyan [application 14 to 18]

3. Amarnath Rana v. State of Himachal Pradesh & Others [Para 9]

Broader Classes of Estoppel- Difference in Estoppel(s)

The scope of applicability of estoppel is enormous and accordingly, there could be variety of estoppel. Some of the most common estoppel which could be differentiated based on their inherent characteristics are below:

Reliance-based estoppels: This is aggregate of all instances of estoppel wherein, one party relies on other for any piece of information, be it bargain, representation of facts or promise. The party upon whose credibility the other relied is liable for estopped.

Estoppel by record: Under such estoppel, comes the ones wherein, orders or judgments made in previous legal proceedings prevent the parties from re-litigating the same issues or causes of action. Such estoppel come up as issue/cause of action estoppel or judicial estoppel.

Estoppel by deed: Under this group of estoppel come those which are applied when rules of evidence prevent a litigant from denying the truth of what was said or done.

Estoppel by silence or acquiescence: This group of estoppel involves situations of silent permission from the litigant. Under the circumstances, Estoppel prevents a person from asserting something which he could do earlier but because of his acquiescence the defendant went on continuing something adverse to the rights of litigant. And, now because of silence maintained by the litigant the defendant has landed to a disadvantageous state of matters.

Laches: Under this group of Estoppel, the defense tool comes into play when a litigant delays bringing in suit /cause of action deliberately. The litigant’s idea is to put the adversary to his disadvantage.

REFERENCES:

IMPORTANT READS on this Blog: