Often used in contract law, this principle comes into effect when two parties have relied upon an assumed true statement of fact, only to learn otherwise after the actions undertaken have been shown as unreasonable or unlawful. A key element of estoppel by convention is “unconscionability or unjustness on the part of the person said to be estopped to assert the true legal or factual position”. Earlier this year, Akenhead J handed down judgment in Mears Ltd v Shoreline Housing Partnership Ltd, the last in a trilogy of cases of the same name dealing with, among other things, the nature and scope of estoppel by convention. The estoppel argument can only be used as a defensive mechanism to a claim, rather than to found a claim in its entirety. During the course of negotiations, the parties agreed that Mears would be paid in accordance with prices set out in a schedule of rates, notwithstanding that the draft contract (an NEC3 Term Service Contract conditions incorporating Option C) contained a different, less generous, payment mechanism. Estoppel by convention contemplates: A “ manifest representation ” of a shared assumption (by statement, conduct or arising from silence) between parties to a contract that a provision of the contract will not be relied upon; Shoreline subsequently sought to rely on the contractual payment mechanism. Katie specialises in contested wills, disputed estates and the removal and substitution of executors. In an unusual proprietary estoppel case, Wills v. Sowray, two brothers found themselves disputing a claim by the daughter of their deceased friend, Tony Sowray, that they were not entitled to inherit his farm despite an understanding that they would do so. The party claiming the benefit of the convention must have relied on the common assumption, albeit that almost invariably both parties will have relied or acted on it or been influenced by it. Akenhead J held that, while an estoppel by convention cannot be used as a sword (rather than as a shield), analysis is required to determine whether it is being used as a sword. Estoppel By Convention.. Mears commenced proceedings seeking payment of the sum deducted. By way of background, it is generally accepted that the leading authority on estoppel by convention is the case of […] What does this mean? Estoppel by convention extends the boundaries of estoppel to include stopping people from arguing a point because of the way that they have acted over time. 1.1. Comment document.getElementById("comment").setAttribute( "id", "7329d08970df8c96f8305586c78a1e7e" );document.getElementById("9c7ef42f70").setAttribute( "id", "comment" ); The Practical Law team and our guest bloggers share their experience and opinions relating to construction and engineering law and projects. What is ‘estoppel by convention’? Estoppel by Convention. Estoppel by representation is sometimes used to enforce a promise for which no consideration was provided. This confirms that, whatever the effect of the trust and partnership language used in NEC3 (and, by extension, other contracts) may be, it will not override or displace the effect of other express terms the parties agree. In so deciding, he made a number of observations that are worthy of note. Estoppel by convention is a form of equitable remedy that acts to bind parties to a shared understanding of the terms and facts of a contract. His reasoning on the point was as follows: “The reality is that the estoppel is properly on the facts being relied upon to show that the deduction of some £300,000 by Shoreline was not conscionable or just by reason of the convention between the parties. Details of these can be found on our Cookie Policy. It claims that the person made a representation, intending another to reasonably rely on it, and out of fairness, it should be upheld. Tags: Estoppel by convention As to estoppel by convention, the basic position has been described as follows: “When the parties have acted in their transaction upon the agreed assumption that a given state of facts is to be accepted between them as true, then as regards that … The Tribunal was referred to a number of legal authorities on the constituent elements of estoppel by convention. Estoppel by convention: Halsbury's Laws of England [368] Representation must have been acted upon by party to whom it was made: Halsbury's Laws of England [375] Reliance on representation must lead person to change his position to his detriment: Halsbury's Laws of England [376] Where this is the case, neither party can go back on this agreement. No presumption is raised by the fact that the party claiming the estoppel is the claimant rather than the defendant, or vice versa. The case makes essential reading for the construction practitioner, not least because of its discussion of the familiar, but thorny, principle that an estoppel by convention cannot found an independent cause of action. Estoppel by convention in English law (also known as estoppel by agreement) occurs where two parties negotiate or operate a contract but make a mistake. It argued that there was an implied term that Shoreline would not take advantage of Mears’ failure to adhere to the contractual payment mechanism without warning. Estoppel by convention is to be used as a shield and not as a sword. As confirmed and clarified by the courts in a recent construction case, estoppel by convention means that a party is prevented, or is “estopped”, from arguing a point due to the way the parties have acted. An estoppel by convention can arise where “the parties to a contract act on an assumed state of facts or law”. (This appears to have been Gloster LJ’s view on the appeal of Shoreline’s strike out application.). Estoppel by conduct means “an inconsistent conduct by one party that causes or threatens to cause harm to another as a result of the second party’s reliance on that conduct.” 1. An estoppel by representation arises where one person (A) makes, by words or conduct, a unilateral representation of fact or law to another (B),which was made by A with the intention of inducing B to rely upon it (or was made in circumstances where A’s conduct is such that a reasonable person would understand that it was intended to be acted upon), and B does in fact rely upon it to their detriment. promissory estoppel, but assume that the requirement of clarity is no greater in the case of an estoppel by convention. There followed Shoreline’s unsuccessful application for summary judgment, alternatively strike out, which was, in turn, unsuccessfully appealed. Skip to main content Accessibility help We use cookies to distinguish you from other users and to provide you with a better experience on our websites. However, the limits of the (potentially very expansive) “materially influenced” formulation that Akenhead J articulated will no doubt be tested by hopeful claimants in future cases. In other words, it is to be used “as a shield and not as a sword”. The doctrine of estoppel cannot vary the terms of a contract, but it may operate to prevent a party from relying on the terms of a contract to the extent necessary to protect the reasonable reliance of the other party. Estoppel and obligation: the modern role of estoppel by convention - Volume 9 Issue 1 - T. Brettel Dawson. Home / The ONCA looked to the SCC in Ryan v Moore for the meaning of estoppel by convention. Hide message. Estoppel by convention. Knowledge base / When two parties proceed upon an assumption which is incorrect, it can be ruled unjust for the parties to revoke that assumption. The Court of Appeal stated that estoppel by convention is "not founded on a unilateral representation, but rather on mutually manifest conduct by the parties based on a common, but mistaken, assumption of law or fact" and that its basis is consensual. In this case, both parties will be prevented from denying that the assumption forms the basis of their relationship. In brief, in order to establish estoppel by convention, it must be established that: The parties to a contract have proceeded on a clear and unequivocal assumed state of facts or law Arguments advanced by R. 3 Decision. The … The parties must share the assumption in question, or at least one party must make the assumption, and then the other party accepts or agrees to it. In a recent case (Rees v Plymouth) that went to the Court of Appeal, the judge ruled that the tenant, Mr Rees, had no grounds for refusing his landlord’s representatives from gaining access in order to carry out an ecological survey on the basis that the request and activity proposed were reasonable. The Court of Appeal further commented that estoppel by convention is a relatively rare form of estoppel that may arise when both parties to a contract act based on a shared assumption concerning circumstances relevant to their contract. Proprietary estoppel. It must also be “unconscionable” or “unjust” for the party in question to act contrary to the convention so that he is “estopped” from departing from it. Estoppel by Convention The Court of Appeal further held that neither estoppel by convention nor promissory estoppel applied to this case. We are talking about the meaning of a convention gleaned from the course of negotiations and we are saying that this meaning is effective to trump the meaning of This case is a good example of how even apparently remote and unusual aspects of the law can have important implications, the implication here being that the claiming party was awarded £300,000 due to the estoppel argument. The Supreme Court of Canada has set out the criteria as to what establishes estoppel by convention in Ryan v.Moore, 2005 SCC 38, [2005] 2 S.C.R. These can be summarised as follows: In the recent case mentioned above, which was Mears Limited –v- Shoreline Housing Partnership Limited, the court held that there was an estoppel both by convention and representation, as a result of which the employer to the NEC3 contract could not retain the deduction it had made of £300,000.00. Instead of focusing on the behaviour of one party who induces another to act in a certain way, estoppel by convention looks at the way in which both parties to a contract have acted due to an assumed state of the law or facts. Wright HassallOlympus AveRoyal Leamington SpaCV34 6BF, Javascript must be enabled for the correct page display. Whether an estoppel by convention can be terminated by the tenant when it no longer receives the service it is paying the landlord for. In Moore, the latest SCC statement on estoppel, Moore’s car hit Ryan’s car on November 27th 1997. Estoppel by convention contemplates: A “ manifest representation ” of a shared assumption (by statement, conduct or arising from silence) between parties to a contract that a provision of the contract will not be relied upon; The legal concept of estoppel does not arise very often, but where applicable, it can potentially be crucial to the outcome. You may choose to decline all tracking cookies, but if you do some key features may not work as expected. Coronavirus (COVID-19): legal guidance from Wright Hassall This is known as ‘estoppel by convention’ and it occurs where two parties approach a situation with a shared or common assumption, i.e. Coronavirus (COVID-19): legal guidance from Wright Hassall, Giving notice under construction contracts by email, In conversation with…Charlotte Johnson, Cedars Farm, Normanton on Soar, Promise of inheritance almost thwarted by intestacy rules, A landlord’s right of access should be considered in context. Relying Party– party acting in reliance on the Representor’s promise Estoppel will operate when the Relying Party has acted on assumption (or reliance) on a representation made by the Representor, and will suffer detriment if the Representor will a… In making such generalisations ‘Lord Denning did not cite, let alone analyse, any of the cases dealing with proprietary estoppel’. Posted by Katie Alsop Estoppel by convention: a legal principal which has been the subject of a number of service charge cases in the Upper Tribunal (Lands Chamber) recently and which managing agents may well find of interest. Pre-action dealings between A and R. First instance decision . Estoppel by convention: the dangers of neglecting to check the legal and factual position before acting in business 27 th November 2015 The case of Dixon and another v Blindley Health Investments Ltd [2015] has reiterated the need to check the legal position on a particular matter properly and thoroughly, as well as any historic documents or agreements between the parties. Shoreline, a social landlord, invited Mears, a contractor, to tender for on-going maintenance and repair works to Shoreline’s substantial property portfolio. At its most simple, the doctrine of estoppel by convention can be thought of as the court concluding that as a result of an individual’s prior representations or conduct, that it would be unequitable and unjust to now allow them to advance a claim. words said or actions performed) which is different from an earlier set of facts.. Estoppel could arise in a situation where a creditor informs a debtor that a debt is forgiven, but then later insists upon repayment. Some of these cookies are essential to the operation of the site, while others help to improve your experience by providing insights into how the site is being used. Reliance includes being influenced by the assumption. Its legal implications can, however, make a big difference to the outcome of a claim, where relevant, when a dispute arises. 2 Facts. Mears carried out work and was paid in accordance with the schedule of rates for six months before the contract, which had retrospective effect, was signed. Estoppel by convention. If that is right, Shoreline is estopped from asserting that it was entitled to make the deduction and, once it is so estopped, the amount deducted should be repaid because there is no remaining good ground to justify its retention.”. As confirmed and clarified by the courts in a recent construction case, estoppel by convention means that a party is prevented, or is “estopped”, from arguing a point due to the way the parties have acted. Overall, while Mears v Shoreline provides useful general guidance on the nature and scope of estoppel by convention, the decision also introduces new scope for argument in relation to both the: Your email address will not be published. 26 op. September communications did not, in any case, amount to an election. Interestingly, Akenhead J rejected Shoreline’s submission that, by claiming the sum deducted, Mears was effectively seeking to subvert the doctrine of consideration and use estoppel as a sword not a shield. Estoppel by convention – what is it, and does it matter? Your email address will not be published. estoppel by agreement: “Mr Tillson … is estopped by the terms of the agreement he made from going behind it … whether it be labelled estoppel by agreement or estoppel by convention is a matter of indifference.” •Peekay v ANZ [2006] 2 Lloyds Rep 511 in which Moore-Bick … The assumption must be shared, or at least “made by one party and acquiesced in by the other”, and must be communicated between the parties in question. Mears Ltd v Shoreline Housing Partnership Ltd, A tale of leaks and complex structure theory. Unsurprisingly, Akenhead J rejected this argument: “I am… not satisfied that there would be any such implied term or that the obligation to act in a spirit of mutual trust and cooperation or even in a ‘partnering way’ would prevent either party from relying on the express terms of the contract freely entered into by either party.”. We use cookies to track usage of our site. It was defined in the case of Amalgamated Investments and Property Co v Texas Commerce Bank [1982]. 53.In paragraphs 53 and 54, the Court sets out how the forms of estoppel have been established in law. However, the principled basis for Akenhead J’s decision may be that Mears’ claim was treated as being for sums due pursuant to the contract in respect of work done after the first six months, and that Shoreline, by way of defence to the claim, sought to set-off the sums it had overpaid for work done during the first six months but was estopped from doing so. Estoppel in English law is a doctrine that may be used in certain situations to prevent a person from relying upon certain rights, or upon a set of facts (e.g. It is similar to the concept of deterimental reliance. In addition to its claims based on estoppel, Mears sought to rely on a separate cause of action arising out of the trust and partnering language used in the NEC3 conditions. Charlotte and Oliver Johnson’s progress from Glebe Farm, a Warwickshire smallholding, to running a Nottinghamshire farm is an inspiration for would-be farmers looking for their break into farming. Estoppel by convention operates to prevent a party to a contract from denying the truth of a common understanding of fact or law. It can arise when parties to a contract act on an assumed state of the law or the facts. Arguments advanced by A. The reference to Mears being “repaid” is also surprising, as Mears did not make any payment to Shoreline that was capable of being repaid. Hayton refers to ‘estoppel by convention, estoppel by representation of fact or promissory estoppel’. At first blush, this explanation appears unconvincing because it proceeds on the (incorrect) footing that it is for Shoreline to justify its retention of the deducted sums, rather than for Mears to make out its claim to them. Extent to which it is necessary to show reliance on the parties’ common assumption in order to establish an estoppel by convention. A key element of estoppel by convention is “unconscionability or unjustness on the part of the person said to be estopped to assert the true legal or factual position”. Contesting a will No doctrine of election for procedural condition precedent. Estoppel by convention: a shield or a sword? if asked about something, each would be in agreement with the other. There are some key requirements. The Court of Appeal said that Grasshopper failed to prove estoppel. What is estoppel by convention? A party cannot found a cause of action on an estoppel, but: Operation and effect of the rule that an estoppel is to be used as a shield and not a sword. It can arise when parties to a contract act on an assumed state of the law or the facts. on 12 November 2015. Akenhead J also gave useful guidance as to the extent to which “detrimental reliance” is required in order to establish an estoppel by convention: “A key element of an effective estoppel by convention will be unconscionability or unjustness on the part of the person said to be estopped to assert the true legal or factual position. No cause of action entitling Mears to payment of the deducted sum (other than estoppel) was identified. As a result of the doctrine of estoppel by convention, the answer is maybe. cit, p. 93. Construction and engineering. Once the common assumption on the facts or the law is made known to the other party, then the estoppel comes to an end. In particular: “…it may, as a result of being able to rely on an estoppel, succeed on a cause of action on which, without being able to rely on the estoppel, it would necessarily have failed”. Agriculture The phrase “estoppel by convention” is not a phrase you hear very often in everyday conversation. I am not convinced that ‘detrimental reliance’ represents an exhaustive or limiting requirement of estoppel by convention although it will almost invariably be the case that where there is detrimental reliance by the party claiming the benefit of the convention it will be unconscionable and unjust on the other party to seek to go behind the convention.”, “In my view, it is enough that the party claiming benefit of the convention has been materially influenced by the convention.”. Estoppel by convention The High Court has held that estoppel by convention is established where parties have established a convention by agreement or understanding and have regulated their subsequent dealings according to that convention such that it would be unjust or unconscionable if one of the parties moved away from it. If you are a lawyer or work in a legal capacity, please register for a free trial to see if Practical Law’s resources are right for your business. 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