Estoppel
How estoppel can hold a party to a promise or assumption it caused you to rely on, even where no binding contract was ever signed.
Contract law basics / 5 min read
Estoppel is a group of legal principles that can stop a party going back on an assumption or promise it caused another person to rely on, where doing so would be unconscionable and cause that person detriment. It can apply even when no binding contract exists. The remedy is what is needed to avoid the detriment, which is sometimes, but not always, holding the party to its promise.
What is estoppel?
Estoppel is a group of legal principles that can prevent a person from going back on an assumption or promise that they caused someone else to rely on. It protects against unfairness rather than enforcing every promise: the law steps in where departing from the assumption would be unconscionable because of the other person's reliance and detriment.
It matters most where a contract was never signed, a promise was made outside the written contract, or one party led the other to believe it would not insist on its strict rights.
What are the main kinds of estoppel?
Estoppel by representation
a person who represents a fact as true, intending or expecting another to act on it, may be prevented from later denying it.
Promissory estoppel
a party who promises not to enforce a strict contractual right, such as a payment date, may be held to that promise if the other party relied on it.
Equitable estoppel
extends the same idea to assumptions about a future legal relationship, even where no contract yet exists.
Proprietary estoppel
applies where someone is encouraged to believe they have, or will receive, an interest in property such as land, and acts on that belief.
Estoppel by convention
applies where both parties have conducted their dealings on a shared assumption, for example about what their contract means, and it would be unjust to let one of them depart from it.
What must be proved to establish an equitable estoppel?
The landmark decision is Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. The Mahers demolished a building and began a new one for Waltons as tenant, assuming the lease would be completed, while Waltons knew of the work and said nothing. The High Court upheld an award of damages to the Mahers although no lease had been exchanged. The elements are broadly these:
An assumption or expectation
You assumed that a particular legal relationship existed or would exist, such as that a lease would be signed or a right would not be enforced.
Induced by the other party
The other party created or encouraged that assumption, by words or conduct, which can include silence where it should have spoken.
Reliance
You acted, or refrained from acting, because of the assumption.
Expected reliance
The other party intended or expected you to rely on it, or a reasonable person in its position would have expected that. In 2024 the High Court confirmed that, for a promise about property, the promisor's actual knowledge of the reliance is not required.
Detriment
You would suffer detriment if the other party were allowed to depart from the assumption.
Failure to avoid the detriment
The other party has not acted to avoid that detriment, whether by honouring the assumption or otherwise, and it would be unconscionable to leave you to bear it.
What will a court order if estoppel is proved?
The remedy is shaped by what is needed to prevent the detriment, not automatically by the terms of the promise. In Commonwealth v Verwayen (1990) 170 CLR 394, Mason CJ and Brennan J described the aim as the "minimum equity to do justice", and Mason CJ stressed that the remedy should be proportionate to the detriment. In some cases nothing short of holding the party to its promise will do justice, as in Waltons. In others, compensation for money spent or opportunities given up is enough.
What does this look like in practice?
Suppose, hypothetically, a landlord and a café operator agree the main terms of a five-year lease by email, and the landlord tells the operator to start the fit-out, saying the lease is "just paperwork". The operator spends a substantial sum. The landlord then refuses to sign and leases the premises to someone else.
If the parties did not intend to be bound until the lease was signed, or their agreement does not meet the writing requirement for dealings in land (see elements of a contract), the operator may have no contract claim. It may still have an estoppel claim. Depending on the facts, a court might hold the landlord to the lease, or order compensation for the wasted fit-out costs.
Frequently asked questions
Sometimes. If the promise formed part of a binding contract, it may be enforceable as a term. If there was no contract, estoppel may still help where you relied on the promise to your detriment and it would be unconscionable for the other party to go back on it.
Not automatically. The other party must have induced the assumption, and you must have relied on it to your detriment. Where those elements are present, the absence of a signed contract is not necessarily the end of the matter.
It can. If a party led you to believe it would not insist on a deadline and you relied on that, promissory estoppel may prevent it from suddenly enforcing the strict term, at least without reasonable notice.
No. Misrepresentation concerns a false statement that induced a contract, and is covered in the misrepresentation guide. Estoppel concerns holding a party to an assumption it created.
Speak with Vamp Law about an estoppel claim
This guide is general information, not advice on your situation, and whether an estoppel arises depends heavily on the facts and the documents. Vamp Law acts in contract disputes, including claims that turn on promises made outside a signed contract, and Kyra Pastrovic can review the emails and conduct behind the assumption you relied on. Make an enquiry or call +61 431 569 686.
More contract law basics
When the question has become a dispute, these are the pages on how Vamp Law acts in it.
Elements of a Contract
What turns an agreement into a binding contract in NSW, from offer and acceptance to capacity, and when a contract must be in writing.
Misrepresentation
When a false statement made before a contract lets you undo the contract or claim compensation, under the general law and the Australian Consumer Law.
Breach of Contract
What counts as a breach of contract in NSW, when a breach lets you end the contract, and what to do next if it does not.
In a dispute?
Talk to us about your contract
This guide explains the law in general terms. For advice on your own contract, send us the documents and we will explain where you stand.