LAW2101 Lecture Notes - Lecture 9: W&G Records, Harry Gibbs, 18 Months
LAW2101'CONTRACT'A'-'CASE'SUMMARIES'AND'KEY'POINTS'
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TOPIC'9:'ESTOPPEL'
Provides'protection'for'a'person'who'has'relied'on'the'truth'of'representations'made'to'another'to'
his/her'detriment'such'that'it'would'be'unconscionable'for'the'representor'to'then'resile'
*Note:'Doctrine'of'estoppel'is'not'part'of'contract'law'it'runs'alongside'it'and'is'often'argued'when'
breach'of'contract'not'available'and'P'relied'on'the'promise'to'their'detriment'
'
DEVELOPMENT'AND'ELEMENTS'OF'EQUITABLE'ESTOPPEL'
Elements'(Walton'Stores'(Interstate)'Ltd''v'Maher'(1988)'(Brennan'J))'
*Note:'HC'has'not'set'out'specific'elements,'but'these'6'points'are'commonly'referred'to'
1. Assumption:'the'relying'party'must'have'adopted'an'assumption,'either'of'fact'or'about'future'conduct'
2. Inducement:'the'assumption'must'have'been'induced'by'the'conduct'of'the'representor'
3. Detrimental'reliance:'relying'party'must'have'acted'on'the'assumption'in'such'a'way'that'he'will'suffer'
detriment'if'the'representor'does'not'adhere'to'the'assumption'
4. Reasonableness:'relying'party'has'acted'reasonably'in'adopting'the'assumption'and'in'the'detrimental'
action'they'took'in'reliance'on'the'assumption'
5. Unconscionability:'it'would'be'unconscionable'in'the'circumstances'for'the'representor'to'depart'from'
the'assumption'
o A'failure'to'fulfil'a'promise,'and'a'promisee'acting'in'reliance'on'it'to'his'detriment,'does'not'of'
itself'amount'to'unconscionable'conduct.''
o Something'more'is'required'(e.g.'promisor'knew'promisee'had'adopted'and'detrimentally'relied'on'
the'assumption'which'promisor'had'created'or'encouraged).'
*Note:'Mere'exercise'of'legal'right'not'to'exchange'contract'is'not'unconscionable'conduct'
6. Departure:'representor'has'departed'or'threatened'to'depart'from'the'assumption'adopted'and'acted'
upon'by'the'relying'party'
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Common'law'estoppel'(i.e.'estoppel'by'representation;'estoppel'in'pais)'
Representations'that'lead'to'assumptions'of'fact'(e.g.,'‘I'have'signed'the'contract)'
History:'
• Until'mid'1800s:'Courts'were'willing'to'enforce'promises'which'induced'reliance'without'consideration'
until'Jorden'v'Money'
o Jorden'v'Money'1854:'HL'held'that'estoppel'applies'only'to'representations'of'present'fact'(i.e.'
estoppel'by'representation)'and'not'to'representations'of'future'conduct'
• Equity'courts'developed'2'limited'exceptions'for'future'matters'
o Proprietary'estoppel:'Promises'regarding'an'interest'in'land'
o Promissory'estoppel:'Promise'that'contractual'rights'would'not'be'enforced'(High'Trees,'Denning'J)'
• Promissory'estoppel'was'(Pre-Waltons)'very'limited'
o Could'only'be'used'as'a'“shield”'and'not'as'a'“sword”'(i.e.'a'cause'of'action)'
o Applied'only'if'there'was'a'pre-existing'legal'relationship'(i.e.'so'typically'applied'in'respect'of'
promises'not'to'enforce'contractual'rights'(eg'you'can'have'extra'time'to'pay))'
• Waltons'Stores'v'Maher'Australia:'Removed'limitations'of'promissory'estoppel'therefore'radically'
expanding'the'scope'of'equitable'estoppel,'but'some'uncertainty'remains,'especially'in'NSW'
1. The'doctrine'can'operate'in'the'absence'of'existing'contractual'relations'(here'it'was'pre-
contractual)'
2. Estoppel'can'be'used'as'a'sword'(offensively'as'a'separate'cause'of'action)'as'well'as'a'shield'
(defensively,'only'if'someone'sues'first)'
3. Unification'of'proprietary'and'promissory'estoppel'into'a'single'doctrine'of'equitable'estoppel'
4. Remedy'is'the'minimum'necessary'to'meet'the'detriment'(could'be'reliance'based'or'expectation'
based'damages)'
LAW2101'CONTRACT'A'-'CASE'SUMMARIES'AND'KEY'POINTS'
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*Note:'This'is'the'dominant'view,'but'some'controversies'remain'regarding'items'1-3,'in'particular'in'
NSW'
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Case'
Findings'
Waltons'Stores'Ltd'v'Maher'(1988)'HCA'
• Waltons'Stores'were'negotiating'a'lease'of'land'
from'Mr'and'Mrs'Maher'
• Mahers'were'to'demolish'a'building'on'their'
land'and'build'a'new'building'to'Walton’s'
specifications'by'15'January'1984'(i.e.'urgency)''
• Agreement'still'not'finalised'in'November'1983,'
but'Maher'wanted'to'start'work'on'demolition'
of'existing'building.'
• 7'November'–'Mahers’'solicitors'contacted'
Waltons’'solicitors'and'said'that'agreement'
needed'to'be'finalised'in'next'day'or'so'to'
enable'new'building'to'be'built'for'January'
deadline'
• Maher'did'not'want'to'commence'demolition'
until'agreement'finalised'
• Later'same'day'–'Waltons’'solicitors'forwarded'
lease'for'Mahers'to'sign:'“you'should'note'that'
we'have'not'yet'obtained'our'client’s'specific'
instructions'to'each'amendment'requested,'but'
we'believe'that'approval'will'be'forthcoming.''
We'shall'let'you'know'tomorrow'if'any'
amendments'are'not'agreed'to.”'
• No'further'communication'either'way'from'
Waltons’'solicitor'
• Mahers'signed'and'forwarded'‘by'way'of'
exchange”'signed'copy'of'lease'to'Waltons'on'11'
November'
• 21'November'–'Waltons'has'second'thoughts'
about'the'lease'so'tells'its'solicitor'to'“go'slow”'
with'completing'the'transaction'(thinking'it'
won’t'be'bound'unless'lease'is'executed)'
• 10'December'–'Waltons'made'aware'that'
demolition'had'commenced,'but'say'nothing'
about'second'thoughts'
• Early'January'1984'–'Mahers'commence'new'
building'in'accordance'with'plans'approved'by'
Waltons'
• 19'January'–'Walton’s'solicitor'writes'to'Maher’s'
solicitor'advising'that'Waltons'no'longer'wants'
to'proceed'with'the'lease'
• Building'works'were'40%'complete''
• Maher'sought'a'declaration'that'there'was'in'
existence'a'valid'and'enforceable'contract,'
specific'performance'or'damages'
Ø High'Court'Findings:'Contract'not'established'as'
per's126'Instruments'Act,'as'lease'not'signed'by'
“person'to'be'charged”'(Waltons),'so'there'was'
no'claim'to'promissory'estoppel'due'to'a'lack'of'
contractual'relations'and'it'can'only'be'used'as'a'
shield'(i.e.'Maher'could'not'use'it'to'enforce'
rights).''However,'estoppel'was'established'and'
equitable'damages'were'awarded.'
v Deane'&'Gaudron'JJ:'Maher'had'acted'on'
assumption'that'Waltons'had'signed'the'
lease'(i.e.'an'assumption'of'fact)'and'were'
estopped'from'denying'that'fact'(common'
law'estoppel)'
v Mason'CJ,'Wilson'&'Brennan'JJ:'Waltons'had'
induced'Maher'to'assume'that'they'would'
sign'the'lease'(promissory'estoppel)'
Ø Equitable'Estoppel'Approach'(Mason'CJ'&'
Wilson'J)'(High'Court):''Assumption'in'relation'to'
a'future'matters'(i.e.'documents'“would'be'
exchanged”)'therefore'cannot'apply'common'
law'estoppel'–'Enforcing'a'voluntary'(non-
contractual)'promise'on'which'the'Mahers'had'
relied'to'their'detriment'(i.e.'sword)'
v Would'undermine'Consideration'
v Concluded'that'the'Promissory'estoppel'
extends'to'the'enforcement'of'voluntary'
promises'unconscionably'departing'from'
basic'assumptions'in'the'transaction'
between'the'parties'
1. Was'Waltons'entitled'to'stand'by'in'silence'
when'it'must'have'known'that'the'Mahers'
were'proceeding'on'the'assumption'that'
they'had'an'agreement'and'that'completion'
of'the'exchange'was'a'formality?'
2. Unconscionability'found:'Mere'exercise'of'
Walton’s'legal'right'not'to'exchange'contract'
is'not'unconscionable'(i.e.'something'more'is'
required)'
v Urgency'that'pervaded'the'negotiation'
of'the'terms'of'the'lease'
v Mahers'had'executed'counterpart'lease'
and'forwarded'it'to'Waltons'solicitors'on'
11'November'(i.e.'Mahers'had'acted'on'
the'assumption'that'completion'was'a'
mere'formality)'
v Waltons'knew'Mahers'were'acting'in'
reliance'on'the'assumption'(at'the'latest'
LAW2101'CONTRACT'A'-'CASE'SUMMARIES'AND'KEY'POINTS'
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on'10'December'when'it'learnt'of'the'
demolition'works)'
Ø Approach'(Brennan'J)'(High'Court):''6-Part'
Equitable'Estoppel'(Unconscionable)'Test''
1. P'assumed/expected'that'a'particular'legal'
relationship'exists'between'P'and'D'(or'will'
exist'in'future'and'D'was'not'free'to'
withdraw'from'this'expectation)'(i.e.'Maher'
assumed'Waltons'was'bound'by'the'lease'or,'
at'the'very'least,'expected'Waltons'would'
execute'and'deliver'the'lease'as'a'matter'of'
obligation)'
2. D'induced'P'to'adopt'that'assumption'or'
expectation'(i.e.'Waltons'induced'Maher'to'
adopt'that'assumption'by'its'silence)'
3. P'acts'or'abstains'from'acting'in'reliance'on'
the'assumption'or'expectation'(i.e.'Maher'
acts'in'reliance'on'the'assumption'or'
expectation'by'starting'to'demolish'new'part'
of'old'building'and'building'in'accordance'
with'Waltons’'requirements)'
4. D'knew'or'intended'him'to'do'so'(i.e.'
Waltons'knew'Mahers'was'acting'in'reliance'
on'the'assumption'(at'the'latest'on'11'
December'when'it'learnt'of'the'demolition'
works))''
5. P’s'action'or'inaction'will'occasion'detriment'
if'assumption'or'expectation'is'not'fulfilled'
(i.e.'Maher'suffers'detriment'if'assumption'
that'the'lease'would'proceed'is'not'fulfilled'–'
Maher'destroys'a'perfectly'good'building'
they'own,'and'incurs'costs'in'building'in'
accordance'with'Waltons’'plans)'
6. D'has'failed'to'act'to'avoid'that'detriment'
whether'by'fulfilling'the'assumption'or'
expectation'or'otherwise'(i.e.'Waltons'failed'
to'speak'up'so'that'Mahers'avoided'that'
detriment)'
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Equitable'estoppel'
• Proprietary'estoppel:'Assumptions'of'a'grant'of'an'interest'in'land'
• Promissory'estoppel:'Representations'that'lead'to'an'assumption'about'future'conduct'(e.g.'I'will'sign'
the'contract…)'
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ELEMENTS'OF'EQUITABLE'ESTOPPEL:'ASSUMPTION'
Assumption'must'have'been'induced'by'representing'party'and'relying'party'must'adopt'an'
assumption'
*Note:'If'current'fact'consider'common'law'estoppel,'but'if'future'conduct'consider'equitable/promissory'
estoppel'
Case'
Findings'
Document Summary
Provides protection for a person who has relied on the truth of representations made to another to his/her detriment such that it would be unconscionable for the representor to then resile. *note: doctrine of estoppel is not part of contract law it runs alongside it and is often argued when breach of contract not available and p relied on the promise to their detriment. Elements (walton stores (interstate) ltd v maher (1988) (brennan j)) *note: mere exercise of legal right not to exchange contract is not unconscionable conduct: departure: representor has departed or threatened to depart from the assumption adopted and acted upon by the relying party. Common law estoppel (i. e. estoppel by representation; estoppel in pais) Representations that lead to assumptions of fact (e. g. , i have signed the contract) History: until mid 1800s: courts were willing to enforce promises which induced reliance without consideration until jorden v money.
