What Is the Difference between Promissory Estoppel and Equitable Estoppel?

R. Kimball
R. Kimball
Estoppel helps hold people to their word.
Estoppel helps hold people to their word.

Promissory estoppel is a cause of action that might be asserted against a party for the first party’s detrimental reliance upon a promise from the second party. Equitable estoppel is a defense against a claim of one party. In equitable estoppel the party claiming estoppel is basing its defense on assertions of present or past facts. Promissory estoppel goes toward the second party’s future intentions.

Estoppel itself is used to keep a party from promising one thing and then changing the circumstances.
Estoppel itself is used to keep a party from promising one thing and then changing the circumstances.

Estoppel itself is used to keep a party from promising one thing and then changing the circumstances after a second party has relied upon the promise. Promissory estoppel allows the party who was wronged by his or her reliance upon the specific promise or assertion to collect damages. In an issue of promissory estoppel, the promise must be definite.

A representation can be made either by words or conduct in equitable estoppel. A party who has a duty to make a statement but fails to make one is in effect making a statement by its silence. The party making the representation intends for the other party to rely upon such a representation.

After the first party makes a representation by word or deed, it may not contradict its representation. The second party states that the first party is estopped from changing its position based upon the first party’s initial representation to the second party. The second party’s claim of estoppel is a defense against whatever claim the first party is putting against the second party. Each of these claims must be factual in nature in order for the two parties to argue them.

The party who detrimentally relied upon the promise made by another party may use promissory estoppel to attempt to get relief for whatever problem the reliance has caused. The party requesting relief will have to prove to the court that the first party made a specific promise and that the second party took an action or actions based upon such a promise. In order to receive relief, the result of the actions taken by the second party must have resulted in some form of loss. Again, the actions taken and the loss incurred must be factual in nature, or there will be no relief granted to the requesting party.

The manner in which each of these forms of estoppel is argued varies by jurisdiction. Certain jurisdictions rarely permit the defense of equitable estoppel. Equitable estoppel is less precise and as such might be more difficult to prove. Promissory estoppel has certain specific elements that must be proven in order for the cause of action to exist; thus, it is permitted in all jurisdictions.

What Is Equitable Estoppel in Contract Law?

Equitable estoppel relating to a contract typically involves voluntary concealment of material facts, fraud, silence or omission of facts and acquiescence. If a contract is voluntarily entered into by the involved parties under false pretense, that situation may not be used to cause harm to one involved party by the other involved party's voluntary action. Equitable estoppel is typically used to protect a victim, and not as a means of legal attack.

An example of equitable estoppel involving a contract can be seen in marriage. Consider a situation in which two people enter into the contract of marriage, believing each other to be legally single, and live together for years as a married couple. If one person decides to file for divorce and during the process, the other person discovers that their marriage is not legally recognized, the courts may uphold that the other person cannot deny alimony based on an argument that their marriage never existed. If both parties believed they were married and carried out their lives in a way that supported that belief, it would fall under acquiescence within equitable estoppel. This would not allow the newly discovered fact that the marriage does not legally exist, to be used to harm the case made by the complaining party.

How To Produce an Effective Equitable Estoppel

A case for equitable estoppel requires certain events to occur for the claim to be effective. Evidence for a case asserting equitable estoppel will usually contain these three basic elements:

  • One party has previously represented a material fact that contradicts a position that is later argues
  • There is a reliance on the previously represented material fact
  • The party claiming estoppel is harmed by the changed position due to reliance on the previously represented position and material fact

If the side asserting equitable estoppel cannot also prove prejudice, loss, injury or some form of detriment in addition to these attributes, the case for equitable estoppel is insufficient. There also needs to be clear proof that the side claiming estoppel fully believed the actions, speech, conduct, and ommissions of the side that the estoppel is claimed against.

The requirements for equitable estoppel vary from state to state and tend to be more effectively litigated by a lawyer or law firm experienced with state-specific requirements. An equitable estoppel plea may, in some states, require proof of intent that the accused intended to deceive. In other states, misleading someone by way of negligence is an acceptable reason to plead equitable estoppel. It is imperative to understand how equitable estoppel is evaluated and defined in the state where the case is being heard.

How To Plead Equitable Estoppel

Equitable estoppel is generally used as a defense tactic. Before pleading, evaluate with legal counsel if a case for equitable estoppel can be met. This would require that an inconsistent argument be made or denial of a previously asserted material fact by the opposing party. There could also be an inconsistent position or fact made in the current case based on the assertions made by one side in a separate but associated case.

How the equitable estoppel is pleaded will depend on the amount of evidence collected showing deception or inconsistencies and how willful the offending party was in committing the estoppel. The court will also consider the amount of belief in the misleading information or action and damage caused by that belief to the party claiming the estoppel. The state where the case is being tried will also dictate how the equitable estoppel is pleaded and what level of willfulness is required by the offending party to be held accountable.

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Discussion Comments

Vincenzo

@Soulfox -- An estoppel action is quite effective in those "handshake deals" where someone relied on the promise of another to his detriment (the first scenario in which Sue painted Joe's house is a good example of such a deal). In contract law, the "statute of frauds" doctrine states (roughly and crudely) that a contract valued at more than $500 is invalid if it is not written down.

Promissory estoppel can nullify that rule in cases where it just isn't fair to let one party make a promise and then not honor it.

Soulfox

Promissory estoppel is a common cause of action that is dead easy to understand. Let's say, for example, Sue agrees to paint Ed's house. Sue buys supplies and paints the house based on Ed's promise to pay her. Ed changes his mind and refused to pay Sue, claiming there was no contract so he isn't obligated to give her a dime.

Is it fair to let Ed have his house painted at not cost to him? In such an instance, it is equitable to award Sue the money she should have received from the job.

How is that different from equitable estoppel? Let's take our scenario again and say that Sue had arranged to paint Joe's house. Joe wrote down the address wrong and Sue wound up painting the house belonging to Sam, Joe's next door neighbor. Sam sees Sue painting his house and keeps his mouth shut. When the job is done, sue can bring an equitable estoppel action claiming that Joe knew his home was being painted but decided to keep quiet instead of asking Sue why she was working on the home. Again, equity suggests that Sam shouldn't get a free house out of the deal -- he knew or should have known Sue made a mistake and should have taken steps to correct it.

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    • Estoppel helps hold people to their word.
      By: TristanBM
      Estoppel helps hold people to their word.
    • Estoppel itself is used to keep a party from promising one thing and then changing the circumstances.
      By: Andy Dean
      Estoppel itself is used to keep a party from promising one thing and then changing the circumstances.