Waiver by estoppel: Difference between revisions
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The other kind of [[waiver]]. The ''difficult'' one. Though not half as perilous as [[Mediocre lawyer|your earnest counsel]] may have you believe. | {{a|contract|}}The other kind of [[waiver]]. The ''difficult'' one. Though not half as perilous as [[Mediocre lawyer|your earnest counsel]] may have you believe. | ||
[[Waiver by estoppel]] | [[Waiver by estoppel]] may arise when a party who is entitled to exercise contractual rights, by its conduct ''leads the other party to believe it will not'', so that ''the other party relies on that representation'' to its detriment. It is an outflowering of the great case of {{citern|Hughes|Metropolitan Railway|1877|2 App. Cas.|439}}. | ||
So: some kind of '''[[representation]]'''; and a '''reliance''' on the representation to the receiving party’s detriment. | |||
===Ingredients=== | ===Ingredients=== | ||
*A legal relationship between the “rightsholder” and the “beneficiary” | For us to even be in the ballpark for waiver by estoppel, therefore, you need: | ||
*A clear [[representation]] by the rightsholder that it will not enforce its | *'''Relationship''': A legal relationship — maybe a [[contract]], maybe something statutory — between the “rightsholder” and the “beneficiary” creating the rights and obligations; | ||
*The beneficiary must rely on the representation to its detriment | *'''Representation''': A clear [[representation]] by the rightsholder that it will not strictly enforce its rights — the representation need not be written or explicit, but it must be ''unequivocal''<ref>Chitty muses that it needs to be as certain as would have given it contractual effect had it been supported by [[consideration]].</ref> In any case, the point here is to differentiate between someone unambiguously giving the impression that they will not enforce a contractual term — entitling a counterparty to rely on that representation — and a rightsholder simply ''refraining from enforcing a term of the contract it was entitled to''. The latter will ''not'' give rise to a [[Waiver by estoppel|waiver]]. | ||
*Unlike [[waiver by election]], generally [[waiver by estoppel]] | *'''Reliance''': The beneficiary must actually rely on the [[representation]] to its detriment ... | ||
*'''Inequity''': ... so as to make it ''inequitable for the rightsholder to go back on the [[representation]]''. | |||
===Effect=== | |||
*Unlike [[waiver by election]], generally a [[waiver by estoppel]] only suspends the rightsholder’s legal rights and does not permanently extinguish them — unless it would be inequitable to allow the waiver to be withdrawn. | |||
===Observations=== | ===Observations=== | ||
Revision as of 11:10, 21 May 2019
The other kind of waiver. The difficult one. Though not half as perilous as your earnest counsel may have you believe.
Waiver by estoppel may arise when a party who is entitled to exercise contractual rights, by its conduct leads the other party to believe it will not, so that the other party relies on that representation to its detriment. It is an outflowering of the great case of Hughes v Metropolitan Railway (1877) 2 App. Cas. 439.
So: some kind of representation; and a reliance on the representation to the receiving party’s detriment.
Ingredients
For us to even be in the ballpark for waiver by estoppel, therefore, you need:
- Relationship: A legal relationship — maybe a contract, maybe something statutory — between the “rightsholder” and the “beneficiary” creating the rights and obligations;
- Representation: A clear representation by the rightsholder that it will not strictly enforce its rights — the representation need not be written or explicit, but it must be unequivocal[1] In any case, the point here is to differentiate between someone unambiguously giving the impression that they will not enforce a contractual term — entitling a counterparty to rely on that representation — and a rightsholder simply refraining from enforcing a term of the contract it was entitled to. The latter will not give rise to a waiver.
- Reliance: The beneficiary must actually rely on the representation to its detriment ...
- Inequity: ... so as to make it inequitable for the rightsholder to go back on the representation.
Effect
- Unlike waiver by election, generally a waiver by estoppel only suspends the rightsholder’s legal rights and does not permanently extinguish them — unless it would be inequitable to allow the waiver to be withdrawn.
Observations
- A representation must be some kind of positive act: Simply not enforcing a term does not give rise to an estoppel or a waiver: “It is difficult to imagine how silence and inaction can be anything but equivocal”[2].
- The estoppel is specific to the particular circumstance. If you have a recurring right (you know, like to make a margin call), then just because you waived it once — even if you somehow permanently waived it — that doesn't mean you have waived it for all time. Just because you didn’t enforce this time, that doesn’t mean you are prevented from ever enforcing in the future.
See also
- Waiver | Waiver by election | Waiver by estoppel
- Course of dealing under the Uniform Commercial Code
- Estoppel
- No waiver boilerplate clause
References
- ↑ Chitty muses that it needs to be as certain as would have given it contractual effect had it been supported by consideration.
- ↑ Allied Marine Transport v Vale do Rio Doce Navegaçao SA (The Leonidas D.)