Contractual Estoppel
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CHAPTER 2
Contractual estoppel: General principle
Representation and promise
2.01 The boundary between estoppel by representation and contract is marked by the foundational distinction between representation and promise. In traditional analysis, a representation is a statement of past or present fact and a promise is a statement of future action.1 A representation (but not promise) may raise an estoppel2 if it is made to induce, and does induce, detrimental reliance;3 a promise (but not representation) may found a cause of action for breach of contract if so intended and supported by consideration.4 The distinction reflects the policy of the law that although one ought not to mislead another about the past or the present, an expression of expectation or intention as to the future is not actionable except as promise by contract.5 Following a late 19th-century change of policy on liability for deceit which dramatically restricted recoverability of damages for misrepresentation, the law of contract was shaped by attempts to rely on statements of fact as contractual promises by which the truth of the statement would be contractually “warranted” so that liability for the untruth would sound in contractual damages. This generated a difficult distinction between a non-contractual “mere” representation of fact and contractual warranty.6Page 30
Promise of past facts
2.02 Courts normally do not allow promissory statements to raise an estoppel; this is to prevent circumvention of the underlying policy that promises do not bind absent a formed contract.7 This policy was turned on its head in Lowe v Lombank Ltd8 where the Court of Appeal refused to accept a statement made by an admittedly binding contract as a contractual promise. A consumer purchaser of an unroadworthy second-hand car brought an action for damages for breach of statutory condition of fitness for purpose.9 A clause in the contract stated that the purchaser acknowledged that the sellers had not been told the purpose for which the car was bought. It was held that the purchaser was not estopped by that clause from establishing her cause of action. Although the clause was part of the contract, the Court of Appeal refused to accept that it was effective as a contractual promise because it could only ever have effect as a representation, and if it were to raise an estoppel against the purchaser, the sellers would have to show actual reliance on it:To call it an agreement as well as an acknowledgment by the plaintiff cannot convert a statement as to past facts, known by both parties to be untrue, into a contractual obligation, which is essentially a promise by the promisor to the promisee that acts will be done in the future or that facts exist at the time of the promise or will exist in the future. To say that the hirer “agrees” that he has not done something in the past means no more than that the hirer, at the request of the owner, represents that he has not done that thing in the past. If intended by the hirer to be acted upon by the person to whom the representation is made, believed to be true by such person and acted upon by such person to his detriment, it can give rise to an estoppel: it cannot give rise to any positive obligation. Although contained in the same document as a contract, it is not a contractual promise.10