Estoppel

Estoppel: Definition, How It Works, and
History
By: WILL KENTON (Updated August 14, 2024)
Reviewed by : ROBERT C. KELLY
What Is Estoppel?
Estoppel is a legal principle that prevents someone from arguing something
or asserting a right that contradicts what they previously agreed to or said.
Put simply, estoppel prevents one person from contradicting an action or
statement from the past.
Estoppel is meant to prevent people from being unjustly wronged by the

inconsistencies of another person's words or actions. Some of the most
common forms of estoppel include collateral estoppel and promissory
estoppel.
How Estoppel Works

Estoppel legally prevents people from making contradictory claims or actions.
It is a legal principle found in common law systems.
Common law is a legal system in which laws are derived from judicial
decisions and precedent. Almost all countries with a judicial system based on
common law—including the United Kingdom, Canada, and the United States
—have incorporated multiple forms of the doctrine of estoppel in their laws.
While the names of the principles differ from country to country, the concept
is essentially the same: consistency matters, in both words and actions.
Estoppel ensures that a person stays true to their word and doesn't unfairly
damage someone else. So if Person A must adhere to their word if they make
a promise to Person B and later rescind it. Estoppel can take many different
forms, the most common of which are listed below.
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Types of Estoppel
There are different types of estoppel. The following are some of the most
common ones found in the legal arena.
 Collateral Estoppel: A collateral estoppel can prevent a person from

going back to court as a plaintiff with the same grievance. This prevents
legal harassment and abuse of legal resources.
 Estoppel by Deed: This type of estoppel prevents a person from
denying the truth of any fact stated in a deed they have executed.
 Equitable Estoppel: This form of estoppel prevents someone from
taking a legal position that is contrary or inconsistent with their previous
stance if doing so harms the other party.
 Promissory Estoppel: This is commonly found in contract
law. Promissory estoppel protects a person who has acted based on
another person's reasonable promise, whether in a formal contract or
not, and then suffers significant economic loss because the other party
did not fulfill that promise.
Other lesser-known forms of estoppel are estoppel by record, estoppel by

deed, laches, estoppel by silence, and reliance-based estoppel.
Estoppel Certificate Components

An estoppel certificate is common in the mortgage and commercial real
estate industries. It is a document that is often required by lenders and third
parties if and when property owners either try to sell their properties (that are
tenanted) or refinance a loan.
This document, which is also called an estoppel letter, is generally prepared

by the landlord and is signed by the lessee or tenant. In essence, it verifies
and asserts claims made to the third party (either a lender or a buyer) by the
landlord. Some of the most common details included in the certificate or letter
are:
 Lease terms, including the start and end dates of the lease
 The date of the last rent payment
 Confirmation that the lease is up to date or highlights what any defaults
were made by either party
 A statement verifying that no modifications were made to the lease or
details of any changes made and when
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Example of Estoppel
Promissory estoppel was the heart of a case pitting two neighbors against
one another in Iowa. A farmer leased property from his neighbor, who he said
promised to sell him his farm at some point in the future for $3,000 an acre.1
The farmer then made substantial improvements to the property during the
term of the lease, with the expectation that he would become its eventual
owner. But the owner sold the property to a third party, prompting his
neighbor to file a lawsuit, saying he had the right to purchase the farm.1
At the trial, the jury awarded the farmer $52,000 in damages to cover the
improvements made to the property. Eventually, the case found its way to the
Iowa Court of Appeals, which ruled that the option for the farmer to purchase
the farm did not need to be included in the written lease agreement to be
valid. The court stated that there was a clear and definite promise along with
the neighbor's understanding that the farmer was relying on that promise. As
such, the property owner was ordered to pay the farmer damages.1
How Do You Define Estoppel?

Estoppel is part of common law. It is a legal principle that prevents someone
from going back on their word to someone else and unfairly causing damage
to someone else. If legal action is taken, the court can stop (or estop) an
individual from rescinding a promise made to another party.
What Is an Estoppel Certificate?

Estoppel is common in the mortgage industry and commercial real estate.
Also called an estoppel letter or certificate, it entails the use of a document
that is signed by a tenant. This document confirms the rental agreement set
forth by the landlord. It can be presented to a third party if the landlord or
property owner tries to do anything with the property, including selling it or
trying to refinance a loan.
What Are the Different Types of Estoppel?

Estoppel comes in many different forms. Some are more common while
others are lesser known. They include equitable estoppel, promissory
estoppel, collateral estoppel, and estoppel by deed. Others include estoppel
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by record, estoppel by deed, laches, estoppel by silence, and reliance-based
estoppel.
The Bottom Line

Common law is a legal system that is based on judicial precedents rather
than statutes. One of the principles of common law is estoppel. Although it
may seem complicated, estoppel ensures that one party doesn't unfairly
damage another by going back on their word. That means that someone can't
legally take back something that they've promised to another party. This is
especially true if one person's actions do harm to another.
Page 4 of 4

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Estoppel: Definition, How It Works, and

Estoppel is meant to prevent people from being unjustly wronged by the

How Estoppel Works

 Collateral Estoppel: A collateral estoppel can prevent a person from

Other lesser-known forms of estoppel are estoppel by record, estoppel by

Estoppel Certificate Components

This document, which is also called an estoppel letter, is generally prepared

How Do You Define Estoppel?

What Is an Estoppel Certificate?

What Are the Different Types of Estoppel?

The Bottom Line

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