Estoppel is a theory that exists primarily under equity principles although some jurisdictions may provide for estoppel under law. People need to understand the concept of estoppel.
The primary use of estoppel under equity principles where the goal is to prevent unjust enrichment by one of the parties. Estoppel precludes or "stops" a person from asserting a fact or a right or prevents a party from denying a fact. Situations where and estoppel may apply is when a party’s actions, statements, statements conduct or failure to act prejudices the other party. There are several types of estoppel.
Equitable estoppel .In an equitable estoppel a party is barred from asserting a fact or right because they made false representations or concealed the facts.For example, if a supplier made a representation in a contract that a certain thing about the product was true or concealed facts knowing that it wasn’t true, they would be prevented from arguing that its wasn’t true or the buyer shouldn’t have relied on the representation.
Estoppel by latches. This occurs where a party is barred from asserting a fact or right because they failed to act until the other party was prejudiced by the delay.For example, if a painting company arrived at your house and started to paint your house in error and you knew that they were doing it and took no action to stop it, in a claim by that company for payment you could estopped from asserting that you had no contract with the supplier or failed to authorize the work. You had the
Collateral estoppel. Collateral estoppel occurs when there is a court ruling against that party on the same matter in a different case.
The goal in equity is to make sure that the parties are treated equitably and that negative actions or failures to act are not rewarded at the expense of the other party. This differs from the responsibility to mitigate damages. The responsibility to mitigate damages requires the use of reasonable care and diligence to minimize or avoid injury. Using the house painting example if the painting company became aware that it was the wrong house being painted, they could not simply continue and expect to be paid. They would need to take reasonable steps to avoid continuing
What this means to procurement people is if they are seeing a supplier do work that they know the supplier is not authorized to do,they can't simply do nothing and expect to get it for free. They need to act to prevent the supplier from incurring further damages.If they don't in a claim for the cost of the work they may be prevented or estopped from making the assertion that it wasn't authorized.
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