Estoppel

Estoppel is not a French pastry.

It is the catchword of legal doctrine used by courts to prevent injustices resulting from people attempting to change a position they once took after someone else has relied on the earlier position.

A classic legal definition of estoppel is: “A man’s own act or acceptance stops or closes his mouth to allege or plead the truth.” (Black’s Law Dictionary, 4th Edition 1951).

Estoppel has been used by the courts in a number of construction-related circumstances. Two of the more commonplace applications may be found in bidding and in creditor reports on the status of payments.

For example, if a supplier reports that he has been paid in full for materials and the general contractor or owner relies on that representation, the supplier may not later be permitted to claim that he had not, in fact, been fully paid as he earlier represented. He is held to be estopped from taking a position contrary to his earlier representation. RD. Reeder Lathing Co. v. Allen, 57 Cal. Rptr. 841, 425 P.2d 785 (1967); Kennemore v. Robbins, 2661 S.W.2d 64 (Ark. 1954).

Similarly, subcontractor who sign lien waivers acknowledging that they had been paid in full were held to be estopped from denying that they had been paid after the owner had relied upon the waivers in making payment to the general contractor. Mountain Stone Co. v. H.W. Hammond Co., 39 Colo. App. 581, 564 P.2d (1977). In that case, the lien waivers were exchanged for the contractor’s checks that bounced. The Colorado Court of Appeals ruled that the subcontractors should have protected them selves by inserting language in their waivers making them effective only if and when the checks they received were paid.

In bidding situations, subcontractors have been held bound to their bids under the doctrine of estoppel where they have given a general contractor a bid and the general contractor relied on their bid amount in its own bid to the owner. Gerson Electric Construction Co. v Honeywell, Inc., 453 N.E.2d 726 (Ill. App. 1983); Preload Technology, Inc. v. A.B.& J. Construction Co., 696 F.2d 1080 (5th Cir. 1983).

The estoppel theory is used in this example to prevent the bidder involved from withdrawing his bid or refusing to do the work at his bid price.

The doctrine of estoppel is a reasonable and common sense application of the notion that a man cannot go back on his word. Parties should be bound by their statements-even if erroneous-when someone has relied on what they had represented.

Moral: speak only the truth!