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Facts[]

Burrows agreed to sell all of the shares in his company to Whitcomb, in the name of his corporation – Subsurface Surveys. Of the cost, $42,000 was to be a promissory note paid annually for 10 years with 6% interest. The two were friends at the time of the deal. Whitcomb was late on a few payments, but Burrows did not take any action. Eventually their relationship turned sour, and when Whitcomb was late on another payment Burrows demanded the full $42,000 in payment, as per the condition in the contract stating this was the remedy for late payments. Whitcomb claimed estoppel as defence. Burrows was successful at trial, Whitcomb appealed and Burrows won on appeal again.

Issue[]

  1. What is necessary for estoppel to apply?

Decision[]

Appeal allowed.

Reasons[]

Ritchie, writing for the court, states that estoppel does not apply in this case. He says that for estoppel to apply the conduct of Burrows must amount to a promise or assurance intended to alter the legal relations between the two, and that it is impossible to infer this from the facts of the case. He was simply acting as a friend, and not entering into any negotiations with Whitcomb over new terms of payment.

Ritchie, J.: “this type of equitable defence cannot be invoked unless there is some evidence that one of the parties entered into a course of negotiation which had the effect of leading the other to suppose that the strict rights under the contract would not be enforced […] this implies that there must be evidence from which it can be inferred that the first party intended that the legal relations created by the contract would be altered as a result of the negotiations.”

Ratio[]

  • In order for a promise to be capable of being relied upon and having estoppel available as a defence, it must be a promise or assurance intended to alter the legal relations between the two parties.
  • A friendly gesture is not a binding agreement, and if it is relied upon estoppel will not be available as a defence.
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