Date: Fri, 23 Jun 2006 21:55:24 +0100

From: Elizabeth Cooke

Subject: Estoppel Query

There are some cases where estoppel is used to cement a three-party understanding/arrangement which is not quite contractually watertight. In particular, where there were two parties, and a third then behaves as if he is also a party; he may be estopped from denying that he is party to the contract.

E.g. X the claimant in shipping litigation gets an extension of time from Y, not realising that he should have asked Z instead (Y is the charterer, but he should have dealt with Z, the shipowner, since the contract on which they were litigating was between X and Z only); T is estopped from denying that he is party to the contract between X and Z (The "Henrik Sif" [1982] 1 Lloyd's Rep 456). In In Re National Benefit Assurance Co Ltd [1932] 2 Ch 185, A agreed to place its reinsurance business with company B on condition that the policies were guaranteed by company C. B and C were closely associated, same director, same staff; the policies stated that they were guaranteed by C; but there was no contractual obligation upon C to guarantee the policies. When A claimed on the guarantees, C was estopped from denying that C was contractually obliged to provide one.

In good old Amalgamated Investments v Texas Bank [1982] 1 QB 184, Amalgamated guaranteed loans made by Texas bank, but the loans intended to be covered were made by a subsidiary of the bank. It was held that those loans were covered by the guarantee too, as if the subsidiary had been a party to the arrangements made by the bank. (Hmm, that's not quite the same, because it's really the addition of a term to the contract; but it's another case where estoppel sorts out a problem caused by confusion between associated companies).

There is an article on this at (2002) 1 Journal of Obligations and Remedies 5; the point made there (I think) is that estoppel can be used to slot a party into an existing deal, but not (at least in England and Wales, because of our shield-not-sword problem) to create an entirely new deal where there was no contract (and no consideration) at all.

Situations like this may be helpfully labelled estoppel by convention, where there is an assumption made and communicated by two or more parties, but I'm not sure that's any more than a way of describing how the representation is made.

I hope that's helpful.
best wishes
Lizzie Cooke

Professor of Law
University of Reading

________________________________

From: John Swan
Sent: Tue 20/06/2006 22:24
To: Jason Neyers
Subject: ODG: RE: Estoppel Query

Standard cases involving multi-party insuring agreements seem to raise the fact situation you have described. See, e.g., Commonwealth Construction Co. v. Imperial Oil Ltd., [1978] 1 S.C.R. 317, 69 D.L.R. (3d) 558, [1976] 6 W.W.R. 219, Trident General Insurance Co. Ltd. v. McNeice Bros. Pty. Ltd. (1988), 165 C.L.R. 107, 80 A.L.R. 574, and Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd., [1999] 3 S.C.R. 108, 176 D.L.R. (4th) 257, [1999] 9 W.W.R. 380, 67 B.C.L.R. (3d) 213, 50 B.L.R. (2d) 169, [2000] 1 Lloyd's Rep. 199. These cases are simply cases where the courts refused to apply the third party beneficiary rule where making anyone of the related agreements unenforceable would have caused commercial chaos.

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