FOUNDATIONS OF BUSINESS LAW

Foundations of Business Law

Foundations of Business Law

Q1- Explain to Gigi how the law regarding equitable estoppel can or cannot help her in this situation.

Ans. Referring to the scenario Zen did provide a document of confirmation to Gigi on the basis of their previous contract. Mr. Zen made the first move by sending Gigi the letter which indicated a contract in the offing initiated by Zen. Gigi acknowledged the letter by stating “we are in business” According to this situation if Zen had any plans to legally go slow or any other problem relating to insolvency and the likes in the project he should have informed Gigi within the first three months tentative notice period, but he did not do any such thing. Gigi on the other hand trusted Mr. Zen and began investment in the project worth AUD $ 500,000/= essential element of an equitable estoppel is that the defendant knows or intends that the party who adopts it will act or abstain from acting in reliance on the assumption or expectation. It is this knowledge or intention which affects the defendant's conscience so as to warrant the intervention of equity. Such knowledge or intention may easily be inferred where the adoption of the assumption or expectation is induced by the making of a promise, but may also be found where the defendant encourages a plaintiff to adhere to an assumption or expectation already formed, or acquiesces in an assumption or expectation when in conscience objection ought to be stated. The unconscionability which attracts the intervention of equity is the defendant's failure, having induced or acquiesced in the adoption of the assumption or expectation with knowledge that it would be relied on, to fulfil the assumption or expectation or - arguably - otherwise avoid the detriment which that failure would occasion. In Legione v Hateley, Mason and Deane JJ identified three general classes of estoppel: estoppel of record, estoppel of writing, and estoppel in pais, which they described in the following terms. (Abbott, H. Porter 2002, Pp. 78)

Estoppel in pais includes both the common law estoppel which precludes a person from denying an assumption which formed the conventional basis of a relationship between himself and another or which he has adopted against another by the assertion of a right based on it and estoppel by representation which was of later development with origins in Chancery. It is commonly regarded as also including the overlapping equitable doctrines of proprietary estoppel and estoppel by acquiescence or encouragement. In Commonwealth v Verwayen 1989 Deane J said, of the doctrine of estoppel by conduct, that its central principle was to prevent an unconscientious departure by one party from an assumption adopted by the other as the basis of a relationship to the other's detriment:

The law will not permit an unconscionable - or more accurately, unconscientious - departure by one party from the subject matter of an assumption which has been adopted by the other party as the basis of some ...