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Suppose you were a tenant paying $2,000 a month in lease payments under a leasing agreement with your landlord. The landlord approaches you and states that construction will be taking place over the next month. He gives you the option to leave the premises or pay a reduced fee of $500 while the construction is in effect. You agree to remain at the premises and pay the landlord the reduced fee without confirming anything in writing.
Given that construction will only be for one month, you decide not to inconvenience yourself and amend the payment terms in your leasing agreement. You pay the landlord $500. Subsequently, after the construction is completed, the landlord claims that you are still indebted to him for $1,500 since the leasing agreement requires you to pay $2,000 per month in rent.
Is the landlord entitled to collect these funds?
Estoppel is a legal term that often arises but is little understood. Effectively, it means that a court may prevent or “estop” a person from asserting a particular position in law where it would be inequitable or unfair to do so. While there are many different types of estoppel, the most common type is “promissory estoppel. ” To establish promissory estoppel, the following three criteria must be established:
- Where Party 1 has, by his words or conduct, made to Party 2 a clear and unequivocal promise or assurance which was intended to affect the legal relations between them;
- Party 2 has taken him at his word and acted on it to his detriment; and
- Party 1 who gave the promise or assurance cannot afterward be allowed to revert to his previous legal relations as if no such promise or assurance has been made by him.
Based on the facts I’ve outlined above, you, as the tenant, would be able to rely on promissory estoppel and only pay the landlord $500. Specifically, because the landlord assured you that rent would only be $500 and you took the landlord at his word and stayed at the premises based on this assurance, the landlord cannot now revert to his previous legal position and demand payment of $2,000 under the leasing agreement.
This example is but one of many examples in which promissory estoppel can arise.
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