Paul Bugden, Bugden + Co., London
Al Saud v Gibbs [2024] EWHC 356 (Comm), at para. 117, Calver J.
This case contains a short but useful discussion of contractual estoppel, as it is often called, being the principle which holds the parties to their agreement that a state of affairs exists, even if such a state of affairs does not exist.
The basic principle is that there is no reason in principle why parties to a contract should not agree that a certain state of affairs should form the basis of the transaction, whether it be the case or not. Contractual estoppel is as such not really in truth a species of estoppel at all; it arises when parties have concluded a binding contract containing an acknowledgment of a state of affairs. The maker of the statement is estopped from asserting in litigation that the opposite was true.
In such a case, a party cannot subsequently deny the existence of the facts and matters upon which they have agreed, at least as far as concerns those aspects of their relationship to which the agreement was directed. Contractual estoppel is a separate doctrine to other forms of estoppel; it contains no requirement of reliance or detrimental reliance, and the party relying on the estoppel does not have to show that it would be unconscionable for the other party to resile from the agreed state of affairs.
It is enforceable because it forms part of the contract between the parties and is in the nature of true warranty rather than an assumption of some promissory obligation to perform an act or bring about a state of affairs.