Contractual estoppel; contractual representations
Wallis Trading Inc v Air Tanzania Co Ltd [2020] EWHC 339 (Comm)
The questionWhen are parties contractually estopped from adopting a different position?
The key takeaway
If parties conclude an agreement that includes particular contractual representations, they are bound by those representations and cannot later assert an inconsistent position to avoid their obligations (even if it transpires the original representation was not true).
The background
Wallis leased an aircraft to Air Tanzania. In the aircraft lease agreement, Air Tanzania made certain representations, including:
- that the lease was legal and valid
- that it had obtained all required authorisations and consents to enable it to enter into and perform the lease.
The decision
The Court held that Air Tanzania was contractually estopped from arguing that the lease was invalid based on failure to comply Tanzanian public procurement laws, because Air Tanzania had already made representations that the lease was legal and valid, and that the entry into and performance of the lease did not conflict with any laws binding on it. These representations had given rise to an estoppel upon entry into the lease. The effect was that both parties had contractually accepted that a certain state of affairs was true, even if it was not or the parties had knowledge of the true position.
Why is this important?
This is a useful example of how contractual estoppel works in practice and demonstrates the worth of standard boilerplate representations and warranties regarding validity and authority to prevent a warranting party from asserting that the true facts were different in order to avoid its obligations.
Any practical tips
Always consider whether standard representations and warranties as to a party’s capacity, authority and legality to enter an agreement are included/required. These can be particularly useful for international agreements/jurisdictions where it may be difficult to investigate the position. If there are important assurances provided in the pre-contract negotiations, also consider whether these should be included as representations, warranties and undertakings within the agreement.