When Silence Isn’t Golden: Understanding Estoppel in Contractual Obligations

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G.R. No. 113558, April 18, 1997

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Imagine you’ve been a loyal customer of a supplier for years, always paying on time. Suddenly, the business changes hands, but you’re not informed. You continue placing orders, assuming everything is the same, only to be slapped with a lawsuit for unpaid debts by the original owner. Can they hold you liable? This scenario highlights the importance of the legal principle of estoppel, which prevents someone from denying something they previously implied or represented as true, especially when another party has acted on that representation to their detriment. This case explores how estoppel applies in the context of contractual obligations and business ownership.

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What is Estoppel?

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Estoppel is a legal doctrine rooted in fairness and equity. It prevents a person from asserting a right or fact that contradicts their previous actions, statements, or representations, especially if another party has reasonably relied on those actions to their detriment. The principle is enshrined in Article 1431 of the Civil Code of the Philippines, which states, “Through estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.”nIn simpler terms, if you lead someone to believe something is true, and they act on that belief to their disadvantage, you can’t later deny the truth of your earlier representation.

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There are several types of estoppel, including:

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• Estoppel by deed: Based on a formal written agreement.

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• Estoppel by record: Based on a court judgment or official record.

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• Estoppel by conduct (or equitable estoppel): Based on a person’s actions or representations.

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Equitable estoppel, which is relevant to this case, arises when one party’s conduct induces another to believe in a particular state of facts, and the other party acts on that belief to their detriment. For instance, if a landlord consistently accepts late rent payments without protest, they may be estopped from evicting the tenant for late payment in the future.

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The Case: Mijares vs. Court of Appeals and Metro Drug, Inc.

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This case revolves around a dispute over unpaid pharmaceutical products delivered to a drugstore operating within a hospital compound. Here’s a breakdown of the key events:

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• Long-standing Relationship: Editha and Glicerio Mijares, doing business as