First Principles of Business Law

8.3. Ordinary estoppel

Case-study. B owns a fruit shop. A tells B that he can supply B with 2000 kilos of apples at a price of $2 per kilo. This is a dollar per kilo cheaper than other apples that are available. When B asks A how he can supply apples so cheaply, A says that he has a licence to import fruit from New Zealand. Relying on what A has told him, B cancels his order with another supplier and contracts to buy 2000 kilos of apples from A for $2 per kilo. However, despite what he told B, A does not have an import licence. He has applied for one, expecting to get it, but his application is unexpectedly refused and he cannot legally import the cheap fruit. If B tries to enforce the agreement, will the fact that A has no licence provide A with a defence?

(a) Yes. Cases are always decided on their true facts. If A does not have a licence, this will provide him with a defence against any attempt by B to enforce the contract.

 (b) No. A told B that he had a licence. B was misled by this and acted on the basis of his mistaken belief. In these circumstances A will not be allowed to rely the true facts of the case as a defence.