Are there affirmative defenses for situations where you broke the rules, but the plaintiff sanctioned or 
condoned your behavior? You betcha. Equitable estoppel, waiver, and ratification are three such affirmative defenses.
You’ve been sued, and you’re full of righteous indignation. The plaintiff is wrong. He had no right to sue. You have the facts on your side and a great defense. You could win if only you knew what affirmative defense to plead. Ever been in that situation? Many of us have. But, who knows all those affirmative defenses? Laches, waiver, entrapment, necessity. It’s mind-boggling.
We’ll save you some time and give you a bonus three–estoppel, waiver, and ratification.
Scenario
Ross borrowed $4500 from his credit union. He paid on the loan for five months before he was laid off. For three months, he continued to pay on time. On the fourth month, he paid on the 10th rather than the 1st. His bills mounted, but he managed to pay all of them by the 10th of each month. Finally, he found a job making slightly less than he did before. He continued to pay his bills on the 10th of the month.
Ten months after Ross started his new job, the credit union froze his account. Ross was unable to get money out. The credit union informed him that the account was frozen due to his late payments. Ross had been paying on the 10th for 15 months. He was not even aware that the credit union considered the payments to be late. Worse, he got nothing but a lecture when talking to credit union employees. Furious, Ross wrote a check for that month’s payment, and the credit union unfroze the account. After that, Ross took all his money from the credit union, stopped direct deposits, put his money into another bank, and never paid another dime on the loan. As expected, the credit union sued him.
Ross must get over his anger to deal with the realities of litigation. He doesn’t care so much about winning, but he wants to make the credit union pay. His challenge is to find strong affirmative defenses. He believes that the bank approved of his late payments because it kept accepting them. He believes there is some rule in the law that says if a person or company accepts payments on a loan or contract that they can’t just out of the blue change it. He’s not sure how to articulate the problem but will know the answer when he sees it.
About Equitable Estoppel, Waiver, and Ratification
Is there a law or affirmative defense that can help Ross?
Yes. There may be. Equitable estoppel, waiver, and ratification all stop a person from reneging or taking legal action that conflicts with previous conduct or behavior. In other words, the three affirmative defenses all prevent someone from going back on their word.
- Equitable estoppel stops a party from taking actions that are contrary to their previous behavior.
- Waiver is the voluntary relinquishment of a right by conduct inconsistent with claiming that right.
- Ratification is the giving of one’s approval of conduct such that one cannot complain about that conduct later.
A Closer Look of Equitable Estoppel, Waiver, and Ratification
An affirmative defense of equitable estoppel means that a party is “stopped” from actions that are contrary to their previous behavior. Ross believes that when the credit union accepted late payments, it okayed those payments and could not then go back on its word. Therefore, when it froze his account it broke the contract it had with him, and he was justified in the actions he took.
Looking closer though, Nolo, USLegal, and Black’s Law Dictionary say that equitable estoppel might bar a party from taking a different position in court than they had earlier. This definition has nothing to do with how the claim came about in Ross’s case. Further, a Florida Jury Instruction [rtf], likens the affirmative defense to fraud, detailing deliberate concealment of information. It lists the elements of equitable estoppel as a (1) misrepresentation of a material fact; (2) that the defendant relied on, and (3) the reliance was detrimental to him. See also State v. Harris, 881 So. 2d 1079 (Fla. 2004). This too is unlike the position in which Ross finds himself.
Can Ross still use equitable estoppel as an affirmative defense? It’s worth it. Ross should review the laws in his jurisdiction to see if the elements of the affirmative defense fit his set of facts. Even if he lives in Florida, it would pay to look at case law before giving up. The more numerous and viable his affirmative defenses, the longer it would take the plaintiff to strike them.
Though similar to equitable estoppel, waiver is different in a good way. Waiver is the voluntary relinquishment of a known right that can be demonstrated by conduct inconsistent with claiming that right. See Weidman v. Babcock, 241 Va. 40, 45, 400 S.E.2d 164, 167 (1991); Cal-Tex. Lumber Co., Inc. v. Owens Handle Co., Inc. 989 S.W.2d, 802 (1999). The elements of waiver are (1) knowledge that one can exercise the right, and (2) intent to relinquish that right. See Employers Ins. Co. Great American, 214 Va. 410, 412-13, 200 S.E.2d 560, 562 (1973).
Ross can claim that the credit union knew it had a right to insist that he pay on time. So, it could’ve charged fees, sent email or letters, or warned him of the consequences of late payments. It could even have stopped accepting payments long before 15 months. It did none of these things. Rather, for 15 months, it took his money late. Thus, Ross can say that the credit union intentionally abandoned it’s right to insist on timely payments or at least abandoned its right to penalize him for it. So, freezing his account was illegal.
Is Ross right? Can he use waiver as an affirmative defense? Yes, and he might even be successful in at least getting a settlement. Here, Ross doesn’t have to be nearly as creative as he would have to be when arguing for equitable estoppel. Waiver is a widely available affirmative defense, so it doesn’t really matter what jurisdiction he’s in. Asserting waiver as an affirmative defense is definitely worth a try.
Ratification
Ratification is the giving of one’s approval or confirmation of the conduct of another such that one cannot complain about that conduct later. Like estoppel and waiver, credit union knows the material facts regarding the act and confirms those acts when it could have condemned or stopped them. Ratification can also refer to the actions of someone else, such as an agent, acting on behalf of another.
“The elements of ratification are: (1) approval by act, word, or conduct; (2) with full knowledge of the facts of the earlier act; and (3) with the intention of giving validity to the earlier act.” Motel Enterprises, Inc. v. Nobani, 784 SW 2d 545, Tex: Court of Appeals (1990)
A ratification affirmative defense would have Ross claim that the credit union accepted late payments with the knowledge that he was paying late. He can argue that each of the 15 months the credit union accepted late payments validated his actions.
Is Ross right? Can he use ratification as an affirmative defense? Yes. The defense seems to be as strong as waiver. As usual, once he’s challenged, he has to be ready with cases and statutes to back up his assertions. Too, all of his affirmative defenses must state facts that bear out all the elements of that defense.
There may be other affirmative defenses available to Ross, but at least two of the affirmative defenses listed here might be winners for him. At the least, they’re all worth a try.
If you feel the plaintiff in your case did something wrong or that the facts are true but you’re not liable for harm to the plaintiff, explore available affirmative defenses. When you find a possible one, tie the facts to the elements of the affirmative defense. You may have a winner.
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