detrimental reliance

detrimental reliance

Taking an action or failing to take an action because of a representation made by another person that turned out to be untrue.

Example: Jake called his mortgage company to find out the remaining balance due on his home loan. The lender sent Jake a letter advising him the payoff was $28,312. The sum was small enough that Jake decided to sell his car to pay off the home loan, quit his job, and take a year off to write a novel. After he sent the money in, the mortgage company advised him that it had made a mistake and the payoff was really $48,312, so he needed to pay an additional $20,000 to satisfy the mortgage. A court may apply the theory of estoppel against the mortgage company and force it to satisfy the loan without any additional money, because Jake had detrimental reliance on the mortgage company's representations.