Amalgamated Investment v Texas Commerce Int Bank [1981] 3 All ER 577

• Texas Commerce Int Bank's (T) subsidiary made loans to Amalgamated Investment's (A) subsidiary and they worked on the assumption that A was guaranteeing the loans, when in fact the wording of the contract meant that only loans made by T itself (main company) were to be guaranteed by A.

• However the CA said that A was “estopped by convention” from seeking a declaration that it had no liability regarding loans to A’s subsidiary. 

Lord Denning

• Where two people are agreed on the “conventional basis” for dealings between them, and that basis is shown to be flawed, it is given effect as though it were fact. 

Brandon LJ

• Conventional estoppel cannot give a cause of action itself, but may be used to make a cause of action successful where it otherwise failed.

  • This goes against the idea of estoppel as a “shield, not a sword” and as CW says, this is the qualification that eats up the rule.