What is rule of equity?
Rule of equity is a separate system of law from common law. It has different rules, principles and remedies. Equity proceeds in the principle that a right or liability should as far as possible be equalized among all interested. In other words, two parties have equal right in any property, so it is distributed equally as per the concerned law.
Thus, to understand the principles on which the rule of equity is based, we must understand the system of law, that is, its origin and the reasons for its necessity despite the presence of common law.
Common Law is the body of customary law that originated in the Curia Regis (King’s Court), London. English Common Law was developed primarily by judges and was based on judicial decisions and precedents.
Origin of rule of equity in India
In India, rule of equity has its origins from the relevant ancient Hindu period, when some famous legal experts defined the old law and laid down new rules for better solutions in case of any conflict arising between the rules of various laws.
Hindu law has never been unstable and has accordingly introduced similar principles to meet the requirements of time. The earliest attempt was to compile the law. In which Smriti Karas (author of Smriti) has actually considered the principle of law.
It was said that decisions should not be based exclusively on scriptures, there should be principles based on reasons. These cause-based theories qualify with the term equity.
Need for rule of equity
The country saw the need for a law of equity for two main reasons: –
- Under the common law, only one remedy was available, i.e. damages. Thus, a just and reasonable measure cannot always be given through the common law, where monetary compensation was not appropriate. This remedy did not always yield significant conclusions in cases.
- A civil action under the common law can only be initiated through a writ which was a legal document where it was written as to why and on what legal grounds a person is being prosecuted. The problem arose when a case was not covered by a writ. The making of writs with every new case was stopped in the 13th century and this meant that if a case was not already covered by the writ, it was not carried forward.
Principles of rule of equity
The body of the rule of equity is preserved in the following twelve maxims. These maxims are the general principles adopted to conduct justice and fairness. They rule over the Equity of Law and are discretionary.
- Equity without a remedy will not be wrong: – This maxim, in Latin, is “Ubi Jus Ibi Remedium” which means “where there is a right there is a remedy”. Maxim states that in situations in which the common law acquires a right, it also have remedies for the violation of the right. It should be kept in mind that this principle only applies where the jurisdiction of the court has both rights and measures.
- Equity follows Law: – This proverb is also expressed as “aequitas sequitur legem“. This maxim abolishes that equity supplement law and does not supersede it. The discretion of the court is governed by law and equity which are subject to each other. Wherever the law can be followed, it should be followed. In cases where the law is not specifically applicable, this maximum limit is limited. But in modern England and Wales, the law follows equity. Section 49 (1) of the Senior Courts Act, 1981 clearly specifies that in case of conflict between the law and the rule of equity, equity will prevail.
- He who seeks equity must do equity: – This maxim states that the plaintiff is also subject to the powers of the court and is thus bound to perform his duties by obeying the principle of equity. The concern of this maxim is the conduct of the plaintiff’s future. Thus, this maxim applies to the party who seeks equal relief because it determines that the plaintiff must also recognize and present his opponent’s authority.
- Section 19A of the Indian Contract Act: – The plaintiff must restore all benefits arising out of the contract which has been cancelled by him.
- Section 35 of the Transfer of Property Act: – The doctrine of election states that a benefit should be adopted under a legal instrument with all the provisions and obligations under such an instrument.
- Order 8, CPC Rule 6, Principles of Set-Off: – In case of mutual debt between two litigation parties, the amount due to one party will be determined by the same party which is due to the other party and only the residual amount will be claimed.
- One who comes in equity should come with clean hands: – This principle relates to the past conduct of the parties and states that a person who comes to court to demand equity should not involve himself in an unequal act in the past. This saying is concerned with the past behavior of the plaintiff.
- Delay defeats equity: – The Latin maxim for this principle is “Vigilantibus non dormientibus aequitas subvenit” which means that equality supports vigilance and not those who sleep for their rights. Unreasonable delay in bringing forth a claim is called headache. There may be consequences. Thus, a party must claim the action within a reasonable period of time. There are certain situations where the statute of limitations is expressly enforced, in such cases, there is a special legal situation where a time period is clearly set, has expired and the party are barred from bringing the suit of action.
- Equality is equity: – This principle is expressed by the Latin maxim “Aequitas est quasi aequalitas” which means that equity is equality. There is a saying that equity litigation, as far as possible, seeks to keep the parties at an equal level and equalize their rights and responsibilities. Ordinary law may give advantage to one party over the other, but the court places the parties on the same footing wherever possible.
- Equality looks at intent rather than form: – This principle is enshrined in the provision of relief against penalties and penalties stating that the purpose of the contract is to execute it and not compensation, thus the damage must be proportionate to the punishment and the receiver should not benefit (Section 74 of the Indian Contract Act provides for claiming reasonable compensation). In the case of a contract for the sale of land, if the party fails to complete it within a specified period of time, the equity gives the party a reasonable time to complete it.
- Equity makes the beneficiary as the true(final) owner: – Due to the limitation in the old common law, there was no remedy for beneficiaries if, for example, a trustee ran away with the trust property. To ensure this and to protect the recipients of the trust property, equity treated the beneficiary as the true (final) owners of the trust property.
- Equity acts in personam: – It has been said that rule of equity applies on a person rather than property. In England, the Court of Common Law and the Chancery Courts were distinguished by the fact that the former had rights over the individual as well as property, but the latter acted only over the people. His authority to contempt the court and punish accordingly arose a tremendous power of the Equity Court. Since the rule of equity was applicable to individuals and not to property, it could also apply to property outside a jurisdiction, provided the person was within the jurisdiction.
- The law prevails, where the equity are treated as equal: – When two parties want the same thing and the court cannot in good conscience say that one object has better rights than the other, the court will leave it where it is. For example, a company that was collecting sales tax and handing it over to the state government found that it was over 2 percent and overpaid. Company applied for a refund from the other party, but the state refused his application. The court upheld the state on the basis that the money actually belonged to the company’s customers.
- Where the equities are equal, the first in time prevails: – When each of the two parties has the right to hold something, the one who has previously earned interest must prevail in equity. For example, a man advertises a small boat for sale in the classified section of a newspaper. The first person who see the ad first and offers him $ 20 which is less than the asking price, and the other man also accepts it. The person says he will pick up the boat or pay it on Saturday. Meanwhile another person arrives, giving the man more money, and the man takes it. Now question, arises who is the owner of the boat. Law of equity and Law of contract states that the first buyer is the owner of the boat and the second buyer should get his/her money back.
- “Equity abhors a forfeiture“: – A forfeiture means to do something as required necessitates a total loss of right or authority. A total loss is usually a harsh penalty. Unless a penalty is justified with respect to the severity of the mistake, it is very harsh. In fairness and good conscience, a court of equity will refuse to allow undue unfair expenditure. This premise has a particularly strong application to the ownership of land, an interest for which the law shows great respect.
Remedies under law of equity
There are some remedies available to the plaintiff primarily by the court of law to compensate for the loss he has suffered, some of them are: –
- Injection: – It is a type of remedy in which the court provides a certain law and order on which the parties are pressured or restrained to perform a specific act.
- Specific performance: – In these types of remedies, the court passes a statement in favor to complete certain functions that are interlinked or already a part of the contract.
- Recession: – This remedy alternatively takes the parties back to their normal position before entering into a contract.
- Rectification: – In such a measure the court orders correcting or making some changes to the written document to reflect what is actually said on the first page.
Case laws
- Penn vs. Lord Baltimore
In this case, the court gave the order for a specific demonstration was made for the plaintiff who brought a case of a border dispute to an English court, yet the land was located in Maryland, USA. The jurisdiction of the Court applied to the parties as they were both in English and resided in England. Court order the plaintiff to take case to the jurisdiction of the case.
- D&C Builders Ltd vs. Rees
Where the plaintiff’s claim of enforcing the plaintiff’s application was rejected because it took undue advantage of the poor financial condition of the defendant’s builder company and thus did not come with clean hands.
- Ashby vs. White
In this case, qualified voter was not allowed to vote and thus court sued the Returning Officer, the matter relates to the principle of law or rule of equity that if a person is empowered with a right, he is also provided with a remedy.