EQUITY: The Issue of Fairness

I think that by now you can see the propensity for the law to pile rules upon rules upon rules. This can produce a certain form of a strait-jacket, which is exactly what happened.

To compound matters, in the fields of tort, contract and property, the courts developed the doctrine of stare decisis - "precedent". It is a commitment to the rules, procedures, principles, and holdings of prior cases. The courts saw themselves as bound to these past cases, and were unable to change to meet new situations. As time went by, more and more people began to bring disputes, so more and more "unusual" situations were faced.

Bound by stare decisis, the law began to stagnate.

And, the remedies available, that is, "I won; so what?" at law were proving too inflexible to meet the "peculiar" needs of new victims and new cases. So people began to petition the king for extraordinary relief outside of law. As it was extraordinary, the king referred the cases to his religious officer (chancellor), for a review of the moral issues involved. From this developed the chancellery courts and equity, with its own set of requirements, remedies, defenses, and rules of proof.

Once you proved a basic case under tort, contract, or property law and you had to make that proof before asking for equitable remedies -you only needed to ask the following additional questions:

Was your remedy at law adequate? If not, then equity would act.

Did you come to the court with "clean hands"? Since you are ask­ing for justice, and for an extraordinary remedy, you may not do so if you have some fault in the matter.

Have you been guilty of laches? That is, have you slept on your rights, allowing the other party to change their position in reliance upon your silence, to their detriment?

What is fair? What should be done?

Because the remedies available in equity were very powerful, the judges were concerned that skillful lawyers might manipulate a jury to an unjust result. To avoid such potential abuses, the jury was denied in equity.

For a number of years, the two fields of law, law and equity, devel­oped side by side, even fighting one another for power. Today we have merged the two systems into one, with our judges having the ability to move from one field to the other during the process of a case. Where both issues are involved, we will have a bifurcated trial: the jury hears the part dealing with law, while the judge decides the matters of equity.

Today we consider remedies as a part of the issue of "I won; so what?". Common Law remedies were compensatory damages and res­titution.

Compensatory damages were designed to make good the loss, they substituted for a tangible thing. Damages may be general, special, pu­nitive, or nominal.

General damages are considered to flow directly from a proven wrong. It is not necessary to prove that a damage is reasonably foresee­able by the defendant; only that they are natural and incidental to the harm, and flow from it. In contract cases, general damages seek to re­store the plaintiff to where he would have been if the contract had not been breached, for the loss of the benefit of the bargain.

Special damages must be reasonably related to the injury (but for), reasonably certain in amount (not speculative) and reasonably foreseeable.

Punitive damages were like a fine, with the money going to the plaintiff and not the state, to punish the defendant to deter him from doing such acts again, and to deter other possible defendants. It requires that the defendant has gone beyond bounds of decency in his conduct. Showing bad faith or malice will help establish such damages, as will grossly reckless conduct or conduct which shows massive indifference to the potential for harm.

Nominal damages are at the opposite end: there is no specific harm involved, but a right has been determined, they are normally granted after proof of the right has been made and after the court has deter­mined that no compensatory damages have been established.

Restitution, in comparison to compensatory damages, does not aim to restore the loss sustained by the plaintiff; it transfers from the defen­dant to the plaintiff any unjust enrichment, secured by the defendant by his improper acts which it would not be right for him to retain.

There were times when the remedies of the Common Law just were not good enough. That is where equity came in with: rescission; refor­mation; injunction; specific performance; equitable receivership; inter­pleader; sequestration; and declaratory judgment.

But in tort and property cases in equity, plaintiff had to prove that his remedy at law was inadequate and face a question of balancing the hardships. In contract actions, plaintiff also had to prove that there were a mutuality of conditions; no outstanding conditions; and an en­forceable contract.

Balancing the hardships meant that the court would look at the hardship and issue an order against a defendant which may cause de­fendant versus the hardship to plaintiff if the order is not entered. If an order against defendant then seems "unjust", only money damages will be awarded the plaintiff.

Defendants at equity could also raise two additional defenses: laches and "unclean hands". Laches is a question of how much time has elapsed since plaintiff knew of the problem and during which he did nothing and what harm the delay caused the defendant. Unclean hands is the recogni­tion that the plaintiff is asking the court to "do justice" and cannot ask for that if he has, in the matter at issue, been guilty of "injustice".

Rescission may often involve restitution by both sides, for it at­tempts to end the relationship between the parties as though it had never been begun. Grounds for rescission are: fraud or material misrep­resentation; mistake (mutual or by one, but known to the other who takes advantage of the mistake rather than warning about it); duress; il­legality; impossibility of performance; or failure of consideration. Gen­erally, the party seeking to rescind must tender back any thing he gained in the process. At law the act of tender and the notice of intent to rescind rescinds the contract at that instant.

Reformation proceeds on the theory that the parties did reach an agreement but that, in reducing it to writing, something went wrong, through mistake or fraud, and thus they signed what they did not agree. Here the request is made for the court to reform a document to the origi­nal intent of the parties. An additional defense here is ratification if the plaintiff learns of the mistake and then continues to act as in the contract.

Specific performance is limited to contract actions. It orders a defen­dant to do what he promised he would do. It is here that the terms mutual­ity of conditions, no outstanding conditions, and enforceability arise.

If the contract is so one-sided as to be unconscionable, it will not be ordered against a weaker party. If one asking for enforcement has not fulfilled his part, he will not be allowed to order the other to fulfill his part in advance. If the contract has an illegal act, which makes it unen­forceable, the court will not order enforcement.

Injunction is an order to a defendant, which may proceed on its own without any damage, or as a part of a damage case. It orders defendant to do, or not to do, specific things, and can come at three stages of a case: temporary restraining order, preliminary injunction; and/or permanent injunction. Bonds are normally required before an injunction is ordered.

Temporary restraining orders are issued without a chance for the de­fendant to respond. They are not favored, are very carefully scrutinized, require the plaintiff to post a bond, and may lead to a claim against plaintiff for damages if the order is subsequently found to have been in­appropriate. There must be a hearing within 10 days of issuance of the order, with notice to the defendant required.

Preliminary injunctions are entered for the length of a case, al­though they can be removed before that time.

Permanent injunctions are good until revoked.

Equitable receivership is where the court takes property at issue between the parties from both parties and places it in the hands of a third party to manage until the case is determined.

Interpleader is when someone with property, which he knows is not his own, is faced with more than one person claiming the property, brings the property into court and the judge orders all the conflicting parties against the property to come and state their cases, while the one who had the property may get to go home.

Sequestration is when an officer of the court is ordered to take pos­session of some property of the defendant and then either deliver it to the plaintiff or sell it and give the proceeds to the plaintiff.

Declaratory judgment asks a court to look at a contract, a statute, or a situation before a conflict has erupted, and declare the meaning of the thing reviewed so that the parties may proceed without conflict.

Finally, both law and equity also offered a remedy of contempt of court. Contempt of court is a remedy of the court rather than of a party, but a party may ask the court to make a finding of contempt. It is the matter of the court upholding the honor of the law, legal process, and position of the judge.

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