CHAPTER 02

Law and Equity

These two words specify the two legal systems we actually have.

Law is the set of rules, written by legislatures, and enforced by society. Rules are enforced by authority, such as police, courts, and so on.

Equity is a system of justice administered according to standards of fairness (as opposed to standards imposed by specific laws or rules). Generally, equity follows the law. This means that applicable laws will be followed where they exist; where there are no applicable laws, principles of equity will be followed. Since most of this book (and law books in general) focuses on law, these few pages will discuss equity.

• 1. Historically in England, sometimes enforcement of laws and legal rules was unfair or harsh because the rules were administered in an inflexible manner. That is, they were applied rigidly, even if the outcome was, in fact, unfair. To overcome this inflexibility, equity courts (also called courts of chancery) were established, based on broad principles of justice and fairness.
  

  For example, it is unfair for one person to gain something of value at the expense of another. Thus an equitable principle arose: unjust enrichment. It may require someone to restore goods or money to another person if not doing so would lead to an unfair result.

If a contractor is in the middle of building a house but stops, the equitable principle of quantum meruit requires that the house owner pay for the work already completed. There is no specific law that forces these payments. But it seems fair, doesnít it? Itís a principle of fairness-thus, equity!

Or, if your neighbor is about to chop down your favorite tree, or you are very concerned about a new building project next door to your little house, you may seek an injunction to halt it. That is, you may seek a court order to order a stop, and prevent a future injury. In the old days, injunctions were issued by equity courts. Today, they may be issued, as well, by law courts.

Today, in most states, law and equity courts are merged. In some states equity courts still exist. They may be called equity or courts of chancery.

• 2. Law courts generally deal with situations after damage has been done- for example, when a personís rights have been violated or a law has been broken. In contrast equity courts may intervene to avoid damage, to prevent harm, and to promote fairness.
• 3. The main difference between law and equity courts lies in the relief they may order. Law courts may award money damages or punish wrongdoers. Equity courts deal with situations when money damages will not suffice. Sometimes the court may order a, potential wrongdoer to stop doing something by issuing an injunction. (for example, to stop dumping trash; or the court may order a person to do something through a mandatory injunction; or, perhaps, the court may order someone to stop doing an action for a brief period of time, by a TRO, a temporary restraining order-for example, an order to stop going to an ex-spouseís house.) Other equitable principles include unjust enrichment.
  No one should unfairly gain over another party. Whatever such gains exist must be returned to the rightful owner.

Quantum meruit.

Paying for what has been earned; not getting away with not paying because of some later occurrence, such as a breach of K. A court may order specific performance as an equitable remedy to a breach of K. That is, the court may order the party to do what he agreed to do, such as sell a particular house or special antique to the buyer rather than simply pay money damages. The reason? There may be no other property just like it. Money damages alone would not suffice, would not ìmake the buyer whole.'

The term equity is also used in the following situations: In a divorce a court may divide property between the spouses as the court believes to be fair, by equitable distribution, rather than by following specific rules, if that may lead to an unfair result.

Here's a test: Is it law or equity?

1. Judge awards fifty thousand dollars in damages to John in a malpractice suit.
2. Judge orders Sam to sell his house to Bill.
3. Jane sues Tom for sending the wrong merchandise.
4. Mary seeks a court order to bar her ex-husband from her house.
5. Neighbors go to court to stop noisy Saturday night parties down the street.

• Chapter 1
• Table of Contents
• Chapter 3

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