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.
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.
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?