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Two legal institutions developed in England during the Middle Ages to which plaintiffs could turn to assert their rights: The courts of law as mentioned above and the Court of the Chancery. This court originally stemmed from the residual judicial power retained by the King. The courts of law became limited by the formalism arising out of the use of writs and forms of action. Despite the perception that judges in the common law system act freely, the historical reality was that it took decades for new forms of action to be judicially accepted. Even these new forms were extremely formalistic and form-bound with no room for judicial interpretation.

A body of case law gradually evolved within the Court of the Chancery addressing situations in which there was no form of action or the remedy at law was insufficient. The legal institution of equity developed as a result of this bifurcation in the English legal system, along the same lines as articulated by Aristotle: “[T]his is the essential nature of the equitable: it is a rectification of law where law is defective because of its generality: it is because there are some cases for which it is impossible to lay down a law, so that a special ordinance becomes necessary.” (1)

To be granted equitable relief, the plaintiff must come to the court with clean hands, without fault. The plaintiff at equity is seeking to invoke the coercive power of the court to obtain a specific action such as an order for specific performance, as opposed to petitioning for monetary damages. Equitable relief is more discretionary than a remedy at law. It is within the judge’s discretion to not award an equitable remedy even if the case is proven. A right at law proven must be awarded with no discretion available to the judge. The early petitions to the Court of the Chancery reflected the nature of this discretionary power, asking the King and his council for remedy, not as a matter of right, but of grace, for the love of God and by way of Charity.

Certain doctrines became firmly established within equity such as the defense of the unconscionability of contracts. At law, the parties are viewed as having freely negotiated the terms of a contract so that the contract per se cannot be seen as unfair. At equity, the court is free to take into consideration the fact that certain contracts, depending upon the bargaining positions of the parties, can be grossly unfair, in other words, unconscionable.

Equitable maxims, such as “clean hands”, were developed by the courts and used to arrive at decisions in equitable cases, including the following:

  • Equity regards that as done which ought to be done;
  • One should not profit by intentional misdeeds;
  • Whoever seeks equity must do equity;
  • Where there is equal equity, the law must prevail;
  • Equity will not suffer a wrong to be without a remedy;
  • Equity regards substance rather than form;
  • Equity aids the vigilant, not those who rest on their rights: and
  • Equality is equity.

The distinction between the separate courts of law and equity has been abolished in most American states with the merging of the two systems. The classification of an action or a remedy as legal or equitable remains important, however, for at least three reasons. First, the courts can enforce equitable remedies. The court can hold the party refusing to comply with the court order in contempt of court. Contempt ultimately can result in the party being fined or imprisoned. The courts do not have this enforcement power with a court order at law awarding monetary damages. (2) The party at law must seek the enforcement. Second, jury trials are often granted as a right in cases at law. There is no right to a jury with respect to a claim in equity. Finally, equitable relief is discretionary.

Excerpted with permission of the author from: American Business Law A Civil Law Perspective, Laura Carlson, J.D.(USA), LL.M.(Sweden)

(1) Aristotle, The Nicomachean Ethics 317 (H. Rackham, trans., 1947).
(2) This difference also exists with respect to many civil law systems in which the courts generally lack such extensive power.