Equity is the name given to the set of legal principles, in jurisdictions following the English common law tradition, which supplement strict rules of law where their application would operate harshly, so as to achieve what is sometimes referred to as "natural justice." It is often confusingly contrasted with "law", which in this context refers to "statutory law" (the laws enacted by a legislature, such as the United States Congress), and "common law" (the principles established by judges when they decide cases).
In modern practice, perhaps the most important distinction between law and equity is the set of remedies each offers. The most common civil remedy a Court of law can award is money damages. Equity, however, enters injunctions or decrees directing someone either to act or to forbear from acting. Often this form of relief is in practical terms more valuable to a litigant. A plaintiff whose neighbor will not return his only milk cow, which wandered onto the neighbor's property, for example, may want that particular cow back and not just its monetary value. However, in general, a litigant cannot obtain equitable relief unless there is "no adequate remedy at law"—that is, a court will not grant an injunction unless monetary damages are an insufficient remedy for the injury in question. Law courts also enter orders, called "writs" (such as a writ of habeas corpus) but they are less flexible and less easily obtained than an injunction.
Another distinction is the unavailability of a jury in equity: the judge is the trier of fact. In the American legal system, the right of jury trial in civil cases tried in federal court is guaranteed by the Seventh Amendment, but only "[i]n Suits at common law," i.e., in cases that traditionally would have been handled by the law courts. The question of whether a case should be determined by a jury depends largely on the type of relief the plaintiff requests. If a plaintiff requests damages in the form of money or certain other forms of relief, such as the return of a specific item of property, the remedy is considered legal, and a jury is available as the fact-finder. On the other hand, if the plaintiff requests an injunction, declaratory judgment, specific performance or modification of contract, or other non-monetary relief, the claim would usually be one in equity.
A final important distinction between law and equity is the source of the rules governing the decisions. In law, decisions are made by reference to legal doctrines or statutes. In contrast, equity, with its emphasis on fairness and flexibility, has only general guides known as the maxims of equity. As noted below, a historic criticism of equity as it developed was that it had no fixed rules of its own, with the Lord Chancellor from time to time judging in the main according to his own conscience. As time went on the rules of equity did lose much of their flexibility and from the 17th century onwards equity was rapidly consolidated into a system of precedents much like its cousin common law.
However, remedies could also be obtained through filing a petition with the king, who held residual judicial power; these filings were usually phrased in terms of throwing oneself upon the king's mercy or conscience. Eventually, the king began to regularly delegate the function of resolving such petitions to the Chancellor, an important member of the King's Council. At the time, the Chancellor was usually a clergyman and the King's confessor, so he was literally the keeper of the King's conscience. Soon the Chancery, the Crown's secretarial department, began to resemble a judicial body and became known as the "Court of Chancery".
By the 15th century, the judicial power of the Chancery was recognised. Equity, as a body of rules, varied from Chancellor to Chancellor, until the end of the 16th century. After the end of the 17th century, only lawyers were appointed to the office of Chancellor.
One area in which the Court of Chancery assumed a vital role was the enforcement of uses, a role which the rigid framework of land law could not accommodate. This role gave rise to the basic distinction between legal and equitable interests.
People started petitioning the King for relief against unfair judgments and as the number of petitioners rapidly grew, the King delegated the task of hearing petitions to the Lord Chancellor. The first Chancellors were men of the cloth, and they were required to pass judgment guided by conscience and based on morals and equality. It has been suggested that ecclesiastics were chosen for this position as they belonged to the small class of people who were able to read and write.
As these Chancellors had no formal legal training, and were not guided by precedent, their decisions were often widely diverse. However, in 1529 a lawyer, Sir Thomas More, was appointed as Chancellor, marking the beginning of a new era. After this time, all future Chancellors were lawyers, and from around 1557 onwards, records of proceedings in the Courts of Chancery were kept, leading to the development of a number of equitable doctrines. Criticisms continued. The 17th century Jurist John Selden once said that “equity varies with the length of the Chancellor’s foot”.
As the law of equity developed, it began to rival and conflict with the common law. Litigants would go ‘jurisdiction shopping’ and often would seek an equitable injunction prohibiting the enforcement of a common law court order. The penalty for disobeying an equitable ‘common injunction’ and enforcing a common law judgment was imprisonment.
The Chief Justice of the King’s Bench, Sir Edward Coke began the practice of issuing writs of habeas corpus that required the release of people imprisoned for contempt of chancery orders.
This tension grew to an all-time high in the Earl of Oxford’s case (1615), where a judgment of Coke CJ was allegedly obtained by fraud. The Lord Chancellor, Lord Ellesmere, issued a common injunction out of the Chancery prohibiting the enforcement of the common law order. The two courts became locked in a stalemate, and the matter was eventually referred to the Attorney-General, Sir Francis Bacon. Sir Francis, by authority of King James I, upheld the use of the common injunction and concluded that in the event of any conflict between the common law and the equity, equity would prevail. Equity's primacy in England was later enshrined in the Judicature Acts of the 1870s, which also served to fuse the courts of equity and the common law (although emphatically not the systems themselves) into one unified court system.
Once equity became a body of law, rather than an arbitrary exercise of conscience there was no reason why it needed its own courts. Consequently the Judicature Act was established, which is the basis of the court structure in England to this date, and that there would no longer be different procedures for seeking equitable and common law remedies. The Judicature Acts fused only the administration of common law and equity; there is still a body of rules of equity which is quite distinct from that of common law rules, and acts as an addition to it. Although they are implemented by the same courts, the three branches of the law are separate. Where there is conflict, equity still prevails.
Henry VIII enacted the Statute of Uses in 1535 (which became effective in 1536) in an attempt to outlaw this practice and recover lost revenue. The Act effectively made the beneficial owner of the land the legal owner, and liable for feudal dues.
The response of the lawyers to this Statute was to create the ‘use upon a use’. The Statute recognised only the first use, and so land owners were again able to separate the legal and beneficial interests in their land.
For an example, see Godwyne v. Profyt (after 1393): a petition to the Chancellor
See generally treatises on equity and trusts.
The comparative question is an easy one to pose. Did English equity develop maturity early enough that all of its derivative systems necessarily tended toward the same doctrines because based on exactly the same set of general principles? Or did the split-offs of any of the colonies occur somewhere in the middle of its development so that substantial permanent differences resulted? One equity? or many?
The answer generally accepted in America, the earliest of the English colonies to gain independence, is the former, that the outcome of a case to be decided today upon principles of equity should be expected to be substantially the same whether decided in the UK or the US. The reasonableness of the belief enjoys strong historical support.
The perfection of modern equity as a system has been authoritatively credited to Philip Yorke, 1st Earl of Hardwicke who served as Chancellor 1737-1756.
For a review of several distinct approaches to identifying how law changes that utilize English legal history as a test bed see Robert Palmer, English Legal History course
1. That it cannot take cognisance of any case wherein the common law can give complete remedy.
2. That it cannot interpose in any case against the express letter and intention of the legislature. If the legislature means to enact an injustice, however palpable, the court of Chancery is not the body with whom a correcting power is lodged.
3. That it shall not interpose in any case which does not come within a general description and admit of redress by a general and practicable rule.
In the United States today, the federal courts and most state courts have merged law and equity in the courts of general jurisdiction, such as county courts. However, the substantive distinction between law and equity has retained its old vitality. This difference is not a mere technicality, because the successful handling of certain law cases is difficult or impossible unless a temporary restraining order (TRO) or preliminary injunction is issued at the outset, to restrain someone from fleeing the jurisdiction taking the only property available to satisfy a judgment, for instance.
Equity courts were widely distrusted in the northeastern U.S. following the American Revolution, and the northern states eliminated their equity courts by the late 1700s. However, the mid-Atlantic and southern states were slower to abandon their equity courts. The federal courts did not abandon the old law/equity separation until the promulgation of the Federal Rules of Civil Procedure in 1938.
Even today, a number of states still have separate courts for law and equity. Delaware is one notable example, as its Court of Chancery is where most cases involving Delaware corporations are decided. Some other states (such as Illinois and New Jersey) have separate divisions for legal and equitable matters in a single court. Besides corporate law, which developed out of the law of trusts, areas traditionally handled by chancery courts included wills and probate, adoptions and guardianships, and marriage and divorce.
After U.S. courts merged law and equity, American law courts adopted many of the procedures of equity courts. The procedures in a court of equity were much more flexible than the courts at common law. In American practice, certain devices such as joinder, counterclaim, cross-claim and interpleader originated in the courts of equity. Also, the modern class action evolved out of joinder.
With this codification, the nature and tenure of the equitable reliefs available earlier have been modified to make them statutory rights and are also required to be pleaded specifically to be enforced. Further, to the extent that these equitable reliefs have been codified into rights, they are no longer discretionary upon the courts or as the English law has it, "Chancellor's foot" but instead are enforceable rights subject to the conditions under the 1963 being satisfied. Nonetheless, in the event of situations not covered under the 1963 Act, the courts in India continue to exercise their inherent powers in terms of Section 151 of the Code of Civil Procedure, 1908, which applies to all civil courts in India. There is no such inherent powers with the criminal courts in India except with the High Courts in terms of Section 482 of the Code of Criminal Procedure, 1973. Further, such inherent powers are vested in the Supreme Court of India in terms of Article 142 of the Constitution of India which confers wide powers over the Supreme Court to pass orders "as is necessary for doing complete justice in any cause of matter pending before it".