The Rise of Equity - Essay Example

EQUITY Few concepts are more important in common law systems of jurisprudence than equity. It works to mitigate the harsh effects of both black letter and common law. This is an important idea. Laws may work in most situations and provide a great deal of certainty, but it is also possible for the law to work injustices too. That is when equity steps in to provide relief. It something that a judge can use, in his or her, discretion to alter the law so that justice will prevail. This paper will briefly explain the rise of equity and demonstrate its application and development in an important doctrine of contract law, promissory estoppel. Estoppel is one of the crowning achievements of equity in the common law system. The doctrine of equity began around 500 years ago in Britain. This country was also the birthplace of the common law, which is also known as judge-made law which features a reliance on precedence and laws set down by earlier courts. The doctrine of equity came to special prominence during the crusades when “uses” or trusts were developed (Cockburn 32). Previous to this, the common law did not permit someone to hold your property in their name. You would have no recourse should they simply claim that the property was theirs. These trusts allowed this to occur. Fearful of losing revenue, the King proclaimed the Statute of Uses to try to outlaw the process, but people still found loopholes. This is an important part of the doctrine of equity: it fills in the gaps of the common law. Following this there were courts of both equity and law. Some of the important maxims of equity are, for example, that you must come to equity with clean hands. This means that equity cannot be used as a sword to injure people and will not be permitted in situations where someone has behaved crookedly. This principle exists in many legal cultures. In Germany, for example, it said that a transaction that is in opposition to good morals is void (Glendon 142). One of equitys key doctrines is promissory estoppel. How this has evolved over the years provides an excellent overview not only of equitys development but how it differs from the common law. Over the years judges have expanded equitys role in business and contract law and it now plays a significant role in righting injustices in this section of the law. The common law tells us that in order for a contract to be made between two parties, consideration must be present. The terms of the contract cannot be altered without fresh consideration. If A rents an apartment to B for $500 a month and after a year agrees to lower the price to $250 then after a few month reneges, changes the rent to the original price and demands back-pay, B will be in a difficult position, as common law says a new contract was not made as the tenant offered no consideration; B will probably owe the full rent for the whole original contract. Promissory estoppel brings principles of fairness and equity into the equation for the first time and lowers the bar to allow more informal arrangements to have force of law. While it would an overstatement to say that estoppel undermines common law rules of consideration—because courts have discretion whether to apply the doctrine or not—it certainly alters the significance of consideration in contract-making. The doctrine of promissory estoppel prevents a party in a legal relationship from withdrawing a promise made to another party if the latter has relied on that promise and acted upon it to his or her detriment. This doctrine was resurrected after many decades in obscurity by Lord Denning in Central London Property Trust Ltd v. High Trees House Ltd [1947] KB 130. In this case High Trees House leased a block of flats for a rate £2500 per year from Central London Property Trust. Because of the war and the German bombing of London it was very hard to find people to live in the flats and High Trees was losing a lot of money. In 1940, the parties made an agreement in writing to reduce the rent by half. The period of time that this reduction was to last, however, was not clear. Over the next five years, High Trees paid the reduced rate. The people paid less. Then, in 1945, the flats were more popular and full again. There was a disagreement between the two parties and Central London sued for payment of the full rental costs. In his ruling, Lord Denning wrote: I am satisfied that a promise such as that to which I have referred is binding and the only question remaining for my consideration is the scope of the promise in the present case. I am satisfied on all the evidence that the promise here was that the ground rent should be reduced to 1,250l. a year as a temporary expedient while the block of flats was not fully, or substantially fully let, owing to the conditions prevailing . . . I am satisfied that the promise was understood by all parties only to apply under the conditions prevailing at the time when it was made, namely, when the flats were only partially let, and that it did not extend any further than that. When the flats became fully let, early in 1945, the reduction ceased to apply. Promissory estoppel requires three things 1) an unequivocal promise by words or conduct; 2) evidence that there is a change in position of the promisee as a result of the promise 3) inequitable circumstance if the promisor were to go back on the promise. Although this goes against the common law tradition of requiring consideration to make a contract, the significant requirements needed to convince a court to find this doctrine as present means that it is hardly truly removing the rigour required in contract-making. As well, it is important to point out that because promissory estoppel is an equitable remedy courts reserve discretion whether to find a case of promissory estoppel or not. Discretion is key to its application. Two important case illustrate this aspect. Both—not surprisingly—also involve Lord Denning. In D & C Builders Ltd. v. Rees [1965] 2 QB 617, Denning looks carefully at the circumstances of a case before providing an equitable remedy in a case where no new consideration was present. A builder had taken a smaller amount for a job than was owed to him (in the form of a negotiable instrument); the debtee effectively held him to ransom, saying she would give him no more and knew he was in financial difficulties. Although he took the cheque and the common law would see the debt as satisfied, Denning writes that, “The harshness of the common law has been relieved. Equity has stretched out a merciful hand to help the debtor . . .” He further cites the first case where promissory estoppel came to light: Hughes v. Metropolitan Railway Co. (1877) 2 AC 439. In this case Lord Cairns wrote: It is the first principle upon which all courts of equity proceed, that if parties, who have entered into definite and distinct terms involving certain legal results, afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them when it would be inequitable having regard to the dealings which have taken place between the parties. It is important to stress that the common law is simply too inflexible and strict to deal with the huge variety of business and contractual relations, especially as they became much more complicated in the 20th century. The requirement of consideration in every case is simply too onerous and complicated, especially as more and more business relationships became less formal in modern times. It is not especially realistic in todays business climate. This is part of the long march of equity into the common law and efforts to make the law more closely reflect the actual way relationships are formed and business is transacted. While consideration is still required to form contracts, there are also times—specifically defined and at the discretion of the court—where it is not required. The common law is not undermined—it is actually enhanced by the doctrine of promissory estoppel. Judge-made law is a great accomplishment. It allows the law to develop over time and represents a collective sense of right and wrong. But it can be too inflexible at time. That is why equity is necessary. Equity permits a judge to use his or her discretion to ease justice into a judgement, should certain facts be in play. This is frequently seen today with contracts, where the equitable doctrine of promissory estoppel plays such an important role. Equity and it development is something that all law-abiding citizens should be proud of. Works consulted Central London Property Trust Ltd v. High Trees House Ltd [1947] KB 130 Cockburn, T. and M. Shirley 2005, Equity in a Nutshell. Lawbook Co, Sydney. D & C Builders Ltd. v. Rees [1965] 2 QB 617 Dawson, John P 1984, "Judicial Revision of Frustrated Contracts: The United States." Boston University Law Review. 64:1 (January) Glendon MA et al 2008, Comparative Legal Traditions In a Nutshell, 3rd edition, Thomson-West. Gough, John Wiedhofft 1985, Fundamental law in English constitutional history. Wm. S. Hein Publishing. Hughes v. Metropolitan Railway Co. [1877] 2 AC 439 Read More