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For other uses, see Equity (disambiguation).
Equity is the name given to the whole area of the legal system in countries following the English common law tradition that resolves disputes between persons by resort to principles of fairness and justness. Equity comes into play typically when none of the parties to the dispute has done anything against the law, but their rights or claims are in conflict. Thus, it is to be contrasted with "law," which is the legal principles from the common law, the laws enacted by governments, and the "case law" (the principles set forth in courts' opinions deciding cases).
The concept of "law" as opposed to "equity" is an accident of history. The "law courts" or "courts of law" were the courts all over England that enforced the king's laws in medieval times. At the end of the 13th century, the courts of law froze the types of claims they would hear, and the procedure that governed the hearing of those claims. Because the range of legal claims at that time was quite narrow, legal procedures were painfully hypertechnical, and jurors were often bribed, the result was that many meritorious plaintiffs were denied relief.
However, remedies could also be obtained through a petition of the king, who held residual judicial power. Eventually, this function of dealing with petitions was delegated to the Chancellor, an important member of the King's Council. 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.
Distinction between law and equity
In modern practice, perhaps the most important distinction between law and equity is the remedies each offers. The most common remedy a court of law can award is money damages. Equity, however, enters injunctions or decrees directing someone either to act or to forebear 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. 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. Equitable remedies can only be dispensed by a judge as it is a matter of law and not subject to the intervention of the jury as trier of fact. The distinction between "legal" and "equitable" relief is an important aspect of the American legal system. The right of jury trial in civil cases is guaranteed by the Seventh Amendment of the Constitution, but only in cases that traditionally would have been handled by the law courts at Common Law. 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 the American Constitution guarantees a right to a trial by jury. 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. Indeed, one of the historic criticisms of equity as it developed was that it had no fixed rules of its own and each Lord Chancellor (who traditionally administered the courts of equity on behalf of the King) gave judgment according to his own conscience. John Selden, an eminent seventeenth century jurist, declared, "Equity varies with the length of the Chancellor's foot."
In the U.S. today, the federal courts and most state courts have combined law and equity in the same courts, so a plaintiff can get legal and equitable relief in one proceeding. This reflects the position in England where the fusion of law and equity was substantially effected by the Judicature Acts 1873–1875.
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. Even today, several of these 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 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.
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