Business Law

Common law and equity: the reasons behind the creation of equity. What is it and how is it different from common law? What is the present relationship between common law and equity?

Methodology

In order to provide a broader image of the principles applied by equity and the common law, secondary research was carried out. The process involved both gathering information from the internet websites and Business Law textbooks.

Findings

The development of English legal system goes back in the history to the year 1066 and the Battle of Hastings. Before this date it can be admitted that there was no body known as English Law. However, after the invasion of William the Conqueror, the Normans due to their exceptional administration skills enabled the English law evolution and gave the way to the centralization process (Origins and development of English law, 2009). Moreover, the law established a better link between the king and the people and according to the views of state it was crucial (Law and the state, 2009).

The creation of equity

The creation of equity is closely related to the foundation and the development of the common law. That is why it is necessary to discuss such code of laws as the Common Law.
During the Norman period of history, the country was ruled by the body named Curia Regis (King’s Council), which possessed juridical power and dealt with different sorts of administrative tasks. However, according to Maclntyre (2008:11), long time after the Norman invasion, the first applications to the legal set of rules, which lately would be known as the common law, were started by King Henry II. He was sending his representatives all over the country to insure all the procedures, which afterwards lead to the fact that these representatives were more judges than the administrators. The concept of this judgment system and its verdicts were based upon the decisions made by the first judges and their recording (Maclntyre, 2008:11). Step by step, all the recordings were synthesized in one code of laws, which is the Common Law.
However, the time showed that the Common Law system is not perfect and contains certain defects. These disadvantages afterwards became the main reason why such a body as equity was formed. The principal cause of this was that as the society was growing and developing the common was not able to meet all the needs and provide a timely respond. Moreover, the writ system seemed to be defective and slow in giving the appropriate solutions. Because of the fact that the common law system was very conservative and narrow, if there was a wording mistake in a writ, it was considered completely defective. In addition, one of the main reasons why there was a need in the creation of equity was the existence of only one civil remedy, which was the payment of damages (Maclntyre, 2008:11).
Having considered all the reasons discussed above, a special committee, headed by the Chancellor, was set up in order to proceed the petitions. Afterwards, by the 15th century the Chancellor founded the Court of Chancery to which the rules of equity were applied.

What is equity and how is it different from the common law?

Originally, the equity law was not created as a competitor of the common law. It was more a supplementary set of laws, however, step by step; it grew into a strong legal system which covered the disadvantages of the common law. It was created to defend the rights of the victim in the cases where the common law was incompetent and provided protection to the wrongdoer (Hudson, 2001:13). As a consequence, the two bodies became rivals to each other.
As highlighted before the concept of the common law was very narrow. Based on the recordings of the previous judges, it did not include a significant number of aspects and what is important it did not change even though there was an obvious need in development. However, the equity law was broader, and the Chancellor set the rules and made his decisions based more on the natural views of what is just or fair. He was operating more with his own thoughts and knowledge rather than previous judges’ experience as it was practiced in the common law (Common law, equity and statute law, 2009). Under the equity law the trust concept was originated, which made a great additional contribution in the English legal system. Another difference is that the equity law did not use the juries (Equity has precedence over the common law, 2009).
In order to face the judgement according to the equity law, the applicant should meet the number of conditions, such as: 1) No delays in presenting the case before the court 2) The applicants should show that they are behaving in a morally guiltless way 3) Important condition was to prove that in common law the applicant could not receive any help and justice (Common law, equity and statute law, 2009).
The set of these conditions is also the aspect that makes the equity law differ from the common one.
Moreover, in the common law system the judges followed rules very strictly, they could not change the procedural regulations. However, in equity the rules were more flexible and they were constantly developing in order to make sure the fairness of case (Common law, equity and statute law, 2009).
One of the most important aspects that make the two systems different is the problem of remedies. As it is known the common law saw only one civil remedy as the resolution to the cases, which is the payment of damages. In numerous cases it was a useless remedy to implement as after paying the damages the side still kept committing illegal actions towards the other side (Maclntyre, 2008:11). The equity law introduced such remedies as specific performance, rescission, injunction and rectification, which developed in a significant manner the sphere of the contract law.

While analyzing the differences between the common law and equity, it is obvious that a number of conflicts could arise. That is why with the Earl of Oxford Case (1615) it was made the decision that the equity law should prevail over the common law in the conflict cases (Maclntyre, 2008:12).

What is the present relationship between the common law and the equity?

Nowadays the relationship between the common law and the equity is still present. With the Judicature Acts 1873-75 the Court of Chancery and the common law courts were merged into a Supreme Court which is now composed of the Court of Appeal and the High Court. All the courts have the power to refer to both the common law principles as well as the equity law. However, nowadays the practical difference between the two law systems does not longer exist; the intellectual difference still takes place (Hudson, 2001:11). Practically, the Chancery Division (High Court) will deal with the issues of property law and trusts (equity) and the Queens’s Bench Division of High Court will hear the cases concerning the contracts and the law of tort (the common law) (Hudson, 2001:11). Moreover, the courts still have a distinct system of claims and remedies. Examples of claims in the common law can be fraud, negligence or the breach of contract and the remedies received are money, common law tracing or damages. On the other hand, the equity’s claims can be tracing property, breach of trust or claiming property on insolvency and the remedies sough can be compensation, equity tracing, injunction, specific performance and others (Hudson, 2001:13).
It is essential to bear in mind that all the courts have the power to refer to both the common law principles as well as the equity law. An example of such implementation and the relationship between the common law and equity in practice is the case of Central London Property Trust Ltd v High Trees House Ltd. It is a key case which originated the doctrine of promissory estoppel. Because of the World War II and the low occupancy rates, the High Trees Ltd. asked Central London Property Trust to lower the rent price from £2500 per year by half. The written agreement took place, however, the period of time during which the price will be low was not defined. As a result, after the war when the occupancy rates increased, Central London Property Trust sued High Trees Ltd. for payment the full rental rate from June 1945. While making his decision on when the full rent payments should be incurred and , the judge Denning J took into consideration both codes of laws. According to the common law, it was obvious that the rent rate should have stayed the same £2500 per annum regardles the agreement (written or oral). Nevertheless, due to the developments of the legal system and referring to the equity law, the court must consider that any variations of the deed have the right to exist and therefore, the plaintiff succeeded in this case. However, it was stated that if the Central London Property sued for the time period starting from 1940, they would have failed, as the other party can enforce the made promise despite the inexistence of the important evidences of the contract. That was the first use of the promissory estoppel (Incorporate Council of law Reporting, 2008).

Conclusion

In conclusion, it can be admitted that throughout the history the English legal system underwent a significant number of changes: from the Norman kings with their first attempts to create the code of laws to the modern well-structured legal scheme. During all these time the core systems are the common law and afterwards the equity law. Despite the fact that they have a significant number of differences as, for instance, the remedies, they merged into one system and the judges are taking into consideration the aspects of both laws when making their final decision.

Bibliography

Manclntyre, E., 2008. Business Law. 4th ed., Perason Education Limited: Essex, pp. 11-12

Hudson, A., 2001. Equity and Trusts. 2nd ed., Cavendish Publishing Limited: London, pp. 11-13

http://www.zeblog.com/blog/uploads/t/titiflo77/Origins_and_development_of_English_law.pdf

http://www.bbc.co.uk/history/british/middle_ages/henryii_law_01.shtml

http://www.coursework.info/GCSE/Law/Common_Law_and_Equity_L122288.html

http://openlearn.open.ac.uk/mod/resource/view.php?id=208928

http://www.geocities.com/CapitolHill/Senate/3616/Equity.html

http://books.google.com/books?id=0u8sGuhuKs8C&pg=PA29&lpg=PA29&dq=Denning+J+and+High+Trees+case&source=bl&ots=TnmJiExOKW&sig=ADrU-lyu3oDr-IBkN3WrFEIkhjs&hl=en&ei=FqTkSpK_MMuH4QaF7ID8AQ&sa=X&oi=book_result&ct=result&resnum=3&ved=0CBQQ6AEwAg#v=onepage&q=Denning%20J%20and%20High%20Trees%20case&f=false

http://www.justis.com/titles/iclr_s4720014.html

Bibliography: Manclntyre, E., 2008. Business Law. 4th ed., Perason Education Limited: Essex, pp. 11-12 Hudson, A., 2001. Equity and Trusts. 2nd ed., Cavendish Publishing Limited: London, pp. 11-13 http://www.zeblog.com/blog/uploads/t/titiflo77/Origins_and_development_of_English_law.pdf http://www.bbc.co.uk/history/british/middle_ages/henryii_law_01.shtml http://www.coursework.info/GCSE/Law/Common_Law_and_Equity_L122288.html http://openlearn.open.ac.uk/mod/resource/view.php?id=208928 http://www.geocities.com/CapitolHill/Senate/3616/Equity.html http://books.google.com/books?id=0u8sGuhuKs8C&pg=PA29&lpg=PA29&dq=Denning+J+and+High+Trees+case&source=bl&ots=TnmJiExOKW&sig=ADrU-lyu3oDr-IBkN3WrFEIkhjs&hl=en&ei=FqTkSpK_MMuH4QaF7ID8AQ&sa=X&oi=book_result&ct=result&resnum=3&ved=0CBQQ6AEwAg#v=onepage&q=Denning%20J%20and%20High%20Trees%20case&f=false http://www.justis.com/titles/iclr_s4720014.html