LECTURE 16INTRODUCTION

TO EQUITY

In last week’s lecture we looked at……..

Conditions, Warranties and Implied Terms

Provisions under the Sale of Goods Act (1979) & The Supply of Goods & Services Act (1982)

This week we will be looking at Equity: Equitable principles and remedies, and the doctrine of promissory estoppel

RECAP- LECTURE 15

Understand what Equity is and how it interacts with the Common Law;

Describe and explain the nature of equitable remedies and the circumstances under which they can be sought;

Explain what the doctrine of Promissory Estoppel is and the principle that estoppel is a “shield and not a sword”;

Outline the facts and judgement of Central London Property Trust Ltd v High Trees House Ltd (1947);

Apply legal principles to given facts and demonstrate criticality & analysis when answering fact based questions; and

Analyse case law and be able to apply case law in a persuasive manner to hypothetical case studies

LEARNING OUTCOMES:

Granville Williams:

the English Law is a composition of 3 great elements: legislation, common law and equity. Infused with European law, these elements

make up the English law we have today

Recap:

UK has a common law system….laws are not codified and come from three different sources……

Statutory law- Acts of Parliament (primary legislation)

Common law- “judge made law”; doctrine of judicial precedent

Equity- (equitable) principles which work with the common law…….G.Williams: “working behind the scenes of the common law”.

THE ENGLISH COMMON LAW SYSTEM

The Osborn’s Concise Law Dictionary definition:

Fairness or natural justice

That body of rules formulated and administered by the Court of Chancery to supplement the rules and procedures of the common law. By the Judicature Act 1873 the Court of Chancery was amalgamated with the Common Law Courts to form the Supreme Court, and the rules of equity are administered alongside the common law rules in all courts. Where there is any conflict between the rules of law and equity, equity is to prevail (see the Judicature Act 1925 ss.36-44)

WHAT IS EQUITY?

The law of Equity until 1873 was administered by the Court of Chancery

Before the passing of the first Judicature Act (1873) there were two different court systems in England- 1) the common law courts (which dealt with the common law) and 2) the court of chancery (which dealt with the law of equity)

Therefore, until 1873 the claimant had to decide whether to bring the claim in equity or at common law (depending on what remedy the claimant sought)

If the claim was made in the wrong court, the claim would automatically fail and needed to be bought again in the appropriate court. This system obviously wasted a lot of time and money

EQUITY’S HISTORY

The Judicature Act of 1873 (and subsequently the Judicature Act 1875) removed the need to sue in common law for a common law remedy

The Judicature Acts created a single High Court of Justice with a Queen’s Bench Division (for common law and Equity cases) and a Chancery Division (for Equity cases) and both divisions could determine questions of Equity

So today, the courts now apply both the common law and the rules of equity

IS NOT THE (WRITTEN) LAW BUT RATHER A SET OF RULES AND PRINCIPLES WHICH THE JUDGES FOLLOW WHEN REACHING A JUDGMENT.

HAS THE PRIMARY OBJECTIVE OF SERVING JUSTICE AND FAIRNESS, WHERE THE COMMON LAW WILL NOT OTHERWISE.

HAS A “FLEXIBLE” AND “OBJECTIVE” APPROACH TO THE LAW AND THE CASE (LOOKS AT INTENT/ “CONSCIENCE” OF THE PARTIES)

WHERE THERE IS A CONFLICT BETWEEN THE COMMON LAW AND EQUITY....EQUITY WILL PREVAIL!

KEY CHARACTERISTICS OF EQUITY

Equity acts in personam

Equity will not suffer a wrong without a remedy

Equity follows the law

Equity looks to the intent rather than the form

Equity looks on that as done which ought to be done

Equity imputes an intent to fulfil an obligation

Delay defeats equity

He who comes to equity must come with clean hands

He who seeks equity must do equity

Where there is equal equity, the law prevails

Where there are equal equities, the first in time prevails

Equality is equity

EQUITABLE MAXIMS (PRINCIPLES)

……..You are expected to be able to recite and explain each of the maxims outlined!

I'm only joking!!!!

1. SPECIFIC PERFORMANCE:

Specific performance is a remedy granted by the court that forces the party to a contract to perform the terms of that contract

The remedy can be applied where the court thinks that it is more appropriate than an award of damages

This emphasis on appropriateness as considered by the court shows that Equity is about fairness ultimately

EQUITABLE REMEDIES

Promissory estoppel allows parties to a contract to suspend rights under the (primary) contract by way of a promise that is not supported by consideration

Denning J in Combe v Combe (1951):

“where one party has, by his words or conduct, made to the other a promise … which was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at his word

and acted on it, the one who gave the promise... cannot afterwards be allowed to revert to the previous legal relations as if no such promise... had been made by him, but he must accept their legal relations subject to the

qualification which he himself has... introduced, even though it not supported... by any consideration but only by his word.”

EQUITABLE REMEDIES:2. PROMISSORY ESTOPPEL

1) A contract already exists between the parties (the primary contract), which is valid and supported by primary consideration

2) There is then a subsequent promise from one party to the other that not all of the terms of the contract – or a modified version of the contract – will be enforced

3) The promisee then “acts on” that promise

4) The promise is freely made, without any threats

5) No consideration is provided for the promise, but it is still enforceable

HOWEVER, PROMISSORY ESTOPPEL ONLY APPLIES TO CONTRACTS WHEREBY:

Under the terms of Contract A, payment is due within 7 days from date of delivery and in the event that the buyer fails to make payment within the 7 day period, the seller is entitled to apply a late payment fee of £1,000

The buyer fails to make payment within 7 days but enters into an agreement (Contract B), whereby the seller waives (“cancels”) his right to apply the £1,000 late payment fee, provided full payment is made by 31st March 2014

Contract A is the primary contract which is supported by primary consideration

Under Contract B the seller promises the buyer that he will not enforce the terms of the primary contract (Contract A), with respect to applying the late payment fee. No (new) consideration is provided for this promise but it is still enforceable

Remember the general rule on consideration?….it makes the contract enforceable

This does not mean that no contract will require consideration. In this type of situation, there is already a contract in existence. The terms of that contract are changed by a promise for which there is no consideration

EXAMPLE:

The facts:

High Trees rented a block of flats from Central London at £2,500 per year in 1937. The Second World War meant that rental prices went down. Therefore, in 1940, Central London agreed that High Trees would pay half of what they usually pay instead (£1,250)

Under the contract, it was not agreed how long the reduced rate would continue for

In 1945, after the Second World War, High Trees were still paying the half-price rate. However, Central London wanted to be paid the full price now. They sued High Trees for the remaining rent owed from 1945 onwards (which amounted to about 6 months)

CENTRAL LONDON PROPERTY TRUST LTD V HIGH TREES HOUSE LTD

(1947)

Held:

It was decided that the full rent had to be paid by High Trees only from 1945 onwards and had they tried to claim back from 1940 onwards, that their claim would have failed

If only the common law rules applied, then Central London would have been able to claim the full rental price from 1940 onwards. This is because the requirements of contract law had not been followed by the parties when making the variation of terms of the agreement

However, Equity stepped in and said that the rules regarding variations of leases were too harsh. It said that if the lease was varied by a contract (which it was in this case), then that would be sufficient to change the price of rental- no consideration had been provided for the promise that half of the rent would be accepted

From this decision, the doctrine of “estoppel” was created

Estoppel is only a defence

Estoppel can only be used as a defence and cannot be used as grounds to bring an action

Combe v Combe (1951): The husband promised to pay £100 per year to the wife, which he never paid. The wife sued him to enforce the promise and relied on estoppel. She failed because there was no contract (no consideration) and this mere promise was not a contract

ESTOPPEL IS A “SHIELD BUT NOT A SWORD”

Hand-out:

Reading List

Glanville Williams :Learning the Law, 15th edition, pages 21-24 (“Common Law & Equity”)

Preparatory Questions

No classes on Friday 21st February 2014

Next week’s peer Observation……….kindly be on your best behaviour!

Please take your rubbish with you at the end of the lecture…

PREPS. FOR SEMINAR 16