principles that regulate these relationships as regard the entity that is the
corporation.
Equity
It is common place that many law will not always deliver perfect justice. One
means by which English law sought to solve this problem, at least in part, was
by the development of equity. Equity is judge made law which supplements
common law or is a gloss or qualification on the common law. Thus equity is
not a distinct branch of the law like tort and criminal law, but a collection of
rules operating in property and contract law. It blends onto these in the ways
set out below. This means that the way to organise equity is to start with the
basic structure of the area of law to which it applies and add the principles of
equity into appropriate categories. These may be new categories or parts of
existing categories.
In its early days, the Lord Chancellor created the rules of equity. Later it was
made by the Chancellor's court, the Court of Chancery. Theoretically the
common law courts could have done the same job. Hence a way to conceive
the position is that there is one body of judge made law that combines the
principles of law and equity. All that is then special about equity is that is was
made by a different court.
Equity performs a number of functions. The major functions are:
(1)
Widening of Grounds for Remedies. Equity widens substantive
common
law and thus allows an established action where common law did
not. For example, equitable fraud is wider than common law fraud.
(2)
Creating Causes of Action. Equity provides some new causes of action,
that is, ones which common law did not provide. An example is an action for
rectification of a contract.
(3)
Creating Remedies. Equity provides a remedy that common law did not.
For example, at common law the remedy for breach of contract was damages.
Equity added a remedy, specific performance, for breach of a contract of sale.
If a court issues specific performance it will require the vendor actually to
transfer property the subject of the contract to the purchaser. This happens
when the subject property is unique such as a piece of land or a valuable
painting.
(4)
Creating Property Interests. Equity recognises interests in property that
common law did not recognise. Equitable interests in property have three
forms:
(i)
The interest is a right to enjoy the property. This involves
receiving the rents or profit or using the property.
(ii)
The interest involves a right to 'get in' the legal title. One way in
which this can arise is a legally incomplete or ineffectual transfer of property.
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