Equity, EQUITABLE RIGHTS, &c. Equity (Lat. equitas) signifies moral justice, of which laws are the imperfect expression; or the spirit of justice which enables us to apply and interpret laws rightly. Thus, the equity of a statute means the fair and wise construction of it, according to the intention of parliament, as distinguished from the literal and technical construction of the words used. It is impossible that any system of positive law should provide a rule suited to every case that arises; even good laws may work injustice, unless they are interpreted by men having discretion and authority to control their rigour and supply their deficiencies. In the Old Testament and in the New, we constantly meet with the distinction between form and substance, between the letter which killeth and the spirit which maketh alive. The early Roman law was, like that of Moses, a system of forms and ceremonies; but the prators, who had jurisdiction in commercial cases, soon found it necessary to go beyond the limits of custom and tradition. They assumed the nobile officium of deciding in accordance with equity; and their decisions formed the jus honorarium (magistrate's law, as distinguished from the customary law of the people). Courts of equity do not exercise an arbitrary discretion; they proceed on principles. The prator, on entering upon his office, published an edict, setting forth the principles by which his judicial conduct would be guided; and as each prator naturally adopted what was sound in the edicts of his predecessors, a system of equity was gradually developed. Ultimately, in the reign of Hadrian, the edicts of the prators were consolidated in a single document called the Perpetual Edict (see EDICT).
In England, all the courts apply equitable principles in construing statutes and formal instruments; but the term equity has acquired a peculiar importance, by reason of the part which the Court of Chancery (q.v.) took in supplementing and controlling the rules of the common law. The common lawyers protested against the arbitrary nature (as it seemed to them) of equitable jurisdiction; they said that equity meant only the length of the chancellor's foot. But before the end of the 17th century this reproach was removed; the rules of equity were reduced to a system; and the Chancery jurisdiction was firmly established. The powers of the court were of three kinds: 1. Exclusive, as in the administration of trusts. When the legal ownership of property was conveyed to a trustee, he was the only person whom a court of law could recognise as owner; but a court of equity would protect the equitable estates of the persons beneficially entitled (see TRUST and USE). 2. Concurrent, in cases where law and equity both provided a remedy. Thus, in a case of breach of contract, the law would give damages to the party wronged; but equity could, in a proper case, go further, and compel specific performance of the contract. 3. Assistant, where equity only interfered to make legal process more effective. Courts of law, for example, formerly refused to allow a party to be called as a witness; a court of equity would order a party to make discovery to his opponent of such facts as the opponent had a right to know.
The principles of equity, as applied by the Court of Chancery, are summed up in certain maxims of wide significance: 'Equity follows the law'—i.e. equity will not set aside a rule of law (such as the rule of primogeniture), but will seek to apply existing rules in a spirit of justice. 'Equity assumes that to be done which ought to be done;' when, for example, a man sells his land, equity treats the purchaser as owner, even before the formal conveyance has been executed. When a man deposits the title-deeds of his land with a banker, in consideration of a loan, this is a good Equitable Mortgage; the borrower is not allowed to plead the absence of a written agreement as an excuse for withdrawing from the transaction; equity will even compel him to execute a formal mortgage, if the lender requires it. 'Equity looks to the substance, and not to the form:' a legal mortgage of land, for example, is, in form, an absolute conveyance; but equity treats it as a security for money. The mortgagee is legal owner; but the mortgagor retains his Equity of Redemption—i.e. his right to have the estate again on paying principal and interest of the loan. 'He who seeks equity must do equity'—e.g. a mortgagor seeking to redeem must pay off all incumbrances held by the mortgagee who has the legal estate.
It is difficult to overestimate the advantages gained by the application of equitable principles to the law of property and contract. But these advantages were counterbalanced in England by the defects of Chancery procedure, and the inconvenience caused by the existence of two sets of courts, applying different rules to the same subjects. Chancery reform has now removed the scandals of the old system. Equitable powers were conferred on the courts of common law by Acts for the improvement of procedure. Finally, the Judicature Acts, which came into force in 1875, effected a fusion of law and equity, so that in every branch of the Supreme Court equitable claims may be made, and equitable defences pleaded. Law and equity are administered concurrently; where they conflict, the rules of equity prevail. Certain classes of business, relating to trusts, mortgages, property of infants, &c., are reserved to the Chancery Division of the High Court of Justice.
In America, and in the British colonies, the distinction between law and equity is or has been recognised as in England. In Scotland, the nobile officium of the Roman prætor is exercised by the Court of Session. For an outline of the English system, see Snell's Principles of Equity.