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CH 5] Business 101 5-9

that the seller now refuses to complete the contracted transaction. Damages
would not be an adequate remedy.
 You, a mortgagor, set out on your horse to pay the mortgage on your farm.
Your horse stumbles, breaking its leg. This mishap delays you by one day in
getting to the appointed time and place to pay your mortgage. The mortgage
holder can foreclose on your farm, and at law, you have no remedy.
Mortgagor: one who owes
 Your neighbor begins in the tanning business. His tanning factory emits great money. The borrower in a
quantities of smoke, soot, and malicious odors in the direction of your home, mortgage, typically a
causing you great personal harm. Your only remedy would be to periodically homeowner or other
sue for money damages. property owner.

Of course, if you could somehow reach the King to plead your case, he could give Mortgagee: one who is
you adequate and appropriate relief given the circumstances; remember the King’s feudal owed money. The
position. The King could order that the farm seller do what he had contracted (promised) mortgage holder. The
to do, or specifically perform on the contract to sell and give you the deed to farm. Or in lender in a mortgage,
light of the circumstances of your injured horse, the King could permit you to redeem typically the bank.
your lost farm from the mortgage holder. The King could enjoin (order to stop) your
neighbor from continuing his nuisance, and that his tanning factory be relocated elsewhere
where it would not be a nuisance. dispensation of equity:
These remedies illustrate royal prerogative, and duty. It was understood that the King delivering what is right to
represented a link between divine authority and man and that the King owed it to his the owner who holds equity;
subjects that rightness prevail without respect to person. However, the demands of royal equity refers to ownership.
duty left little time for royal dispensations of equity. The King eventually delegated this
element of royal function to his “chancellor,” a highly educated high churchman (generally
a church bishop), who would possess the moral fiber to see that the right thing was always
done (equity). It would be inappropriate to entrust “the conscience of the King” to a mere
common law judge, as we do today; they could easily be corrupted, making case law 5
where the rule of stare decisis (to stand by already decided cases) would be applied or
misapplied.
The enormity of cases overwhelming the King’s Chancellor caused him to establish a
system of courts of equity, delegating the chancellor’s authority to other high churchmen.
This produced a divided court system of law courts and equity courts. The purpose of the
equity court was to remedy the inadequacy of a legal remedy. The United States originally
had a divided English court system, however in almost every state one court gives both
legal and equitable relief. Redeemed: purchased
Equitable remedies of course have become formalized and the three most important from bondage and set free.
Property that is has been
are: returned to the who bonded
1. Specific performance: Compelling the parties to a contract to perform per the it, (set it up to be forfeited
terms of the contract as distinguished from awarding damages for its for non payment). The
nonperformance which is a legal remedy. property, think of the pink
2. Relief from forfeiture: Disallowing strict enforcement of a contract where it slip, evidence of a loan and
possession, on you car that
would produce a forfeiture of property. This would prevent the mortgage you hold and the title that
holder from foreclosing, taking the property from the mortgagor, and allow the the finance company holds.
mortgagor to redeem his property when the late payment of the mortgage was When the lender is paid,
caused by circumstances beyond his control. This eventually became known as the finance signs your pink
the equity of redemption. slip as the debt being paid,
is reported to the state
3. Injunction: Ordering a person to do or to cease and desist from doing some office of records and you
thing. receive a Title document
which is evidence that the
The qualifications for equity relief also developed. That is, the one seeking equity property has been
must also be doing equity. Equity has this doctrine of “clean hands,” which is to say that redeemed from bondage
the one seeking equity must not themselves be guilty of fraud or other unconscionable and the incurred debt has
been paid.
conduct in relation to the relief sought.
Equity requires that all parties be fair to each other and thus one must also act
diligently to assert their rights. Here is where the maxim that “equity aids the vigilant, not
those who slumber on their rights.” Laches, an unreasonable delay, will bar a suit in Laches
equity, as the statute of limitations bars a suit at law. If one party is to rescind a contract, an unreasonable delay.
that party must act promptly to do so upon discovering their rights, for even a short delay
may be fatal.

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