Equity in contract law

Abstract

Introduction Much of equitable doctrine concerning contract law is now covered in contract law or property law subjects. Our coverage will therefore be brief. Equitable intervention into contract law can take one of four forms: (a) Equity enforces some promises which are unenforceable at common law. It may also modify or even prevent the enforcement of promises which would otherwise be enforceable at common law. These results are principally achieved by the doctrine of estoppel. (b) Equity sets aside contracts where the consent of a party to the contract has been impaired or vitiated by factors such as mistake, misrepresentation, undue influence or unconscionability. (c) Equity intervenes where the contract is substantively unfair, for example where it contains a penalty clause or a clause requiring forfeiture of property. (d) Equity provides remedies unavailable at common law (or, in the case of rescission, available on restrictive conditions) which: • enforce contracts (for example, specific performance or injunctions); • set aside contracts where consent has been vitiated (rescission); or • correct contracts where they do not reflect the mutual intention of the parties (rectification). The focus of this chapter will be on the first three examples of equitable intervention. Equitable remedies are discussed in Part B. Estoppel and promise enforcement Estoppels were originally developed as rules of evidence and some applications of estoppel (such as estoppel by deed, and judgment estoppel) remain evidential in character. The equitable estoppels considered in this chapter have outgrown their evidential origins. In all cases one party is prevented from enforcing a legal right, or from departing from an assumption relied upon by the other party, where it would be unconscionable to do so. This chapter focuses on two types of estoppel: common law estoppel and equitable or promissory estoppel. Proprietary estoppel is discussed in chapter 8. Common law estoppel This estoppel prevents a person who, by a representation of fact, has induced another to alter her position, from denying the fact as represented. Common law estoppel is not a cause of action. It alters the basis on which other causes of action may be brought or defended. It is confined to representations of existing fact, not to representations as to future intention. In Jorden v Money the plaintiff owed money to a solicitor.