Equity's System of Open-Ended Wrongs and Limited Remedies

Abstract

It is well-known that equity gives courts considerable discretion to override the normal operation of legal rules to prevent an injustice in a particular case. This Article shows equity combined this discretion with limited remedies (rescission, restitution, reformation, and estoppel), and that these limited remedies strike a balance between the value of doing justice in a particular case and the cost of destabilizing the law in a way that places a heavy thumb on the scale favoring stability over justice. Henry Smith has described equity as a “second-order safety valve.” Equity’s limited remedies make it a weak “second-order safety valve.” This Article also examines what became of this system in the United States after the merger of law and equity. The most interesting developments involve the doctrines of constructive fraud and abuse of a confidential relationship, which are treated as torts with compensatory and punitive damages. This has had a small effect because of two developments. Courts reject most claims seeking compensatory damages by imposing categorical restrictions on the doctrines, while courts ignore these restrictions when a plaintiff seeks an equitable remedy. Thus, courts generally continue to do equity much as it has always been done in cases that would be covered by these doctrines, albeit in an ad hoc and confusing way