Equity Law Essay Example

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Doubling Up
Problem No. 15

The issue at hand is equity trust (Bell, 2003). When Ramon Harding made an agreement with his wife, Alysha Harding on 15th November 1985, they entered into a contract. The proof and evidence of this contract was the separation deed that recorded their mutual agreement to live apart from each other. The separation deed also included the fact that Ramon Harding will pay his wife $65,000 each year for the remaining years of her life for her support and maintenance. This contract mentioned that no money would be deducted from this amount that is guaranteed to the wife. A second contract came into existence when Ramon Harding wrote his will before his death. This contract first directed his estate to the Northern Territory of Australia in the form of three funds: Alysha fund, Robert fund and lastly the Marion fund. The contract also reinforced the fact that Alysha will continue to be given $65,000 during the course of her life and that it would be paid on quarterly basis. This was in furtherance of the trust of his real and personal estate.

The trustees of Ramon’s will were given the power to gather all the value for his estate and convert the net proceeds into three trust funds. They created three funds accordingly exactly as instructed by Ramon in his will. The will did not mention the payment of any debts and the trustees took the responsibility of settling all the legal debts that had been incurred by the existence of Ramon’s estate (Edwards and Stockwell , 2005). Alysha’s complaint about the trustees not paying all the estate’s debts and obligations may be true. However, because of the absence of any reference to debts in the will by the testator, the only debts that remain payable are only those that are legal or recognized in the eye of the law. Other debts and obligations may be recognized as illegal and they thus do not stand in the capacity of being settled. Alysha’s complains may be referring to such debts.

The debts she complains about will therefore not be paid from the estate nut from her personal resources. The separation contract or agreement between Ramon and Alysha meant that Alysha is still legally married to Ramon but they may legally live physically apart from each other. This also means that Alysha still has beneficial interests in the estate of the deceased, her husband Ramon. The non-legal debts that the estate has can also be settled by her as she still has vested interest in the estate. Interest in property calla for one to incur debts as much as they enjoy profits derived from the estate.

Alysha seeks the$65,000 agreed upon in the separation agreement with her deceased husband. This was the first contract. A will, when in conflict with any existing contract or clause, emerges as the dominating document (Brown, p.5). In this case, the contents of the will are relied upon as opposed to the contents of the separation deed. In addition, the trustees can only carry out what has been instructed in the will. Alysha’s request for the payment of the annuity for the rest of her life can therefore not be accomplished. She can only enforce the clause in the will that guarantees her $65,000 on an annual basis.

Specific performance is a remedy under equity law that applies in events where no monetary compensation can be made (Janan, 2010). In this case, payment of Alysha’s annuity for the rest of her life cannot be valued in monetary terms as one is uncertain of how many years she will continue to live. Also to avoid the error of overcompensation or undercompensating Alysha, it deems fit in these circumstances to file for specific performance. This case, when filed, will obligate the trustees to pay, in action, the specified amount of money to Alysha at the beginning of the months January, April, July and October in each year. This is in fulfillment of the contractual obligations stated in the will. Indeed, Alysha’s objectives of getting the trustees to pay her share of the estate returns will be adequately met. The courts can however not compensate her more than is stated in the will as equity holds the intent to compensate fully but not to leave the plaintiff in a better position than he was in before breach of contract (Chancery Court, 2003).

Problem No. 16

Late For a Date

The issue at hand is equity conversion. This equity maxim means that “equity regards as done what should have been done” (Miller et al, 2010). A case brought before a court will be treated with the consideration that the breach of a contract may have occurred due to unavoidable circumstances. Such circumstances are beyond the control of either parties and ignoring this fact will be deemed as unfair to either of the parties yet equity upholds fairness to all. These circumstances may lead to omission or lapse of the contract at hand as per Common law but applying the principles of equity law changes the outcome. In this case, Mr. Macmichael and Mr. Plympton entered into contract that specified the contractual terms of the exact time given for the debt payment. Mr. Plympton had the obligation of paying Mr. Macmichael before 3 pm on 30th June. On that very date, the two parties were to see the completion of the contract at 2.30 pm, but there was an unseen delay at the bank. The unexpected meeting had to be attended by the authorized signatories at the bank and the plaintiff could not impose on the meeting to register the urgency of the matter at hand. As a customer, he could only wait for the meeting to end as he had no further control vested on him.

Other uncontrollable circumstances also arose after the plaintiff tried calling the defendant to notify him of his lateness before the contract could lapse (The Fair Debt Collection Practices Act, 2006). The plaintiff could not reach the defendant. More so, the defendant’s conveyancer said that his lateness will be tolerated. The plaintiff relied on these words as it is obvious that the conveyance is under the authority of the defendant if he picked up the line that should go through directly to him. If he said this statement outside the scope of his authority, any liability that is caused thereafter will be incurred by his employer and should not be incurred by the plaintiff. The principle of equitable estoppel will come into play as the plaintiff acted in the belief that his lateness will not affect the existence of the contract (Lubé, 1889). This belief being created by the defendant’s conveyance.

When two or more parties enter into a contract relating to the sale of property, the party who is the buyer is assumed to have acquired an individual equitable right which becomes an individual legal right after the completion of the deal. This equitable interest that arises from the contract allows the buyer to file for specific performance if he suffers any losses due to breach. This equitable remedy can be applied if the case is filed because paying damages in monetary terms would not sufficiently cover the losses incurred by the plaintiff from lending $250,000 from the bank as well as the value lost due to appreciation of the property. Filing a case that seeks the acceptance of the balance of the purchase price and completion of the transaction as an action of specific performance will therefore be fair as the plaintiff is relieved from loss (Dobbs, 1993).

If the remedy is in monetary terms, the value compensated will be the value at the exact time of the breach, irrespective of depreciation or appreciation. The contract was breached by the defendant when the value of the property that was to be in the ownership of the plaintiff held the market value of $400,000. The legal option of refunding the deposit that had already been paid and paying damages for the breach of contract will not be adequate as the plaintiff’s chances of getting a similar property at the same appreciation rate are uncertain. The specific performance remedy is thus more workable but the outcome of the case is still left to the discretion of the court (Visconsi, 2008).

Problem No. 17

Pay Your Way

Howard’s mother entered into a contract with Howard and Maria when they mutually agreed that Howard’s mother would loan $255,000 to the couple for it to be refunded upon request. The terms of this contract were met when a portion of Howard’s share of the estate he inherited was used to repay the loan. The home lay in ownership of Howard’s mother but as soon as the contractual terms of refunding the loan were met, the home lay in full possession of the couple. When Howard and Maria Harrison got married, they also entered into a similar contractual agreement that gave each of them equitable interest in the property that is jointly owned. Such property includes the family home that they owned with the aid of Howards mother.

The first principle of equity law that comes into play is “equity delights in equality”. This means that in a situation in which two persons have equal interest or equal right, the concerned property should be owned equally. This property therefore has joint ownership with each party benefitting equally from the property and neither of them dominating over the ownership of the property (Huseman (2006). In the event of separation or divorce, the property should be divided equally with each party getting equal proportions of the property. This principle stands unless the concerned parties expressively agree otherwise. In this case, Howard did not at any one point discuss the matter with his wife, Maria therefore the couple did not agree on anything that would result to the alteration of the terms of their matrimonial contract. Even though either of the parties registers the family home under their individual name, the property is legally owned by both Howard and Maria in accordance to equitable distribution of property in Law (Fruehwald , 2010).

The second maxim that surfaces is the fact that one who seeks equity must do so with clean hands (Loughran v. Loughran, 1934). This means that any individual who approaches a court of law because of actions done by someone else, and that individual has acted wrongly; there is no likelihood that the help sought will be given. Howard in this case knew very well that the family home stood in joint ownership by him and his wife but he failed to register it under both names. He did not want to give Maria her share of the property which is $125,000 and he therefore did not register the property as he ought to be done. Instead, he kept the official documents in his cabinet with the intention of waiting for the debt to be expunged. A debt is expunged after about 6years depending on the country in which the law applies and once this happens, Maria can no longer recover her debt. This was a wrong action on the part of Howard. The courts of Law cannot ask Maria to return the documents because he himself did not have clean hands (Riggs v. Palmer , 1889).

A case that seeks an injunction can however be filed to stop Maria from registering the family home under a clear title that shows her name only. This is because Howard did not actually go and register the family home under his name and it is uncertain whether he would have given Maria her share if she asked for it. The injunction is sought because Howard still has equitable interest or property interest that needs to be protected. Such interest still stands because the couple has not yet divorced and the matrimonial contract between them is still alive. The injunction will therefore prevent Maria from gaining full ownership of the family home however it may not fully prevent Howard from financial disadvantage. This is because he had acted wrongly by hiding the title documents from his wife and this may cause him some implications. The court may also provide an outcome of the case that will ensure that the family home property is divided equally between the plaintiff and the defendant (Berle, 1965).

Problem No. 18

Take It Away

The issue brought out in this case is that of redemption in the realms of equity. Redemption is the right of a property owner to reclaim specific property after its title owner has forfeited it. Forfeiture usually occurs when a debtor defaults in the payment of one or more installments in the purchase of a certain property (Osborne, 1979). In spite of this default, the debtor is usually granted a redemption period in which he is allowed to get back the property by paying the due amount as well as interest. In this case, it will be the right that Anne and John have when it comes to the issue of continuing in the process of purchasing the piece of land. Even though they couple had not yet occupied the land, they still had vested interest in it that accrued over the period in which they were amidst payment of installments (Waldron, 2004).

The sellers, Rural Opportunities refused the payment of the 10th installment and refunded the deposit and installments that the couple had already paid. This is proof of termination of the contract that existed between Rural Opportunities and the couple (Pereira, 2004). The refund shows that the couple can no longer purchase the property, an act that is likened to foreclosure of property. When property is being paid for under installments and there is a default of one or more of the installments, the purchases are entitled to a certain period of time before the contract is terminated due to default in payment. Such timelines vary from country to country but the period is one of a reasonable amount of time all across the world. The length of a reasonable period is left to the discretion of the court but the 20 day period granted to the purchasers was, with no doubt, not a reasonable period of time. In accordance to Equity Law and the legal terms of the contract between the parties, it was too short a period of time for the defendants to terminate the contract with the plaintiffs. If the defendants had given sufficient time allowance and the debt would still be pending, it would then be legally correct to terminate the contract as one of its parties has failed to fulfill his obligations.

Under Equity Law one is also required to attempt to resolve any defaults of payment with the property owner or purchaser (Graf v. Hope Building Corp., 1930). Such attempts include giving a notice to the purchaser and clearly mentioning to him/her their default status. In this case, the plaintiffs did not receive any notice and this is brought out when they attempt to pay the due amount and are surprised that they cannot go through because of breach of contract. After notifying the purchaser and there is no respond thereafter, the seller can then reach an attorney in search of court action. In this case, the defendant threatened to sue the plaintiff yet no notification was given to the plaintiff to warn him of termination of the contract. With no evidence of notification, it will be difficult for the lawsuit to go through.

A case can be filed in court to seek specific performance as an equitable remedy. This will specifically urge the defendant to take back the deposit money as well as the installments and move towards completing the purchase of the land in question. This remedy deems fit as it adequately protects the rights and interests of the purchasers. Payment of damages can also be in monetary terms. The defendants will take back the deposit and the installments but will have to pay the plaintiffs the loss incurred due to breach of contract. The contract is seen to have been breached as the defendant failed to comply with all its terms which include giving notice of default as well as sufficient time for debt recovery. Either of this remedies as granted by the court are in accordance to the equity maxim “equity will not suffer a wrong to be without remedy”. This means that the outcome of the cases will be to the benefit of the party which has been wronged (Bivens v. Six Unknown Named Agents, 1971). The plaintiffs indeed defaulted in paying their 10th installment but were not given sufficient time to repay it. The defendant on the other hand terminated the contract prematurely without giving notice of default and without allowing tome for debt repayment, making him the weaker party in a court of Law. As a result, the defendant will have to compensate the plaintiff accordingly.

Problem No. 19

Bad Marriage

Phillip Hyland entered into a lease contract with the owner of the business premises on Macquarie Street. This contract terminated on 31st December 1978 due to the expiry of the lease term that Mr. Hyland and his landlord had agreed on. The two parties entered into a contract afresh on October 1979 but this new lease agreement was between the landlord, Phillip and his new partner Robert Caroline. It contained the option of extending the lease term to a further 3year tern upon expiry. The second evident contract at hand is the partnership contract between Mr. Hyland and Mr. Caroline that commenced on 6th August 1979.

The First equity principle that surfaces is that of “Equity delights in equality” (Bell, 2003). A partnership agreement calls for the sharing of profits, workload as well as the sharing of property. Mr. Hyland and Mr. Caroline therefore shared the leased premises when they entered into a partnership. According to equity Law, this also means that they equally own the leases premises and have the freedom to use it to carry out ones business. After experiencing disharmony in the operations of the partnership, the partners mutually agreed to dissolve the partnership. This dissolution meant that the premises would no longer be jointly owned by the partners but the premises will now belong to Mr. Hyland as it was before the existence of the partnership. The dissolution also meant that the lease agreement will no longer have 3parties but only two.

The doctrine of equitable estoppels is also evident in this case (Hening et al, 1912). This applies as the leased premises were owned by the two partners according to the landlord. He was not informed by any of the partners that the partnership would be terminated and that the ownership of the leased premises will be reverted to Mr. Hyland and not the two partners. Mr. Caroline refused to sign the document that would have renewed the lease contract. He then used this to his advantage and manipulated the fact that the lease had not been renewed. He applied to lease the same premises and the landlord granted his request based on his knowledge of the premises still being jointly owned with Mr. Hyland. His action was not intentional but one that was induced by Mr. Caroline and he therefore lies free from blame. Equitable estoppels is what also caused Mr. Hyland’s clients change their camp to that of Mr. Caroline. The premises had belonged to Mr. Hyland for the past 10 years and the clients retained Mr. Caroline with the knowledge that their service offered to them would be the same as before.

“Equity will not suffer a wrong to be without remedy” and it is for this reason that Mr. Hyland gas the upper hand in court as the wronged party (Ashby v White). Mr. Caroline wronged him by refusing to help Mr. Hyland renew his lease only to apply for the same premises after their separation for his personal business. Mr. Caroline went on to carry out a competing business in the same premises, serving Mr. Hyland’s clients without bothering to refer them to him at any one point. If a case is filed, equity law states that the outcome of the case will be to the benefit of Mr. Hyland. Equitable remedies that would adequately compensate Mr. Hyland for the loss that he has suffered will include specific performance (Laycock, 1993). This is because monetary compensation will be inadequate compensation or redress for the plaintiff, Mr. Hyland. This is because even though money damages are paid for theft of the plaintiff’s clients, the plaintiff’s business is one that relies on these clients and the decline of the business operations cannot be compensated for. The plaintiff’s business will take another 10 years to recover or it might never recover at all and this fact is one that cannot be compensated for in monetary terms. Specific performance, however, will ensure that the plaintiff will get his original clients back (Schwartz, 1979). For this to happen, the court may decide to have the defendant declare the premises to the plaintiff because mere referral of the clients to the plaintiff’s new premises may fail to be effective.

Hard times – Hard assets
Problem 20

In this case, the plaintiff, Mel, entered into a contract with Hard Assets Ltd, a company that trades in gold and other precious metals. After the bank interest rates dropped to 2%, Mel sought options on how he could invest his money. Even though the bank employee suggested this company, this was not enough to convince Mel to trade in gold. It is only when Mel read the brochure that he was convinced that it was a reliable option. The brochure assured its potential customers of expert analysis who are well conversant with the relevant industry and market trends with 10 year experience as well. The company also encouraged potential consumers to constantly visit their website for advice from these expert analysts so that they could know when best to purchase and sell gold through the company. The company also promised free storage of gold stocks on the behalf of their customers.

Having been given such assurance by the company, Mel proceeded to register with the company in February 2009. In late March, when he felt that it was a right to place an order, he sought consultation from the company website exactly as the brochure had suggested. The website advised that gold was going to be highly beneficial in the near future. Mel sought more consultation before buying by calling the most prominent analysts of the company and his voice message said that customers should refer to the company website and confirmed that it was indeed the right time. Mel then purchased gold relying on the advice given by the Dr Cebula (Ewan McKendrick, 2005).

The issue on equitable estoppels arises when a party of a certain contract carries out a certain action in the course of the contract because the other party said or did something that was significant enough to make this party perform this action (Meagher et al, 2002). Dr Cebula’s message and website postings were therefore relied upon by Mel when he purchased the gold. This information did not mention the liquidation of the company and when Mel lost his money the person who he relied on when buying the gold is the person who is held liable for any damaged caused due to such reliance. Equity Law also states that “Equity will not suffer a wrong to be without a remedy” and this suggests that the stronger party in a court of law is the party that has been wronged (Sir Pollock, 1878). Mel in this case is therefore the stronger party and is entitled to compensation for the money he lost through Hard Assets Limited.

The equitable remedy that best fits this situation is that of rescission. Rescission is restoring the parties to their original positions held before entry into the contract (O’Sullivan et al, 2008). This restoration can be done by returning the purchased commodity or by paying monetary compensation. The liquidation of the company could have been sudden but the company would have warned its customers not to purchase any more gold. Additionally, one of its directors lied about his whereabouts yet if he would have told the truth, this would have made customers such as Mel avoid the incurrence of losses. The company saw its liquidation and a case should be filed against Dr Cebula for rescission of Mel. This will adequately provide a solution to Mel’s situation and other decisions made are left to the discretion of the court (Chancery Court, 2003).


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