Equitable Remedies

1. Equitable remedies
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2.  Remedy that allows for contract to be set aside and parties
restored to there original position
 Available at CL (void) in a limited fashion but generally and
exclusively an equitable remedy (void abintio)
 Damages not available at CL for rescinded contract
 Contract remains in effect until rescinded albeit may affect
the rights of a third party
 P may be entitle to indemnity (Nebiggins v Adam:
recession granted but me can only get expenses that arise
under the contract but not consequential loss or profits)
 Contracts are set aside retrospectively and prospectively
Car & universal finance v Caldwell (rogue disappears with
vehicle and P reports it to the police and the car association)
 Practical Justice overreaching position
 Aim of equity deliver practical justice ( fairness from a
practical standpoint) 2

3.  Spencer v Crawford: WrightL, …must not seek to tie the
hands of the court…with rigid rules. Court must do…what is
practically just.
 PJ objectives
 Even though defendant is blameworthy, p must still AP
enjoyed under the rescinded contract because neither must
be unjustly enriched
 PJs relief is about compensation and not about punishment.
Best illustrated by the court granting
 Recession, indemnity, AP where restituto in tegram has been
impaired
 Equity cannot grant money remedies without rescinding the
contract unlike CL
 Recession granted in certain case to ensure that PJ is effected
(applying flexible approach)
 Indemnity:
 May be granted at the time of rescission, no entitlement of damages
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4.  Indemnity: granting obligation that arises under the contract, no
consequential loss or profit (Newbiggins v Adam – grant all
obligations arising under the contract but nothing more , (p133)
 No indemnity if the contract us not rescinded
 Accounts of profit
 Cannot be granted with the rescission of the contract
 AP: all benefits gained under the contract (regal v Guliver –
directors purchasing shares in a subsidiary company, then selling it
for a profit. Must account for the profits)
 Based on compensation and not punishment
 Liability to AP does not depend solely on fraud, merely because
profits was made
 No one that is a part6y to the contract can escape the risk of AP
(Erlange v New Sombrero – banker purchasing a land for a low price
and reselling to the public at a higher cost. Must account for the
profit
 Recession:
 Blackburn : general rule is restituto integram (ending the contract and
restoring the parties back in the position they were as far as is possible
 Stumbling block: apart from delay, the ability to restore the parties to
there original position
 Equity is about PJ thus if u no AP or restituto integram, no money can be
given
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5.  Nature of rescission
 Its not automatic, must be invoked by a party to the contract
 Party invoking must give notice of the decision
 Must be done within a reasonable time (Car & Financial Co v
Caldwell – had done all he could do so the contract was rescinded)
 Rescission in Equity:
 CL and Equity recession different
 CL= void but can still claim damages and performance stops at that
point
 Equity: contract rescinded treated as never existed void abinito,
absolves the injured party from performance
 Modes of Recession
 Contract valid at law cannot be rescinded in equity
 Mutual mistake:
 No recession, resolution in favour of one of the parties by way of
the objective test (reasonable man test, because equity follows
the law)
 Mutual mistake does not nullify contract, no SP, no recession (no
lack of agreement/consideration) 5

6.  Contract valid parties were just mistaken, cross purposes
(Tamplin v James: no misdescription in the state of the land did
not represent a mistake and the def is not allowed to evade
performance by simply saying he made a mistake)
 Unilateral mistake: negates consent to the existence of an
agreement- void at CL and equity follows the law
 Misrepresentation
 Party may rescind the contract but has no right in CL
 Innocent misrep
 Fraudulent/non fraudulent misrep – approach the court
 Spence v Crawford: case of fraud(shares selling), and court
exercised the jurisdiction to prevent the def from enjoying the
benefits at the expense of P
 Statutory provision: available where the court considers it to do so
(misrep Act 1967)
 Undue Influence:
 CL test too narrow, equity wider and looks more than just the threats but
the presumptions of the different type of relationships (fiduciary) (Tate
v Williams _ setting aside contract because financial advisor breached
fiduciary duty) 6

7.  Bars to rescission
 Restitution:
 Putting parties back in the position they would have been before
the contract (RI)
 Rational-party seeking the recession shall not seek to enjoy the
benefit
 RI not always applied in its full rigour (in cases of misrep/UI/FD
 Transaction may be rescinded even though impossible for RI to
be fully applied, provided PJ can be achieved
 PJ achieved where the wrongdoer gives up AP and compensate for
any losses (Erlange v New Sombrero p145, O’Sullivan v New
management agency)
 Where restitution is impossible a contract will cease to be
capable of recession (Thorpe v Fasey) monies collected under the
contract must be returned.
 Effects of Equity
 Spence v Crawford: illustrate that the court looks at both side of the
case because ER is not about punishment but to compensate p146
 Factors affecting restitution
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8.  Deteriorating and declining value: reduction in value through no
fault of the def (Armstrong v Jackson broker buy shares for client but
in effect sold him his shares that later lost value on the market)
 Disposal of assets
 No rights to rescind if subject matter cannot be found
 Improvement of Benefit (Spence v Crawford: court rescinded
contract even though share value had increased and not the shares
themselves)
 Delay and Affirmation:
 Remedy of recession may not be lose to lapse of time
 Laches applicable albeit that equity wishes for timely asserting of
rights (Leaf International Galleries: delay operates only when there
is knowledge-applicant did not know the painting was fake)
 Affirmation: election to continue with the contract, no right to
rescind thereafter (Long v Lloyd defendant accepted defected lorry
no recession; Payman v Lanjani: right to rescind was not lost
because he did not know that he had the right)
 Cases of fraud:
 Pleading fraud without restoring the benefits of the contract 8

9.  Redgrave v Hurd: P sold worthless practice to def
 3rd party rights:
 No rescission against innocent 3rd party who has acquired
interest for value (Shogun finance v Hudson)
 Recession may be granted against the volunteer (Re Eastgate:
3rd party must acquire the right and not be a mere volunteer)
 Summary:
 Rescission is unwinding of contract
 Brings party back to original position as if contract never
existed
 Equitable remedy therefore it is discretionary
 Affirmation of contract, no rescission (Long v Lloyd)
 Innocent third party will get hurt there us a reluctance to
rescind
 Rescission should be mutual so benefits under the contract
should be handed back
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