Civil Law

Equity Looks to the Intent Rather than the Form

The maxim “Equity looks to the intent rather than the form” reflects one of the fundamental principles of equity, which stands in contrast to the rigidity of Common Law. While Common Law emphasises strict adherence to formalities and the literal wording of agreements, equity prioritises fairness by considering the true intentions of the parties involved.

Meaning of Equity Looks to the Intent Rather than the Form

As seen before, the Common Law was very rigid and inflexible. It could not respond favourably to the demands of time. In respect of the acquisition and transfer of property, it regarded the form of a transaction to be more important than its substance.

Moreover, it was expected that the contracting parties would observe their agreements strictly and fulfill their stipulations to the letter of every promise or contract. Common Law, thus, was fond of mere technicalities. But, as expressed by Romily in Parkin Case, “courts of equity make a distinction in all cases between that which is matter of substance and that which is matter of form; and if they found that by insisting on the form, the substance will be defeated, they hold it to be inequitable to allow a person to insist on such form, and thereby defeat the substance.

Equity thus looks to the spirit and not to the letter, it looks to the intention of parties and not to the words, and it looks to the realities rather than to mere appearances. Instead of swimming on the surface of mere form, it penetrates through the external form of a transaction to discern and decide the real intention of the parties, because the external form of a transaction cannot be allowed to conceal or throw a cloak on the real object, purpose, and consequences of a transaction.

Application and Cases

In the case of a land sale, if a party fails to complete it within the time fixed, they are, at Common Law, in breach of the contract; however, equity does not adopt this rigid attitude. It allowed a reasonable time to the party concerned to complete it. Moreover, in the case of the construction and enforcement of an agreement, equity did not give undue importance to its negative aspects. Still, it reviewed the document to determine its actual substance and intent.

The application and working of this maxim can well be examined from the following instances:

Relief against penalties and forfeitures

Common Law courts insisted on the rigid and literal (to the very letter) performance of all agreements and promises. In cases of contracts where there was a provision to forfeit a certain amount or to charge a penalty in case of breach of contract, the Common Law imposed these on the party in default. It may be that the actual damage sustained was less. This unjust situation was alleviated by equity through the interpretation of the contract’s purpose and intent. The principal object of the contract lies in its performance, rather than the imposition of a penalty. The damage sustained may therefore be compensated; the imposition of a penalty and forfeiture being subsidiary.

Relief regarding precatory trusts

A trust is created when the author of the trust indicates with reasonable certainty by any words or acts —

An intention on his part to create a trust thereby.
The purpose of the trust.
The beneficiary, and
The trust property.

In case of precatory trusts, the author of the trust in raising the trust does not use express and unequivocal words but express his desire by such words as ‘I hope’, ‘I request’, or ‘I recommend’, giving thereby a latitude to the trustee to ignore the request of the author.

Relief regarding mortgages

A mortgage is a conveyance of property whereby one person (mortgagor) secures to another (mortgagee) the payment of money, whether already owing or advanced at the time or to be advanced (called mortgage debt). A mortgage is treated as a security for debt and thus differs from a sale.

The mortgagor has the right to obtain their property back by paying the debt, and that is their right of redemption. The mortgagee has the right to repayment of their advance, and in the event of default by the mortgagor, the mortgagee can exercise their right to recover the amount by foreclosure or by selling the property.

Courts safeguard the mortgagor’s right to redemption, as expressed in the well-known legal maxim, “once a mortgage, always a mortgage, and nothing but a mortgage.” Lord Davey observed in the case of Noakes & Co. vs Rice, “a mortgage can’t be made irredeemable and a provision to that effect is void.”

Attitude regarding the statute of frauds

Where a contract, which was required to be in writing, was, due to the defendant’s fraud, not reduced to writing, equity granted relief, and the statute was not allowed to be pleaded as a defence against specific performance.