Law vs Equity: Difference and Comparison

Law and equity are two branches of the legal system that historically operated separately. While law follows strict rules and precedents, equity focuses on fairness and justice. In modern legal systems, these distinctions have blurred, and courts apply both principles to achieve a balanced resolution in cases involving complex issues.

Key Takeaways

  1. The law refers to rules and principles that govern human behavior, enforced by a government or other governing authority.
  2. Equity, conversely, refers to a set of legal principles that focus on fairness and justice in individual cases.
  3. The main difference between law and equity is that law is concerned with enforcing rules, while equity is concerned with achieving a fair outcome in individual cases.

Law vs Equity

A set of rules established by a government or other authority to govern a society is referred to as law. Equity refers to a set of principles that supplement or override the application of the law to achieve a just outcome in a specific case.

Law vs Equity

Both these are common terms used by lawyers and courts because they have a significant meaning. So, it is important to know how they are different from each other.

Comparison Table

OriginCommon law traditionDeveloped alongside common law to address its limitations
FocusStrict adherence to legal codes and precedentsFairness and justice, going beyond the rigid rules of common law
RemediesPrimarily monetary damages (e.g., compensation)Focuses on non-monetary remedies like injunctions (court orders to perform or stop an action) and specific performance (enforcing a promise)
ProceedingsAdversarial system (parties argue their cases)Less formal proceedings, judge has more discretion
OutcomesPredictable and consistentMore flexible and adaptable, aiming for a just outcome

What is Law?

Law is a complex and multifaceted system that governs societies, providing a framework for order, justice, and the resolution of disputes. It encompasses a set of rules and regulations created and enforced by a governing authority, a government, to regulate conduct within a society. The study and practice of law involve various legal principles, institutions, and processes aimed at maintaining social order and promoting justice.

Sources of Law

1. Constitutional Law:

Constitutional law refers to the fundamental principles and rules laid out in a country’s constitution. It establishes the structure of the government, defines the powers of different branches, and protects the fundamental rights of citizens.

2. Statutory Law:

Statutory law comprises laws enacted by legislative bodies. These statutes cover a wide range of issues, from criminal offenses to contract regulations, and they play a crucial role in shaping the legal landscape.

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3. Common Law:

Common law is a system of law developed by judges through decisions in individual legal cases. It relies on precedent and the principle of stare decisis, where decisions from higher courts set binding precedents for lower courts.

4. Administrative Law:

Administrative law governs the activities of government agencies. It ensures that these agencies act within their delegated authority and adhere to legal procedures when making decisions.

5. International Law:

International law governs the relationships between states and international entities. Treaties, conventions, and customary practices contribute to this body of law, which aims to regulate cross-border interactions.

Legal Systems

1. Civil Law:

Civil law systems, prevalent in continental Europe and parts of Asia, rely on comprehensive legal codes and statutes. Judges in civil law jurisdictions interpret and apply these codes to resolve disputes.

2. Common Law:

Common law systems, found in countries with a British legal tradition, emphasize precedent and the decisions of previous cases. Judges play a crucial role in interpreting statutes and shaping the law through their decisions.

3. Islamic Law (Sharia):

Islamic law is based on the principles of the Quran and the Hadith. It governs various aspects of life, including family, commerce, and criminal justice, in countries with predominantly Muslim populations.

Legal Professions

1. Lawyers:

Lawyers, also known as attorneys or advocates, are legal professionals trained to provide advice and represent clients in legal matters. They may specialize in areas such as criminal law, family law, or corporate law.

2. Judges:

Judges preside over court proceedings, interpret laws, and ensure fair and just outcomes. They play a crucial role in applying legal principles to specific cases and shaping legal precedent.

3. Legal Scholars:

Legal scholars engage in academic research, contribute to legal theory, and serve as educators in law schools. Their work helps shape legal thinking and contributes to the evolution of legal systems.

Legal Processes

1. Litigation:

Litigation involves the resolution of disputes through the court system. Parties present evidence and arguments, and judges or juries make decisions based on applicable laws and legal principles.

2. Mediation and Arbitration:

Alternative dispute resolution methods, such as mediation and arbitration, offer parties a way to resolve conflicts outside of traditional court settings. These processes promote faster and less adversarial resolutions.


What is Equity?

Equity refers to the ownership interest in a company, representing the residual interest of its owners after deducting liabilities. It signifies the shareholders’ claim on the company’s assets and earnings. Equity is a crucial component of a company’s capital structure, alongside debt.

Types of Equity

1. Common Stock

Common stock represents basic ownership in a company and comes with voting rights at shareholder meetings.

2. Preferred Stock

Preferred stockholders have a higher claim on company assets and earnings than common stockholders. They receive fixed dividends before common shareholders.

Components of Equity

a. Paid-in Capital

Paid-in capital, also known as contributed capital, is the amount shareholders invest in exchange for their shares.

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b. Retained Earnings

Retained earnings are the accumulated profits that a company has kept instead of distributing them as dividends. It contributes to the company’s equity.

c. Treasury Stock

Treasury stock is the company’s own stock that it has repurchased from the open market. It is deducted from total equity.

Importance of Equity

Equity plays a crucial role in a company’s financial health and stability. It serves as a cushion for creditors, provides a source of funding for future growth, and aligns the interests of shareholders with the company’s success.


Main Differences Between Law and Equity

  • Historical Origins:
    • Law: Developed through common law traditions and statutory laws.
    • Equity: Evolved from the Court of Chancery in England to provide remedies beyond what common law offered.
  • Types of Remedies:
    • Law: Monetary damages or compensation.
    • Equity: Non-monetary remedies like injunctions, specific performance, or declaratory judgments.
  • Decision-Making Authority:
    • Law: Decisions made by a judge or jury.
    • Equity: Decisions made solely by a judge (equity judge) without a jury.
  • Precedent and Flexibility:
    • Law: Relies heavily on precedent (stare decisis) for consistency.
    • Equity: More flexible, with decisions based on fairness and individual circumstances.
  • Nature of Claims:
    • Law: Typically deals with legal rights and monetary compensation for harm or damages.
    • Equity: Primarily concerned with fairness and justice, addressing matters of conscience.
  • Legal Maxims:
    • Law: Adheres to legal maxims like “he who seeks equity must do equity” or “he who comes to equity must come with clean hands.”
    • Equity: Operates on maxims such as “equity delights in equality” and “equity will not suffer a wrong to be without a remedy.”
  • Procedure and Rules of Court:
    • Law: Adheres to formal court procedures and rules of evidence.
    • Equity: Has its own set of procedures that may be less formal, with the judge having greater discretion.
  • Judicial Discretion:
    • Law: Judges have less discretion as decisions are based on statutes and precedents.
    • Equity: Judges have more discretion, allowing for a case-by-case analysis and consideration of equitable principles.
  • Defenses and Remedies:
    • Law: Focuses on defenses like contributory negligence and remedies like damages.
    • Equity: Allows for unique defenses and remedies, such as laches (unreasonable delay) and specific performance (compelling a party to fulfill a contractual obligation).
  • Merging of Law and Equity:
    • Historically: In some jurisdictions, law and equity operated in separate courts.
    • Modern Practice: Many legal systems have merged law and equity, allowing for comprehensive resolutions in a single court.
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Last Updated : 02 March, 2024

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25 thoughts on “Law vs Equity: Difference and Comparison”

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