Concepts of equity and efficiency

Equity arise from the provisions within the legal structures does allow deviation from the strict application of the laws if such a move is believed to offer more justice to the parties involved. Acknowledging that both certainty and fairness are key to legal systems, equity aims at creating a balance between the two. Efficiency on the other hand from the economic point of view deals with efficient allocation of resources, this translated to law relates to jurisdiction allocation efficiency. It constitutes the justice systems ability to give efficient judgments within its legal framework.

Economic analysis addresses the question of social acceptability of rules as well as the effect of the rules to the various stakeholders. Economic analysis of law is applicable to various spheres of law which include criminal law, torts, family laws, contract laws and the constitutional law. Efficiency is achieved by allocating of jurisdictions in a way that that offers the best reedy possible to both of the parties. This paper will look at efficiency and equity to contract laws and economic tort laws. The application of the concept of equity and efficiency is profound in interpretation of the contract laws.

Equity and efficiency comes into play in ensuring that contractual obligations are honored in a way that results into fair results to both of the parties. They allow the courts to not only base contractual litigations on strict legal guidelines but further analyze the circumstances leading to formulation of contracts either written or non-written. In Walton’s Stores (Interstate) Ltd v Maher, application of equity and efficiency interplays in the ruling. The concept allows the court to take remedial measures regardless of the fact that no written contract exists.

By using the promissory estoppel of reliance the court deviates from the strict application of law to acknowledge that for equity and efficiency to prevail, the circumstances leading to the current scenario are adequately analyzed to establish whether the action by one party arose from reliance of the promise of the other. To achieve efficiency, the ruling rather than force implementation of the earlier promise which may be detrimental to the defendant, focuses only on restoring the plaintiff to his original status by ordering payment to the tune of the cost incurred as a result of reliance on the agreement within reason.

Tort laws likewise employ the concept of equity and efficiency in their application. This is achieved by careful analysis of factors leading to a tort rather than the few facts at hand. Economic torts arise from those activities that result from activities that restrain trade. Equity and efficiency is then applied within the antitrust laws as well as in the competition laws in ensuring that looks into agreements that may result to restrain of trade of the other party. This is evident in in Nordenfelt v. Maxim, Nordenfelt Gun Co. case where the Swedish arm inventor promised not to make or sale guns or make arms upon the sale of his business.

In the ruling the court took the initiative of analyzing the circumstances which led to the sale and whether on essence there exists activities that restraint trade and if there was a breach of a duty owed to one party by the other resulting to an economic tort. -. In Byrne v. Heller for instance took consideration of economic losses arising from detrimental reliance on other individual’s statement within reason. The ‘within reason statement protects the interest of the defendant while by allowing the plaintiff to sue for damages offers him equitable hearing.

Efficiency is attained when such judgments having taken into consideration both sides facts offers a sufficient remedy . In conclusion it is worth noting that equity and efficiency must not be confused with equality as equality in itself may achieve efficiency but fail to offer equity. Equity and efficiency calls for the rule of reason to prevail over the letter of the law but allowing the jury to apply the trust placed in them to ensure maximum possible justice is served to the parties to the litigation.Equity and efficiency is thus said to exist when the ruling offers the maximum possible fair judgment between the parties involved.


Mark, L. & Oliphant, K. (2003) Tort Law – Texts, Cases 2nd Ed. London: Oxford University Press Kaplow, L. and Shavell, S. (1991) ‘Economic Analysis of Law, Handbook of Public Economics, 1 Walton’s Stores (Interstate) Ltd v Maher (1988) 164 CLR; 76 ALR 513 Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535 Byrne v. Heller [1964] AC 465 Finn (1985) Equitable Estoppel in Finn (ed): Essays in Equity, The Law Book Company Ltd, Sidney p24