Equity looks to the intent rather than the form
INTRODUCTION:
The maxim, or its substantial equivalent, that equity regards substance rather than form, has been frequently stated and applied. This principle is well established and is expressed in other but more or less similar language in many cases.
MEANING OF THE MAXIM:
It means that equity looks to the spirit and not to the letter. It looks to the intention of the parties and not to the words.
ROMILY M.R.:
"Courts of equity make a distinction in all cases between that which is a matter of substance and that which is a matter of form; and if they found 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."
APPLICATIONS OF THE MAXIM:
Construction of Written Instruments:
In determining the operation and effect of a written instrument, equity always attempts to get at its substance, and to ascertain, uphold, and enforce the rights and duties that spring from the real intention of the parties.
Avoidance of Technicalities:
By applying this maxim, equity disregards mere technicalities. It will not lend its aid to one whose sole ground for seeking such aid is based on a technicality.
Expiry of Time for Completion of Sale:
In the case of the sale of land, if a party fails to complete it within the time fixed for it, he is at Common Law, in breach of the contract, but equity did not take this rigid attitude.
Separable Transactions:
A transaction that could lawfully have been affected by two or more separate transactions was held by equity to be valid, though it was unauthorized.
Relief Against Penalties and Forfeitures:
In cases of contracts when there was a provision to forfeit a certain amount or to charge a penalty in case of breach of contract, Common Law imposed these on the party in default.
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,
- (1) the purpose of the trust,
- (2) the beneficiary, and
- (3) the trust property. Equity in such cases ignored the form and looked to the intention which can easily be found out by having a reference to other ingredients of the trust in the conduct of its author.
Relief regarding Mortgages:
Equity of Redemption: The mortgagor's right of redemption is guarded by courts and this has been expressed in a well-known legal maxim, once a mortgage, always a mortgage, and nothing but a mortgage."
The doctrine of Clog on Redemption:
The extension of this principle of the right to redeem has found further expression in the well-known doctrine of clog on redemption.
Attitude regarding Statute of Frauds:
The statute of frauds always insisted upon the writing and signature of the party sought to be bound regarding land transactions.
RECOGNITION IN PAKISTAN:
Contract Act:
Section 55:
As provided by Section 55, if time is the essence of the contract, and it is not performed within the stipulated time, the contract or a part of it that is unperformed would be voidable at the instance of the promise.
Section 74:
Under Section 74 of the Contract Act, only reasonable compensation can be claimed by the party complaining of a breach of contract, despite its agreement to the contrary.
Transfer of Property Act:
Sections 114 & 114-A:
Forfeiture clauses in a lease are similarly disregarded in some cases where they are inserted only for securing or ensuring the prompt payment of the rent.
Section 91:
It is within the competence of the parties to enter into any reasonable agreement regarding the mortgage and its redemption right, but where their agreement makes it impossible or indefinite for the mortgagor to redeem his mortgaged property, equity will not allow such provisions to prevail, and will give relief.
CONCLUSION:
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 concealer throw a cloak on the real object, purpose and consequences of a transaction.