Commercial Law

Commercial Law

Introduction

The law of equity encompasses a body of rules, principles and doctrines initially developed by the Court of Chancery, broadly aimed to address the conflicts identified with uniform rules of justice that were inflexible and often harsh on particular individuals in specific situations and standards of fairness and conscience. It is discretionary and not based on precedent so this jurisdiction has continually changed and developed by judicial decision of the substantive principles of law and since its conception.

Relief against forfeiture is but one of the substantive doctrines of equity that has evolved.

Relief against Forfeiture

Relief against forfeiture, in general terms is the equitable jurisdiction to 'prevent one man from forfeiting what in fair dealing belongs to someone else, by taking advantage of a breach from which he is not commensurately and irreparably damaged...".

Historically, this jurisdiction was limited to relief against the terms of penal bonds but now applies commonly to proprietary interests and has been extended to possessory interests. Circumstances in which relief against forfeiture of an interest in property may arise is in the context of contracts for the sale or lease of land. Relief of forfeiture of personal interests to which one party is entitled may arise where a right of occupancy exists under a license agreement.

Underlying Principles

The maxims of equity are significant central principles that underlay all equitable remedies, but it is the unconscionable conduct of a person that has evolved to determine equities jurisdiction to relieve against forfeiture.

A contract/agreement may provide that on termination, the promisee may keep or forfeit money paid under the contract or the goods or interest in land of the promisor. Equity has an ancient jurisdiction to relieve against forfeiture on such grounds as fraud, accident or mistake. The normal equitable remedies are used here. For example, in order for repayment of money the remedy would be an injunction or specific performance. Typically, equity will intervene to relieve against forfeiture only if the promisee has acted unconscionably or the forfeiture is harsh or of the nature of a penalty. This was affirmed in Stern v McArthur:

"The general underlying notion is that which has long been identified as underlying much of equity's traditional jurisdiction to grant relief against forfeiture is unconscientious conduct, namely, that a person should not be permitted to use or insist upon his legal rights to take advantage of another's special vulnerability or misadvantage for the unjust enrichment of himself."

Forfeiture and contracts for the lease of land

By exercising a right to forfeit, a lessor terminates the lease. A lessor's right to terminate the lease by forfeiture usually arises where there is:

breach of a condition;

a repudiation by the lessee which is accepted by the lessor ; or

A breach of a covenant in respect of which the lease contains a proviso for re-entry.

Relief against forfeiture for non-payment of rent

Equity has long exercised jurisdiction to grant relief against forfeiture of an interest in land.

Where the forfeiture is based on non-payment of rent, the court will readily grant relief, as long as a lessor ...