Equitable: Overview, definition and example
What does equitable mean?
Equitable refers to something that is fair, just, or reasonable in a legal or business context. It’s about achieving fairness based on the circumstances, rather than strictly following rigid rules or laws. The term is often used when a court or agreement seeks to address situations where applying the law alone wouldn’t result in a fair outcome.
For example, if two business partners dissolve their company and one has contributed significantly more effort or resources, an equitable division of profits might account for this imbalance, rather than simply splitting profits 50/50.
Why is equitable important?
Equitable is important because it focuses on fairness in situations where strict legal rules might lead to unjust results. In contracts, it ensures that both parties are treated reasonably and that their unique contributions or circumstances are considered.
In legal disputes, courts often use equitable principles to provide remedies like injunctions or specific performance when monetary compensation alone wouldn’t resolve the issue. For businesses, equitable arrangements promote trust and cooperation by ensuring fair treatment.
Understanding equitable through an example
Imagine a supplier contracts with a retailer to deliver goods on time, but the supplier’s factory is damaged by an unforeseen natural disaster. An equitable resolution might allow for a reasonable extension of the delivery timeline instead of penalizing the supplier for a delay outside their control.
In another case, a property owner agrees to sell land to a developer but tries to back out of the deal at the last minute. The developer might seek an equitable remedy, such as specific performance, to compel the owner to complete the sale instead of simply seeking monetary damages.
An example of an equitable clause
Here’s how an equitable clause might look in a contract:
“In the event of a dispute, the Parties agree to seek an equitable resolution that considers the rights, responsibilities, and circumstances of each Party, in addition to any applicable laws.”
Conclusion
Equitable means fair and reasonable, emphasizing outcomes that account for the unique circumstances of each situation. It’s a principle used in contracts and legal matters to ensure fairness beyond what strict rules or laws might provide.
By understanding and applying equitable principles, businesses can foster trust, resolve disputes fairly, and maintain strong professional relationships. It’s about balancing justice with practicality to achieve outcomes that work for everyone involved.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.