Conditions for the Application of Equity in Contracts and Non-Contractual Obligations

Abstract

Equity refers to behavior aligned with the moral conscience of society in the context of judicial decision-making and the implementation of legal rules. Objectives such as the protection of the weaker party in contracts, safeguarding individuals unaware of legal provisions and subject matter, supporting indigent individuals, recognizing benevolent actors, and preventing the abuse of legal rights lead to the intervention of equity in both contracts and non-contractual obligations. This study, conducted using a descriptive-analytical method, poses the following question: What are the conditions for the application of equity in contracts and non-contractual obligations? The findings indicate that, in principle, the factors that render contracts inequitable are the very same conditions under which equity intervenes and exerts its effect. These conditions in contractual settings are as follows: (1) inequality of bargaining positions between the parties, which may occur in circumstances such as duress, lack of familiarity with legal concepts, or absence of freedom of choice; (2) exploitation of the unequal position; and (3) deriving benefit or avoiding loss through such exploitation. If all three of the above conditions are met, the contract is deemed inequitable, and equity is invoked to protect the weaker contracting party. Furthermore, according to the study, the conditions for the application of the principle of equity in non-contractual obligations include: (1) unintentional causation of harm; and (2) the presence of justifying factors for the occurrence of harm.