The equitable damages definition explains how courts handle a situation when a monetary payment is not sufficient and requires a defendant to perform their part of a contract. Equitable damages allow the defendant to fulfill their obligations stated in the contract without the court imposing a fine. 

Overview of Equitable Damages

In a court of law, a common practice that applies is to award a monetary payment for damages to one party. In a court of equity, the party is ordered to either perform or refrain from doing a specific act to ensure an equitable resolution. 

In both situations where monetary damages are being requested or a specific action must be performed or halted, an individual can make the requests from the same court to handle both cases. 

Due to the complexity of civil lawsuits, a court may order that both legal and equitable relief be granted in a single case.

The court system in the United States combines the principles of equity and law to allow the legal system to provide legal and equitable relief in cases put before the court. In this way, courts are following the concept of equity by being fair and impartial without bias. 

Difference Between an Equitable and Legal Claim

Winning a lawsuit does not automatically mean a person will be awarded money. There are two types of claims: equitable and legal. 

Equitable Claim

When an individual or a business entity asks that the court grant an injunction, this means a judge is being asked to compel an opposing party to do something or stop doing something. 

Many times, an injunction is granted for the sole purpose of preventing harm from being done while the dispute is being litigated. An example would be a developer petitioning the city to re-zone an area, demolish old buildings, and build a shopping complex. The residents do not want the historical buildings destroyed and they petition the court for an injunction. Once granted, whether temporarily or permanently, the developer cannot move forward with eliminating the potential "harm/damage." This action is considered an equitable remedy.

Legal Claim

The majority of lawsuits filed in U.S. courts are legal claims where an individual is claiming the actions of another individual or entity resulted in some form of loss. This can include:

  • Bodily injury due to an accident.
  • Property damage resulting from a contractor's negligence.
  • Financial losses due to fraud.

When a legal claim is filed, it is up to the plaintiff to prove to the court that he or she suffered a loss due to the actions or failure to act by the defendant. If the plaintiff is successful, the court may order the defendant to make a monetary payment to the plaintiff. This action is considered to be making the plaintiff "whole." A monetary award is referred to as "damages."

Equitable Distribution

An equitable distribution is the legal term used for the fair division and distribution of marital property and debt when a couple is divorcing. The distribution includes financial assets such as cars, household furnishings, and the family home as well as division of the debt. 

The court system in most states does not arbitrarily make a 50/50 division and instead relies on the financial condition of both parties. Also, spousal support may be awarded to either party when the court is determining a fair judgment. 

Equitable Remedy and Breach of Contract

Equitable remedies can be categorized as either legal or equitable and can be used in a breach of contract situation. With legal remedy, the non-breaching party is allowed to recover monetary damages. With an equitable remedy, the court prescribes actions to resolve the dispute or breach. 

An equitable remedy is typically granted with monetary compensation or when legal remedies cannot resolve the dispute or breach. Often, before a court will determine equitable relief, it is required that legal damages be unavailable.

In a breach of contract dispute, three equitable remedies are available:

  • Specific Performance - This a court order or decree requiring the party in breach of contract to completely perform their part of the contract.
  • Contract Rescission - The old contract is rescinded. 
  • Contract Reformation - The former contract is rewritten to reflect the intentions of each party more clearly and accurately. There must be a valid working contract in place before this action can be taken.

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