The maxim means that to obtain an equitable relief the plaintiff must himself be prepared to do "equity", that is, a plaintiff must recognise and submit to the right of his adversary, because, you must do unto your neighbour what you wish him to do unto you. There must be reciprocity.
If you want to exact the full measure, you must also be prepared to reciprocate. A court of law cannot impose terms on the party suing.
If he is entitled to a decision, the law must take its own course; but the practice of the Chancery Court was different in that while giving equitable relief it imposed such terms on the applicant which are agreeable to the conscience because of equity acts on the conscience of the party.
(b)Application and cases - This rule has many applications, e.g.:-
(1) Doctrine of the election - Stating the gist of the doctrine succinctly it may be said that where a donor A gives his own property to B and in the same instrument purports to give B's property to C, B will be put to an election, either to retain his own property and reject the benefit under the instrument or to accept the benefit granted to him by the donor, and allow the gift of his own property made by A to C to take effect.
But in no case can B choose to keep the benefit granted to himself and at the same time retain his property referred to in the instrument.
Equity fastens on the conscience of a person who is put to the election and refuses to allow him to take the benefit of a disposition contained in the will, the validity of which is not in question, except on certain conditions.
(2) Consolidation of mortgages - Where a person has been become entitled to two mortgages from the same mortgagor, he may consolidate these mortgages and refuse to permit the mortgagee to exercise his equitable right to redeem one mortgage unless and until the other is redeemed, i.e., unless there is simultaneous redemption of all.
This is called equity of consolidation. This is naturally on the principle that he who comes into equity must do equity.
(3) Notice to redeem mortgage - Notice to a mortgagee to redeem one's mortgage is an equitable right of the mortgagor.
(4) Equitable Estoppel: meaning, nature, and purpose - Estoppel is a principle which precludes a party from alleging or proving in legal proceedings that a fact is otherwise than it has appeared to be from the circumstances.
Apart from estoppel from record and estoppel by deed, promissory estoppel arises where a party has expressly or impliedly, by could or by conduct or by negligence, made a statement of fact, or so conducted himself, that the party who made the representation is not allowed to allege that the fact is otherwise than he has represented it to be.
The doctrine has been known by various names: promissory estoppel, equitable estoppel, quasi-estoppel, and new estoppel or estoppel in pais (by conduct).
It is a principle evolved by equity to avoid injustice and though commonly named as promissory estoppel, it is neither in the realm of contract nor in the realm of estoppel.
Essentials and Basis
The essential factors giving rise to an estoppel in pais are:
(a) a representation intended to induce a course of conduct on the part of the person to whom the representation was made;
(b) resulting from the representation, an act by the person to whom it was made;
(c) detriment to such a person from the act.
The doctrine has its basis in justice to an individual and though often described as a rule of evidence, more correctly it is a principle of law.
The starting-point of such application may be considered to be Collector of Bombay v. Municipal Corpn., Bombay, wherein the view was that holding out of the promise by the Government was binding on the Government and that a court of equity must prevent the perpetration of legal fraud.
Limitations of the doctrine, however, cannot be overlooked. The doctrine obviously (1) cannot apply against the State legislature; and (2) to Acts of Parliament because they are no representations; (3) The government or public authority cannot be compelled to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the government.
Conclusion: Estoppel is a rule of equity flowing out of fairness striking on behaviour deficient in good faith.
Though it is a branch of the law of evidence it is also capable of being viewed as a substantive rule of law insofar as it helps to create or defeat rights, which would not exist, or be taken away, but for that doctrine.
It may have the effect of creating substantive rights against the person estopped. Where rights are involved estoppel may with equal justification be described both as a rule of evidence and as a rule creating or defeating rights.
5. Restitution of benefits on cancellation of the transaction - It is but proper justice to return the benefits of a contract which was voidable, and, equity enforced these principles in cases where it granted relief of recession of a contract.
A party cannot be allowed to take advantage of its own wrong. The limit of this doctrine is that no compensation can be ordered where the contract is void.
6. Set-off - Where there have been mutual credits, mutual debts or other natural dealings between the debtor and any creditor, the sum due from one party is to be set-off against any sum due from the other party, and only the balance of the account is to be claimed or paid on either side respectively.
Equity courts exercised this jurisdiction independently and even before the existence of the statutes of set-off and exercised it even beyond the law. There is now no difference between set-off at law and in equity.
7. Waiver - States Condonation would not amount to a perpetual waiver of agent's lapses and defaults. Agent has behaved against an equitable principle, that "He who seeks Equity must do Equity." State-conduct does not amount to a perpetual waiver.
(c) Limitations of the maxim - (i) In order that Equity courts can stretch their helping hands to a defendant by applying this maxim, the demand for equitable relief must arise from a suit that is pending.
(ii) This maxim is applicable to a party who seeks equitable relief. Those who wish to prosecute and exercise their legal rights and ask for legal relief from a court of equity will not be allowed to avail of the benefit of this maxim.
(d) Recognition in India - (i) Indian Contract Act, Under Section 19-A of the Indian Contract Act, contracts entered into under undue influence are voidable and therefore a party to a contract who has the option of getting the contract declared void will have to return the benefits so obtained to the party from whom he obtained it under such contract.
(ii) Transfer of Property Act - Under the Transfer of Property Act, Section 35 embodies the principle of election which rests on the principle of "approbate and reprobate", meaning thereby that a man shall not be allowed to approbate and reprobate.
A party who elects against the document has to compensate the disappointed donee and the rest he can retain; while in India the refractory donee's interest is forfeited.
(iii) Specified Relief Act and Indian Trusts Act - The maxim is illustrated also in Sections 30 and 33 of the Specific Relief Act and Sections 62 and 86 of the Trusts Act.
(iv) Civil Procedure Code - In Clerk v. Ruthnavaloo, it was decided that equitable set-off can be pleaded in India. Conditions for a legal set-off are considered in Order 8, Rule 6 of the Civil Procedure Code.