Why Delaware? A Lesson in Chance-ry
Posted by Gennine
August 22, 2018
1960s America reveled in the cultural phenomenon known as the British Invasion. Although the Rolling Stones and The Who played into the spectacle, no one held more influence on Americans or American pop culture like The Beatles. But what many people do not know is there was another British Invasion that happened hundreds of years prior. This invasion was less bloody than war-like attacks and less romantic than dreamy boys from England with their swooning accents. This invasion, known as the Court of Chancery, would change the dynamic of the American court systems forever and make Delaware a legend on the legal stage.
The earliest form of Chancery Courts date back to the 1400s in England where common law was the traditional practice. Common law bases judicial decisions on precedence-past similar cases- to yield similar outcomes. Even then, the English realized there was a crucial need to separate common law cases from those pertaining to businesses, trusts, and land laws; thus, Chancery courts were born. Ironically enough, over time the desire to systemize the Chancery Courts became so widespread that it lost the purpose for which it was founded and Parliament decided to disband the court system in England.
Flash forward to the 1700s in America, colonies were forming all along the eastern seaboard and establishing their own set of laws. At the time, most states were leaning away from their courts of chancery and consolidating judicial and chancery laws. All except Delaware. As the first state, Delaware had originally decided that courts would hear all types of cases: “Delaware never had an institutionalized chancery during the colonial period… so equity was never founded on royal prerogative” (Quillen). Because of this foundation, the Chancery court was not swayed by politics, and equity was never in competition with common law. Therefore, the division of the court systems thrived and has been a huge part of Delaware’s economic success.
Over time, the need to adapt to meet the needs of a developing America, has resulted in many cases in which new legislation was written. For example, Maclary versus Reznor called for “fiduciary relationships between parties to disclose facts that may influence the other party” (Quillen) ergo the need for UCC searches became prevalent in Delaware. Every time a case challenged the current statutes, it helped tailor this very unique court into the power house it is today. In so many words, the Delaware Chancery Court was literally founded and has been thriving on chance since its very existence.
To this day, the Chancery court remains a steadfast reason why businesses decide to incorporate in Delaware. Sure many people believe it is Delaware’s cost-effectiveness and/or “tax-free shopping” that bring so many people to incorporate or qualify here, but the root of why incorporating in Delaware is beneficial goes deeper than that. Because the courts are separate from that of the courts of common law, cases involving businesses can be heard more quickly thus ensuring swift but thorough results. Ultimately, the first “British Invasion” is the cause for one of Delaware’s greatest claims to fame!
Amanda Archambault, Registered Agent Associate