Since an early article of Professor Brian Simpson’s, the opinion of historians and lawyers has been that the penalty doctrine which disallows the enforcement of penal stipulations in voluntary transactions derives from a fusion of law and equity. Specifically, the doctrine derives from ‘fusion by convergence’: the independent development by separate courts of law and courts of equity of similar rules concerning relief from penalties.
Under Simpson’s account, the penalty doctrine has become a model of the fusion of law and equity dating to the life of equity’s ‘father’, Lord Nottingham. On that account, after transacting parties began using them in the fourteenth century, English law condoned the use of penalties in voluntary transactions for upwards of one century. Slowly the Court of Chancery found situations in which it would be inequitable to condone the penalty: at first because of special circumstances, later simply because the penalty was a penalty. The common law soon followed, inverting the maxim aequitas sequitur legem. By the last quarter of the seventeenth century, the common law courts routinely relieved against penalties, and by the turn of the nineteenth century had taken over the bulk of such litigation. The penalty doctrine became a common law doctrine solely or nearly so …
Turner, PG, Lex Sequitur Equitatem: Fusion and the Penalty Doctrine (January 20, 2018).