specific performance

Specific performance is a discretionary remedy made by court order requiring a litigant in legal proceedings to do some specified act. Being an equitable remedy there are circumstances in which courts will decline to exercise its discretion this remedy. The exercise of the jurisdiction is based on the existence of a valid and enforceable contract, where there has been a breach of contract or threatened breach. Courts have power to order individuals and legal entities (such as companies) to perform the specified acts so as to avoid or reduce the loss and damage which is likely to be suffered as a result of a breach of contract. This remedy has been described in the House of Lords as a “heavy handed nature of the enforcement mechanism”. To not do the act or interfere with a person looking to comply with the order amounts to a contempt of court.

Specific Performance

Where a party to a contrary defaults in it performance of its obligations, in principle, the contracting party is entitled to refuse to accept the breach of contract and require the defaulting party to perform its obligation or accept the breach of contract and sue for damages to compensate for the losses sustained by the breach. In many circumstances, the innocent party would prefer that the contract is performed, rather than being left with a claim for monetary damages which must then be recovered from the defaulting party after judgment. Be that as it may, not all contracts however are amenable to court orders requiring them to be specifically performed. The main exception to what a court will require a person to perform is the payment of money. Where a contracting party is contractually obligated to pay a sum and refuses to do so, as a matter of public policy, courts require the creditor to issue legal proceedings to sue for the debt. That is, courts take the view that the obligation to pay can be enforced by suing on the debt.

Refusal of Specific Performance

There are a series of grounds upon which a court will refuse to grant such specific performance to a innocent party who has suffered from a breach. These limitations to the application of the remedy are in keeping with and consistent the restrictions on claimants obtaining equitable relief generally (such as other forms of injunctions).

Damages as an Adequate Remedy

The most common hurdle to be overcome is that damages would amount to an adequate remedy. Examples include:

1. In contracts for personal service (consultants, subcontractors and employees) on the basis that is not desirable to order unwilling individuals to work together, as such an order would interfere with the party’s personal liberty.
   As a general rule, the innocent party may have ready access to alternative labour to perform the required contractual task and recover the losses suffered from the defaulting party in damages. The measure of damages is likely to be the difference between what the innocent party would have paid and the cost of the alternative labour.
2. Breaches of contracts for the sale of land and other contracts for other unique property (such as domain names, copyright works and patents) are unlikely to be adequately compensated by damages, in circumstances where the claimant will not be able to obtain the same or similar property elsewhere. Even where specific performance is declined, the claimant would probably be entitled to recover the difference in price that it would have paid and the sum actually paid for the substitute.
3. where there is likely to be difficulty calculating the financial loss actually suffered increases the prospects of success of obtain orders for performance of the contract. Variant or volatile market conditions may contribute to the difficulty calculating damages with reasonable certainty.
4. It may be that damages are an inadequate remedy in the circumstances because the defendant could not pay if ordered to do so, or the loss suffered would amount to be nominal damages.
5. Contracts for the transfer of shares, stocks and bonds are unlikely to be order to be performed, however the court has discretion under the Sales of Goods Act to order performance of sales of specific and ascertained goods, due to a more relaxed view of what may constitute 'unique' goods.

Further Grounds for Refusal of an Order

Even where damages are considered an inadequate remedy, a discretion remains with the court to decline to order specific performance. These reasons include where:

1. the contract would require constant supervision by the court or constant reference to the court to ensure performance of the contract, having regard for the nature of the contract. It is useful to distinguish between situations where constant superintendence by the court would be required and the supervision of a final result (such as a building contract). Where making an order is likely to result in frequent court appearances to ensure compliance, an application is more than likely to be refused.
2. severe hardship would be caused to the defendant, such as the losses that would be sustained by the defendant would be well in excess of the loss suffered by a successful claimant.:
3. the claimant has acted unconscionably, although not to the extent that he should be deprived of his legal rights.
4. the conduct of the claimant is such that the remedy should not be made available, that is, if he acted unfairly in his performance of the contract, or induced the party in breach by a misrepresentation which was not legally binding.
5. the contract was obtained by the claimant by unfair or sharp conduct where the innocent party had superior knowledge to the defendant, or the claimant failing to disclose its own breach of contract.
6. a promise to do something was gratuitous, whether by deed or nominal consideration.
7. performance of the order would be impossible.
8. a contract is so vague that it cannot be enforced at all, such that the obligation cannot be expressed precisely.
9. the contracting party against whom the order is sought has the power to terminate the contract, which would have the effect of rendering a court order nugatory.

Furthermore, courts may refuse to grant the order on the basis that the defaulting party itself would not be entitled to obtain an order for performance itself. This a requirement of mutuality of remedy explains why minors are not entitled to cannot obtain performance.  There are however significant exceptions to the rule.

More than one of these factors is likely to arise in any given dispute. The court is likely to conduct a weighing exercise to assess the detriment by making the order. For instance, courts are unlikely to make orders which would force a company to trade at a loss.

Third Parties to Contracts

In introduction of the Third Party (Contract Rights) Act 1999 entitles third parties who benefit from the contract to obtain specific performance for contractual promises, despite not being a party to it.

Specific performance is a power tool to in the event of breaches of contract which would cause or a likely to cause serious damage to claimants. These orders are available on an interim basis to ensure that the status quo is maintained between the parties pending trial in cases where urgent action is required to avoid loss being suffered. As the remedy is not always available, parties intending to embark into litigation should be cautious and assess their prospects of obtaining such orders before acting.