What is specific performance in contract law?

When a breach of contract occurs, there are a number of legal remedies that may be used to correct the breach. One type of remedy is “specific performance.” So, what is specific performance in contract law? Expert Commercial Law explore the meaning of “specific performance”, when it us used, and the alternative remedies that may be available.

What is specific performance in contract law?

Put simply, specific performance is a type of equitable relief in which the Court compels a defaulting party to perform their contractual obligations and duties.

Unlike monetary damages, which offer financial compensation for breach of contract, specific performance mandates the actual performance of the agreement as originally intended. This remedy is provided on the notion that, in some cases, monetary compensation cannot adequately remedy the harm caused by a breach of contract.

Its significance lies in its capacity to ensure that contractual obligations are fulfilled as closely as possible to the parties’ initial intentions, preserving the contract’s inherent value.

When is specific performance granted?

The Court does not automatically grant specific performance, but requires consideration of several factors.

Primarily, Court Orders for specific performance are usually granted in cases where the contract involves real property, unique goods or services that cannot be easily substituted. Real estate transactions, for example, often qualify for specific performance due to the unique nature of land. Quite often, remedies, such as monetary damages are not considered to have adequately compensated the claimant in these circumstances.

The courts will also assess whether the specific performance can be carried out in a practical manner. If enforcing the contract would require constant supervision by the court or lead to ongoing disputes, specific performance is less likely to be awarded by the courts.

The court has wide judicial discretion when awarding specific performance. The courts consider the conduct of the party seeking the remedy, ensuring that they have acted fairly and have also fulfilled their contractual obligations. Equity aids the vigilant, not those who slumber on their rights, highlighting the need for timely action by the aggrieved party.

Additionally, the remedy is more readily available where there is a clear standard for what constitutes performance under the contract. Where the obligations are too vague or subjective, specific performance becomes less viable as a remedy.

When would it not be granted?

Specific performance is subject to notable limitations within our current legal system. One of the main limitations is the remedy’s inability to be applied to contracts of personal service.

The courts are typically reluctant to enforce specific performance of employment contracts or contracts for the provision of personal services. This is to avoid situations, such as involuntary servitude and because of the difficulties in supervising the quality of the performance.

Furthermore, specific performance will not be granted where it would cause undue hardship to the defendant. If fulfilling the contract in the specific manner ordered would be excessively burdensome or unjustly punitive, the courts may opt for damages as a more appropriate remedy.

The principle of mutuality also plays a role in the limitations of specific performance. This principle requires that the remedy be equally available to both parties to the contract. If one party, cannot be compelled to specific performance due to the nature or circumstances of the contract, then neither can the other.

Case law provides numerous examples of these limitations in action. For exampke, the landmark decision in Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1997] highlighted the courts’ reluctance to enforce specific performance of a contract to operate a business due to the impracticality of supervising the same.

Specific performance clauses within contracts

Specific performance clauses may be included within contracts. They are contractual provisions that stipulate the expectation or requirement for a court to order specific performance as a remedy in the event of a breach.

These types of clauses are an attempt by the parties to a contract to predetermine the remedy for non-performance or misperformance. It highlights their preference for the actual fulfilment of the contract’s terms over other forms of remedies, such as monetary damages.

Whilst the inclusion of a specific performance clause highlights the parties’ intentions and priorities, its enforceability and the ultimate decision to grant specific performance rests with the court.

These types of clauses are often included in contracts involving unique goods or properties. This may include art, antiques, custom-made items, or real estate, where monetary compensation is deemed inadequate to address the non-breaching party’s loss.

The inclusion of a specific performance clause can highlight the parties’ commitment to the terms of the contract. They can also serve as a deterrent against breaches, given the potential for a court order compelling performance.

When drafting a specific performance clause, parties should:

• Be specific: Clearly define the obligations for which specific performance is sought, ensuring they are central to the contract’s purpose.
• Consider feasibility: Reflect on whether the court can practically enforce the clause without undue burden.
• Legal Advice: Seek legal advice to ensure the clause aligns with legal standards and is likely to be enforceable.

How to obtain specific performance of a contract

Seeking specific performance in England and Wales involves a legal process whereby the aggrieved party makes a claim outlining their case for the specific performance remedy.

The claim must demonstrate that specific performance is the most appropriate remedy under the circumstances. It should also highlight the inadequacy of damages and the specific criteria met for granting of this remedy.

The process typically begins with an application to the High Court or County Court, depending on the case’s nature.

The applicant must provide evidence supporting their claim, including details of the contract, and overview of the breach, and why specific performance is necessary and just in the circumstances.

The court will then examine the merits of the case. It will consider the legal principles governing specific performance. This includes evaluating the uniqueness of the subject matter, the feasibility of enforcement, and any potential disadvantages to the defendant.

If the court finds in favour of the claimant, it will issue a decree for specific performance. This will specify the actions the defendant must undertake to comply with the contract. Failure to comply with this type of decree can result in contempt of court.

How can Expert Commercial Law assist?

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