Specific Performance

Question 1

What is specific performance?

Answer 1

WHAT: an order that a contracting party perform his or her contractual undertakings or else risk being in contempt of court.

STARTING POINT: Damages are the preferred remedy. SP is the exception.

o WHY: efficiency (Tito v Waddell) + liberty and supervision concerns
 If the contract can be fulfilled elsewhere then damages will suffice in giving the plaintiff money to secure his contract with someone other than the defendant. So long as the good that is actually available somewhere else.
o Discretionary, as this remedy must be justified to avoid undue hardship on defendant or when the plaintiff did not come with clean hands.
 Typically given as a right in the context of land.
 Not given as a right in the context of goods/chattels.

Question 2

What are the 3 key principles of Specific Performance?

Answer 2

Three Key Principles for SP (S. Smith)
1. Granted only when damages are inadequate (uniqueness)
 Granted automatically for purchase or sale of land – theory being that no 2 pieces of land are the same.
 Damages are inadequate for unique objects ex. paintings, antiques
o Even with many unique objects though a monetary value can be found to fully compensate the plaintiff
o Maybe “inadequacy” = challenge determining the value of compensation
o Compensatory vs. substitutionary damages.
 Compensatory damages are damages based upon the expectation of the contract being fulfilled.
 With substitutionary damages there comes a point where unique goods can be difficult to obtain and its value can also be difficult to point out, so the defendant pays you in damages until you are satisfied. i.e. paying $1M for a painting that you paid $500K for.
2. Not available for personal service contracts (liberty and mutuality)
 The court ordering the defendant to do something such as singing at your wedding can go against mutuality of the contract’s value, as soon as 1 party says “I don’t wanna do this anymore” they clearly don’s see the value in completing their service anymore.
 Key Q: how ‘personal’ is the service?
o A defendant who’s a large company there is very little personal component to a service contract for employment, as the court order is directed at a company and not 1 individual.
 Liberty concerns: concerns of indentured servitude – i.e. this person no longer wants to do this contract, so ordering them to do so goes against their values and liberty attaching the 2 parties together when there is no longer a mutuality of interest.
 Mutual trust: difficulty created when the contract requires mutual trust since this relies on a party performing the contract well
 Contracts “not to do”: Contracts “not to do something” are frequently enforced however
o Exception: when a contract not to do something essentially gives the defendant no choice but to do something (ie: choice between working with a company or being unemployed) (Warner Brothers)
3. Not available unless the court is able to see that the order is executed (supervision)
 Finality of the conflict between the parties is the goal  Impossible for court to make indefinite series of rulings to execute an order
 Want to avoid multiplicity of proceedings
o In specific performance there can be problems with finality, as 2 parties are being bound together again to continue their relationship when they don’t want to be, so their performance might be half-hearted/inadequate leaving the possibility that the parties will come back to the courts.
 Clarity (vs liberty concern)
o The court when it issues and order of specific performance must be sure that it is issuing something that can actually be completed.
 i.e. an order for a singer to sing beautifully can be hard to measure and could be vague, or it might even be different from what the parties had originally agreed to before going to court. For instance, maybe they just wanted the singer to sing, but not necessarily having a standard that he sings beautifully.

Question 3

Sale of Goods/Chattels: What situations do we not want specific performance?

Answer 3

HOW: We don’t want SP in some situations: considerations
1. Unfair transactions – Specific performance will be refused where the transaction is unfair to begin with (Falcke)
o Falcke: plaintiff knew high value, defendant did not
o Falcke: inadequacy of the price is so great that courts should not grant SP
o Courts typically won’t enforce hard bargains with SP
2. Uncomfortable for years – SP is refused when it ties parties in an uncomfortable situation for many years
3. Goods Aren’t Unique – SP is not granted for fungible goods, but can be granted when goods are unique in some way:
o Commercially unique – ex: shortage or location of supply
 RULE: Goods can be commercially unique because of shortage or because of the particular location of supply; in those cases, specific performance will be available: Sky Petroleum
 Sky Petroleum – SP for sale of petroleum granted since it was in oil crisis. Oil was hard to find at the time and price was rising/falling so quickly it was hard to determine damages.
 Does not mean that the thing being bought is simply a good investment – this is measurable in damages so not inadequate
o Unique in another way:
 One of a kind object
 Uniquely suitable for plaintiff’s needs