Specific Performance

Question 1

Specific Performance Generally

Answer 1

To obtain specific performance, a plaintiff must show that

(i) a contract exists,
(ii) all contractual conditions have been fulfilled,
(iii) the legal remedy is inadequate,
(iv) enforcement is feasible, and
(v) there are no defenses available to the defendant.

Question 2

Does a Contract Exist?

Answer 2

Obviously, there must be a valid contract for specific performance. Remember that equity requires the contract terms to be somewhat more certain than would a court in an action at law, although parol evidence may be used to make the contract more certain. The contract must be supported by consideration. Generally, equity courts will not examine the sufficiency of consideration unless it is unconscionable. Unconscionable contracts are not entitled to equitable relief.

Question 3

Have all Conditions Been Fulfilled?

Answer 3

(1) Time of the Essence Clause. A time of the essence clause requires performance within a stipulated period of time. Such a clause must be expressly included in the contract; in its absence, a reasonable time to perform will be implied.
(2) Deficiencies. The main concern here is whether the seller can deliver the quantity or quality of land promised. If there is a deficiency, the seller may get specific performance only if the deficiency is minor.

A buyer can get specific performance despite substantial deficiencies but will be unable to get specific performance if the deficiency is very large. In any case, if specific performance is granted there must be an abatement in price for the deficiency.

Question 4

Is the Legal Remedy Inadequate

Answer 4

Usually applies if:

(1) Thing bargained for is rare or unique.
(2) Inadequacy of money damages.

Question 5

Personal Services Contract

Answer 5

A personal services contract will not be enforced, both because it would be tantamount to slavery and because it would be difficult to supervise performance.

Note that in Florida, franchise agreements are considered personal service contracts and so are not subject suit for specific performance.

Question 6

Land Sale Contract

Answer 6

(a) If both the parties and the res are before the court.
(b) If the seller and the res are before the court.
(c) If the buyer and the res are before the court.
(d) If both parties are before the court, but the res is outside the jurisdiction.

Question 7

Both Parties and Res Before the Court

Answer 7

If both the parties and the res are before the court, enforcement is feasible.

Question 8

Seller and Res Before the Court

Answer 8

If the seller and the res are before the court, enforcement is feasible if the purchaser is bringing the action. If the seller brings the action, it is difficult to grant specific performance because it requires the buyer to make payment of money, which is an in personam order.

Question 9

Buyer and Res Before the Court

Answer 9

If the buyer and the res are before the court, enforcement is feasible since the court will simply act in rem and transfer the property by court order if the seller does not comply.

Question 10

Both Parties Before the Court; Res Outside of the Jurisdiction

Answer 10

If both parties are before the court, but the res is outside of the jurisdiction, the recent trend has been for equity courts to decree that the property be conveyed, and the court may hold the seller in contempt if he does not make the required conveyance.

Question 11

Standard Contract Defenses

Answer 11

Standard contract defenses, including the Statute of Frauds, inadequate consideration, misrepresentation, impossibility, and mistake, may be raised. The most important here is the Statute of Frauds and the exceptions to its application, the part performance doctrine.

Question 12

Part Performance Doctrine

Answer 12

An oral contract for the sale of land may be enforced if there is part performance: payment, possession, or valuable improvements.

Question 13

Misrepresentation

Answer 13

To be a defense, the misrepresentation must go to a material factor. Concealment of a material fact will prevent specific performance as long as the party concealing this information stands in a confidential relationship to the other contracting party. The level of misrepresentation necessary to qualify as a defense to specific performance is not as high as rescission of the contract.

Question 14

Mistake

Answer 14

To be a defense, the mistake must be bilateral, material, and a mistake of fact rather than am mistake of law. Unilateral mistake is a defense to specific performance only if the nonmistaken party either knew or reasonably should have known of the mistake.

Question 15

Equitable Defenses

Answer 15

Equitable defenses include, e.g., unclean hands, laches, and unconscionability (tested at the time of contract formation).

Question 16

Covenants Restricting or Prohibiting Competition

Answer 16

Florida allows these if reasonable in time, area, and line of business. To be enforceable:

(i) Must be a signed writing ;
(ii) Legitimate business interest justifying the restriction; and
(iii) The restraint must be reasonably necessary to protect the legitimate business interest - not overboard

Question 17

Presumption for Former Employee, Agent, or Independent Contractor

Answer 17

If the defendant is a former employee, agent, or independent contractor, and the case does not involve the sale of business assets or any type of equity interest in a business or professional practice, it is presumed that a restraint of six months or less is reasonable in time, while a restraint of more than two years is presumed unreasonable.

Question 18

Presumption for Former Distributor, Dealer, Franchisee, or Licensee

Answer 18

If the defendant is a former distributor, dealer, franchisee, or licensee of a trademark or service mark, and the case does not involve the sale of any of the business assets or any type of equity interest in a business or professional practice, a restraint of no more than one year is presumed reasonable, while a restraint of more than three years is presumed unreasonable.

Question 19

Presumption for Seller of All or Part of A Business Interest

Answer 19

If the defendant is the seller of all or part of business assets or any type of equity interest in a business or professional practice, a restraint of no more than three years is presumed reasonable, while a restraint of more than seven years is presumed unreasonable.

Question 20

Cases Involving Trade Secrets

Answer 20

If protection is sought for a trade secret, the court will presume that a restraint of no more than five years is reasonable, and a restraint of more than 10 years is unreasonable.

Question 21

Enforcement May Be Refused on Public Policy Grounds

Answer 21

The court may refuse enforcement of the covenant not to compete for specifically articulated public policy reasons, if such reasons substantially outweigh the need to protect the applicable legitimate business interest.

Question 22

Means of Enforcement

Answer 22

A restrictive covenant may be enforced by any appropriate remedy, including temporary and permanent injunctions. Violation of an enforceable restrictive covenant creates a presumption of irreparable injury to the plaintiff.

Question 23

Specific Enforcement of Contracts to Make Particular Testamentary Dispositions or Execute Mutual Wills

Answer 23

As long as the property involved is unique, equity will specifically enforce these contracts by imposing a constructive trust on the property in the hands of the personal representative.

Where such contracts relate to real property, they must be in writing to be specifically enforceable.

Question 24

Equitable Conversion

Answer 24

After a contract for the sale of land has been entered into, the seller has a personalty interest and the buyer has a realty interest. For equitable conversion to come into effect, the land sale contract between the parties must be specifically enforceable.

Question 25

Inheritance

Answer 25

In most jurisdictions, real property passes directly to the heirs, whereas personal property goes to the estate’s executor or administrator. A mandatory direction to sell in a will ‘converts’ real property into personalty on the testator’s death. Thus, the proceeds from the sale of the real property will go to those individuals entitle to the personal property. Note that this is not the result where the will gives a discretionary power of sale to the executor.

Question 26

Option Contracts

Answer 26

The majority rule (which is followed by Florida) is that in an option contract case, equitable conversion occurs upon exercise of the option.

Question 27

Risk of Loss Generally on Buyer

Answer 27

Under the majority rule (which is followed by Florida), the buyer has the risk of loss as soon as the parties enter into a contract for the sale of real property.

Question 28

Right to Insurance Proceeds

Answer 28

If insurance monies are involved, determine who is entitled to them. If the risk of loss is on the seller, he should take out the policy. If he does, he is entitled to the proceeds. Remember, however, if the buyer has the risk of loss and insurance proceeds go to the seller, the buyer can get them using a constructive trust theory.