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Elements in a Contract XXV - Specific Performance
In addition to common law remedies for breaches of contract there are also remedies that are provided by equity and they come into play when common law remedies fail to deliver a just outcome. As per the norm equitable remedies are governed by equitable principles or the rules of equity and for breaches of contract the types of equitable remedies that the courts will allow are as follows: -
i) Specific performance and
Specific performance simply means that the courts will compel a party to a contract to perform their duties and obligations under the contract.
In Nutbrown v Thornton (1805) the plaintiff entered into a contract with the defendants to purchase some machines. Subsequently the defendant refused to deliver the machines and because the defendant was the sole vendor for that type of machines, the plaintiff brought an action against the defendants and sought specific performance as a remedy. The court granted specific performance and compelled the defendants to perform their duties as stipulated by the contract.
The above however would not have been the case if the machines were available elsewhere. In Cohen v Roche (1927) the plaintiff a furniture shop owner entered into a contract with the defendants to purchase a certain type of chairs. The defendants subsequently failed to deliver the chairs and the plaintiff sued for breach of contract and requested for the remedy of specific performance. The court did not grant specific performance despite there being a breach of contract because the chairs could be purchased elsewhere.
In order for specific performance to be granted the party requesting for specific performance must have acted fairly or equitably. In Walter v Morgan (1861) the defendant had acquired some land and the plaintiff compelled the defendant to sign a lease allowing the plaintiff to mine on the land. The defendant once he’d discovered the true value of the land refused to allow the plaintiff to mine and the plaintiff brought an action against the defendant requesting for specific performance to be granted. The court refused. Specific performance is an equitable remedy and the equitable maxim that he who comes to equity must come with clean hands applies.
In Lamare v Dixon (1873) the defendant sought to rent some cellars from the plaintiff and when he went to make an inspection of the cellars he discovered that the cellars were damp and requested that the plaintiff make the cellars dry before the defendant used the cellars. The plaintiff agreed to do so but subsequently failed to carry out his promise and the defendant refused to continue with the arrangement. The plaintiff sought an action for breach of contract and requested that the defendant be compelled to take possession of the cellars. The court rejected his claim. The plaintiff had acted unfairly himself and therefore he could not compel the defendant to continue with the contract. In other words, he wasn’t entitled to an equitable remedy because he hadn’t acted equitably himself.
Specific performance is normally granted when damages are nominal or are not sufficient to cover the breach. In Beswick v Beswick (1968) the plaintiff’s husband sold a business to his nephew with the stipulation that an annual income be made to him and upon his death to his wife. The nephew failed to make the stipulated payments, following his uncle’s death, as agreed and the plaintiff sued. It was held that that the aunty despite not being privy to the contact was able to sue because she was also the executor of her husband’s estate and the courts via the remedy of specific performance compelled the nephew to pay the stipulated annual payments. If they’d awarded damages instead of specific performance, the damages would be nominal and the plaintiff would most likely lose out.
Specific performance because of its equitable nature will not be granted if it would cause undue hardship to one of the parties. In Patel v Ali (1984) the defendant had agreed to sell her house to the plaintiff. Four years had lapsed since the parties entered into the agreement and in that time the defendant’s husband had gone bankrupt and the defendant had become disable due to an illness. The plaintiff requested for specific performance to compel the defendant to sell her house but the courts refused on the grounds that compelling the defendant to follow through with the conditions or stipulations in the agreement would cause undue hardship to the defendant.
Certain types of contracts would not be granted the remedy of specific performance especially in circumstances where to do so would require the continuous performance of a duty. In Ryan v Mutual Tontine Association (1893) where the lease on a flat required that a porter be in constant attendance, the courts refused to grant the remedy of specific performance because to do so would require that a porter be in attendance at all times, for the duration of the lease.
The decision in Ryan v Mutual Tontine Association (1893) however has to be compared with the decision in Posner v Scott-Lewis (1987) where the plaintiffs, who rented a luxury flat, sought to enforce their landlord’s undertaking that there would be a porter handy. The courts granted specific performance on the grounds that there was no continuous duty imposed.
In Co-Op Insurance v Argyll Stores (1997) the plaintiffs, developers of shopping centers, had granted the defendants a 35-year lease to operate a supermarket with the stipulation that the supermarket should not be closed for more than four months in the entire 35-year period because the customers from the supermarket generated income for the other smaller retailers in the shopping center.
15 years into the lease, the defendants realizing that they were running at a loss sought to vacate the supermarket. The plaintiffs offered to allow the defendants to rent the premises at a lower rate but the defendants refused. The plaintiffs brought an action in court seeking to compel the defendants to do so. Their claim was rejected by the House of Lords because under normal circumstances the courts would not compel a party to carry on with business. In addition to that despite the offer to rent the premises to the defendants at a lower rate it was difficult to estimate the defendants turn-over or profits in the next 20 years.
© 2017 Kathiresan Ramachanderam and Dyarne Jessica Ward