Posted in Business Litigation, Partnership Law, Real Estate Law
If you entered into a contract, you may want it to go forward but the other party is not complying, or that contract you entered into may give you second thoughts and you’re wondering if you made a bad choice. If you fit into either of those situations, you should think about what could happen if this dispute is taken to court. One outcome is a judge ordering the breaching party to comply with the contract, known as “specific performance.”
Equitable and legal remedies
If the terms of a contract have not been complied with, the party that has suffered harm could ask a judge to award it damages (a money award) from the other party (a remedy at law) or that the other party specifically perform the contract (an equitable remedy). An equitable remedy can only be ordered if there is no legal remedy and the judge thinks specific performance is the best outcome for the situation in the interests of fairness and justice. Equitable remedies are an area of law not created by statute, but by prior legal decisions.
Equitable remedies are frowned upon in the legal system. A judge would much rather find a way to come up some kind of money damages that one party would need to pay and create a clean break between the parties. An equitable remedy would force one party to take actions against its will, create a continuing relationship between parties who don’t get along and the court may need to continue to be involved to make sure those actions actually take place.
Elements needed to be proved for specific performance
To be successful in this type of lawsuit, a plaintiff would need to show:
- The contract is valid.
- Its terms are sufficiently specific and reasonable,
- Both sides agreed to be bound by its terms, and
- There is adequate consideration from both sides (both sides promise an exchange of something valuable, to show that the dispute at issue is not an unenforceable gift from one to another).
- The plaintiff is willing and able to perform its end of the bargain, and has offered to do so (or there’s a valid excuse for its nonperformance).
- The defendant committed a material breach of the contract.
- It failed to do something important, even though it was on notice it needed to act to comply with the contract.
- A remedy at law (money damages) for some reason would be inadequate to compensate the plaintiff for the harm done.
Examples of specific performance
Virtually any contract could be the subject of a specific performance lawsuit.
- If a contract for purchase of real estate is breached, an action for specific performance would ask the judge to order the defendant to sell the property to the plaintiff on the terms stated in the contract.
- If a business is being sold or merged into another company, and the buyer gets cold feet after a contract is formed and refuses to move forward, the seller could seek specific performance of the contract so the sale goes through.
If you find yourself on either end of these kinds of contract disputes, contact my office so we can talk about your situation and the best options for you to go forward. As a business owner, you must consider the possible return on any investment you make, including the time, money and energy invested in a lawsuit. If you’re considering this type of legal action, or have already been sued, I can help.
