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An extraordinary equitable remedy that compels a party to execute a contract according to the precise terms agreed upon or to execute it substantially so that, under the circumstances, justice will be done between the parties.
Specific performance grants the plaintiff what he actually bargained for in the contract rather than damages (pecuniary compensation for loss or injury incurred through the unlawful conduct of another) for not receiving it; thus specific performance is an equitable rather than legal remedy. By compelling the parties to perform exactly what they had agreed to perform, more complete and perfect justice is achieved than by awarding damages for a breach of contract.
Specific performance can be granted only by a court in the exercise of its equity powers, subsequent to a determination of whether a valid contract that can be enforced exists and an evaluation of the relief sought. As a general rule, specific performance is applied in breach of contract actions where monetary damages are inadequate, primarily where the contract involves land or a unique chattel (personal property). Damages for the breach of a contract for the sale of ordinary personal property are, in most cases, readily ascertainable and recoverable so that specific performance will not be granted.
An important advantage to this remedy is that, since it is an order of an equity court, it is supported by the enforcement power of that court. If the defendant refuses to obey that order, she can be cited for criminal contempt and even imprisoned. The defendant can also be cited for civil contempt for continuing to refuse to obey the order and can be incarcerated until she agrees to obey it. In such a situation, it is said that "she has the keys to freedom in her pocket," which signifies that the defendant can release herself by complying with the court order. These enforcement powers are one of the principal reasons why plaintiffs seek specific performance of contracts.
Right to Specific Performance
Specific performance is ordered only on equitable grounds in view of all the conditions surrounding the particular case. The determining factor is whether, in equity and good conscience, the court should specifically enforce the contract because the legal remedy of monetary damages would inadequately compensate the plaintiff for the loss.
The remedy of specific performance presupposes the existence of a valid contract between the parties to the controversy. The terms of the contract must be definite and certain. This is significant because equity cannot be expected to enforce either an invalid contract or one that is so vague in its terms that equity cannot determine exactly what it must order each party to perform. It would be unjust for a court to compel the performance of a contract according to ambiguous terms interpreted by the court, since the court might erroneously order what the parties never intended or contemplated.
A plaintiff seeking specific performance of a contract must have contracted in good faith. If the plaintiff has acted fraudulently or has taken unfair advantage of superior bargaining power in drafting extremely harsh contract terms with respect to the defendant, the plaintiff has thereby contravened the doctrine of clean hands. Under that doctrine, the court will deny relief to a party who has acted unjustly in regard to a transaction for which that party is seeking the assistance of the court.
A classic example of the clean hands doctrine involved Charles Flowers, an outstanding college football player who was drafted by the New York Giants and Los Angeles Chargers. In November 1959, he signed to play football with the Giants. According to the college rules, however, any player who signed a contract to play for a professional team was ineligible for further intercollegiate games. Because Flowers wanted to play in the Sugar Bowl on January 1, 1960, he and the Giants agreed to keep his signing of the contract confidential, deceiving his college, the opposing team, and the football public in general. One of the terms of the contract provided that it was binding only when approved by the commissioner of football. Part of the plan was that the contract would not be submitted for approval until after January 1. Flowers subsequently attempted to withdraw from the contract, but the Giants promptly filed it with the commissioner, who approved it on December 15. Public announcement was withheld until after January 1.
On December 29, Flowers negotiated a better contract with the Chargers and signed it after the Sugar Bowl game. He notified the Giants on December 29 that he was withdrawing from his contract with them and returned his uncashed bonus checks. The Giants sought specific performance of their contract with Flowers. The court denied relief because the Giants did not come into equity with clean hands (New York Football Giants, Inc. v. Los Angeles Chargers Football Club, Inc., 291 F.2d 471 [5th Cir. 1961]).
Equitable relief will be denied to anyone who has acted unjustly or with bad faith in the matter in which she seeks relief, irrespective of any impropriety in the behavior of the defendant. The misconduct does not necessarily have to be of such nature as to be punishable as a crime or to justify any legal proceedings. Any intentional act concerning the cause of action that violates the standards of fairness and justice is sufficient to prohibit the granting of equitable relief. The Giants club accepted from Flowers what it claimed to be a binding contract, but it agreed that it would represent to the public that there was no contract in order to deceive others who had a material interest in the matter. If there had been a straightforward execution of the contract, followed by its filing with the commissioner, none of these legal problems would have existed. The Giants created the situation by their devious conduct and, therefore, had no right to obtain relief from a court of equity. The court refused to specifically enforce the contract.
At all times, a plaintiff must be willing to "do equity," which means that the plaintiff must fulfill whatever equitable obligations the court imposes upon her in order to do what is just and fair to the defendant. A person will be granted specific performance only if that person has done, has offered to do, or is ready and willing to do all acts that were required of her to execute the contract according to its terms.
Inadequate Legal Remedy
Specific performance will be denied where money would adequately compensate the plaintiff for the loss. The court determines whether money would be adequate after examining the subject matter of the contract itself. If it is land, money is inadequate because land is traditionally viewed as being unique, in that no two parcels of land are exactly alike. An award of damages will not enable the plaintiff to acquire the same parcel of land anywhere else.
If the contract involves the sale of ordinary chattels—such as furniture, appliances, or machinery—rather than land, the general measure of damages for breach of contract is the difference between the market price and the contract price. Damages are adequate since the item could be easily repurchased on the open market and the buyer would be compensated for the amount he was compelled to spend in excess of the original contract price. The Uniform Commercial Code (UCC) (a body of law adopted by the states that governs commercial transactions) permits specific performance for the breach of a sales contract for goods under limited circumstances.
Specific performance will be granted where the contract involves a unique chattel; the court determines whether a chattel is unique. A rare stamp collection is a unique chattel for purposes of specific performance, whereas stock listed on the New York or American Stock Exchange is not unique. Antiques, heirlooms, or one-of-a-kind items are considered unique because money cannot replace their value to the plaintiff. The claim that an object has sentimental value to the plaintiff is not, in and of itself, sufficient to justify specific performance. When the sentiment or personal desire for the object is based upon facts and circumstances that endow the item with a special value so that it becomes a family heirloom, specific performance will be granted.
Damages are inadequate if the estimate is difficult to make, such as in a requirements contract—a written agreement whereby one party assents to purchase from the other all the merchandise of a designated type that he might require for his business. The same principle applies where the chattel is scarce and cannot be readily repurchased on the open market even though it is not unique. Where the same contract combines unique and ordinary items, the entire contract will be specifically enforced.
As a general rule, breaches of personal service contracts are compensated at law by damages unless the services are unique. In such a case, the contract usually contains a negative covenant that prohibits a person from practicing her profession or performing those unique services for anyone else within a certain distance from a former employer for a specified period of time. The employer would seek to specifically enforce this negative covenant against the person who violates it. These provisions, sometimes called covenants not to compete, are enforced only if they are reasonable in scope; otherwise monetary damages are awarded. A court will never specifically enforce an employment contract by ordering an employee to work for an employer because the Thirteenth Amendment to the Constitution prohibits slavery.
Insolvency of the defendant, which prevents the plaintiff from collecting damages, does not determine whether specific performance will be granted. The court ascertains only whether an adequate legal remedy exists, not whether the defendant has the financial resources to pay the judgment.
Supervision of Performance
As a general rule, equity will not order acts that it cannot supervise. In many instances, specific performance is denied where courts would be unduly burdened with the task of supervising the performance. Supervision is a particular problem in building or repair contracts because the court lacks the technical expertise, means, or agencies to learn exactly what tasks the contractor is performing or whether she is performing them properly.
There are, however, certain exceptions to this rule. If the plans for the building are clearly defined, or if there has been sufficient partial performance so that supervision of the remainder is not difficult, the court might grant specific performance for its completion. An attempt to enforce a building repair contract is more problematic for the court. It must initially determine what repairs are to be made and the time within which they are to be performed; then it must decide whether there has been substantial performance and, if not, whether the defendant had any excuse. Usually an adequate remedy at law exists in the form of damages that represent the excess of the construction cost paid over the original contract price. Where damages are inadequate, however, the court can order specific performance.
A contract that is unenforceable because it has not complied with the statute of frauds (an old English Law, adopted in the United States, that requires certain contracts to be in writing) cannot be enforced through specific performance.
Laches is an equitable defense (matter asserted to diminish a plaintiff's cause of action or to defeat recovery) that prevents the enforcement of a contract by specific performance. Laches is an unreasonable delay in asserting a right with the result that its enforcement would cause injury, prejudice, or disadvantage to others. Laches is applied only where enforcement of a right will cause injustice.
The doctrine of clean hands is a defense in an action for specific performance. As explained in the discussion of the case of Charles Flowers, a court will deny specific performance if the plaintiff has acted in bad faith or fraudulently in the same transaction for which he is seeking relief.
A contract might not be specifically enforced if, as a result of superior bargaining power, the plaintiff takes unfair advantage of the defendant who is in a debilitated position. This situation transpires when the consideration (the inducement to enter into a contract) is so inadequate as to "shock the conscience," or when "sharp dealings" are involved, such as where the defendant is ill. Failure to disclose material facts to the defendant that, if revealed, would have prevented a contract from being made is a ground to deny specific performance.
Mistakes and misrepresentations in the terms of a contract might constitute a defense against specific performance. If such mistakes are sufficient to justify rescission of a contract, they are sufficient to prevent the enforcement of the contract. A court will enforce only a contract with definite and certain terms.
Blatt, Dana. 2002. High Court Case Summaries on Contracts. 2d ed. St. Paul, Minn.: Wadsworth.
Grinsted, Brandon. 2002. "The Evolution of Court-Ordered Mergers: An Equitable Remedy or a Marriage Made in Hell?" Mercer Law Review 53 (summer).
Ibbetson, David J. 2001. A Historical Introduction to the Law of Obligations. New York: Oxford Univ. Press.
Seamon, Richard H. 1998. "Separation of Powers and the Separate Treatment of Contract Claims Against the Federal Government for Specific Performance." Villanova Law Review 43 (June).