Specific Performance

Where a Court makes an order for specific performance a party to a contract is compelled to carry out his contractual obligations. This remedy was created in order to provide relief where damages may not be appropriate.

It is based on the principle that a person should be entitled to have that which he has contracted for. An essential prerequisite is a valid enforceable contract. The terms of this contract must also be sufficiently certain and the onus lies upon the plaintiff to prove this. Specific performance will not be granted where there is an adequate common law remedy

In Wilson v Northampton and Banbury Junction Railway Co it was stated that the court gives specific performance instead of specific performance only when it can by that means do more perfect and complete justice.

The appropriateness of specific performance is very much dependant on the type of contract in question. For example, a contract for the sale of land could fall under the remit of specific performance while contracts which require a large amount of supervision generally do not, as the courts are aware that in such cases, specific performance may be akin to slavery.

Like all equitable remedies, specific performance is discretionary in nature.  In Conlon v Murray it was stated that this discretion is not arbitrary, but is to be exercised on the principles which have been worked out in a multitude of decided cases.

In O’Neill v Ryan it was stated that there may well be cases where the courts decide it is not fair to specifically perform the contract, and so they will grant damages instead.

An order for specific performance is often sought in relation to contracts for the sale of land. While it cannot be said that a plaintiff is entitled to a decree in these circumstances, in practice an order will usually be granted provided that a valid contract exists and the onus lies upon the defendant to establish why the remedy should be refused. This is because land is unique and so will not allow for the plaintiff to be easily compensated via damages.

It is important to note that to successfully seek an order of specific performance of a contract for the sale of land it is necessary to comply with certain requirements. First, there must be a valid contract made for consideration. Once this is established there must be compliance with the requirement that there is a written accord of the transaction, or there must be some good reason why equity will not insist on compliance.

In Jodifern Ltd v Fitzgerald  it was stated that in a claim for specific performance a plaintiff must establish the making of an enforceable concluded agreement. Where the agreement is a verbal one, the plaintiff must establish not only the concluded agreement but also the existence of a note or a memorandum signed by the defendant.

In Lynch v O’Meara it was made clear that if the negotiations between the parties have not culminated in a contract the plaintiff’s claim for specific performance will fail. Uncertainty has surrounded the issue of whether certain matters, for example the payment of a deposit must be addressed in order for there to be a concluded and complete agreement.

Uncertainty has surrounded the issue of whether certain matters, for example the payment of a deposit, must be addressed in order for there to be a concluded agreement. In Boyle v Lee it was stated that the amount of the deposit to be made is a very important issue and so must be part of the concluded agreement, unless it was agreed that no deposit would be made.

However, in Supermacs Ireland v Katesan Justice Hardiman suggested that while there is no doubt that an agreement in relation to the matter of a deposit is usual in contracts for the sale of land, there was at least scope for the contention that deposits may not be considered essential. The better view would seem to be that it is not essential that a term in relation to the payment of a deposit must invariably be included in order for there to be a concluded agreement and the crucial question must be whether everything that there is evidence the parties intended to include in the contract has been addressed.

Under section 51(1) of the Land and Conveyancing Reform act, there must be a valid note or memorandum of the agreement. Only the material terms need by included in a note or memorandum for it to be sufficient  but all the terms, whether they be important or unimportant must be agreed before there can be a concluded agreement.  The note or memorandum must be in writing and signed by the person to be charged or by someone authorised by him to do so.  While what is material must depend on the circumstances of the case, in Shirley Engineering v Irish Telecommunications Investments it was stated that the amount of the deposit was an essential term in the sense that it need be included in the memorandum.

In Mulhall v Haren Justice Keane stated that either read alone or with other documents which can be properly read with it, the note or memorandum must contain a recognition, express or implied of the existence of the oral contract to be enforced.

A further related issue which has caused considerable controversy over the years is the effect of the inclusion of the words ‘subject to contract’. Justice Keane stated that a letter which stated that a transaction is ‘subject to contract’ cannot be a sufficient note or memorandum, since the use of those words is normally inconsistent which a concluded agreement.  Only in very rare circumstances, such as in Kelly v Park Hall School could those words be dismissed.

However, in the Supermacs Ireland case, Justice Hardiman stated that it was plainly arguable that the use of the phrase ‘subject to contract’ did not preclude the existence of a ‘done deal’ between the parties. In the Jodifern case Justice Barron suggested that if the words are contained within the body of the document, it is a matter if construction of the writing as a whole whther or not it is intended to deny the existence of a concluded agreement. Thus an element of uncertainty has returned to this are of law.

Often where an oral agreement is reached between parties there may be no sufficient note or memorandum and equity is faced with the dilemma of insisting on strict compliance with formalities or allowing alternative evidence of the agreement in order to prevent the perpetration of fraud. A plaintiff may be able to obtain specific performance in the absence of a note by invoking the doctrine of part performance, which allows a plaintiff to rely on his own actions as evidence for the existence of an agreement.

In Lowry v Reid it was stated that the issue is whther the plaintiff has an Equioty arising from part performance which is so affixed upon the conscience of the defendant that it would amount to a fraud on his part to take advantage of the fact that the contract is not in writing. The right to relief rests not so much on the contract as on what has been done in pursuance of it.

In Steadman v Steadman it was suggested that it would be sufficient if the acts of part performance in question were, on the balance of probabilities referable to some contract and may be referred to the alleged one.

 In Mackie v Wilde Justice Barron stated that what is required is that acts relied upon as being acts of part performance be such that on examination of the contract which has found to have been concluded and to which they are alleged to refer, show an intention to perform that contract. Ultimately the court seeks to ensure that a defendant is not ‘breaking faith’ with a plaintiff by relying on a statute. What is essential is that

1.       There was a a concluded oral agreement

2.       The plaintiff acted in such a way which showed an intention to perform the contract

3.       The defendant induced such acts or stood by while they were being performed

4.       It would be unconscionable and a breach of good faith to allow the defendant to rely on the Act to prevent the performance of the contract

The detriment to the plaintiff must be the result of what the plaintiff does with the defendant standing by. These principles were applied by Justice Laffoy in Liberty Asset Management V Gannon

As Spry has stated, it should be emphasised that an act of part performance must be judged not in the abstract but in light of all the material circumstances in order to establish whether it is sufficiently unequivocal.  The acts upon which a plaintiff seeks to rely in establishing part performance must be his own acts and not those of the defendant.

A common example of part performance is the carrying out of imporvements or alterations to the property. In Starling Securities v Woods  it was held that entry onto land and the demolotion of buildings thereon constituted part performance.  Another common issue is the payment of purchase money, which was traditionally not a sufficient act of part performance. In Howlin v Thomas F. Power Ltd. it was stated that while payment was a sufficient act, it was stressed that the application of the doctrine was still confined to cases where it would be fraudulent for a defendant to rely on the statute.

In England, the equitable doctrine of part performance no longer exists.

A further issue that may arise in specific performance actions relating to contracts for the sale of land is the circumstances in which a party will be required to comply with a completion notice. A party serving a completion notice must be ready willing and able to complete the sale at the date of service of the notice. It is clear from the judgement of Justice Barrington in Keating v Bank of Ireland that a party cannot be forced by a court to close a sale before the issue of whether he is entitled to compensation under the original contract has been confirmed.

As a general principle, the courts will not exercise its discretion to award specific performance where damages would be more appropriate. Therefore, as a rule specific performance will not be granted for the sale of personal property. However, this is not a steadfast rule and specific performance for the sale of personal property may be granted where the item in question is of unusual beauty, rarity, or distinction. A further question that has been suggested is whether or not the object in question is of unique or peculiar value to the individual concerned.

In Falcke v Gray it was stated that while you cannot get specific performance for ordinary chattels,  if the chattel is unique and damages wouldn’t be an adequate remedy you can get specific performance – unless the object had been sold to a 3rd person, then you get damages.

In Cohen v Roche  the order for specific performance was refused because it was ruled that there was an adequate remedy in breach of contract. The issue of whether or not the items are freely available elsewhere is usually the go-to test.  This was seen in the case of Sky Petroleum Ltd v VIP Petroleum Ltd. This approach has been followed in relation to the sale of shares in the case of Duncuft v Albrecht. This has been  also shownby the case of Pernod Ricard & Comrie plc v FII Fyffes plc (1988) where the courts were called on to resolve a dispute which arose following intense negotiations, regarding the purchase of very valuable shares, conducted by a large number of persons over three days. The courts had to examine the negotiations in detail and, on the facts, held that an offer had been made by the defendant which had been accepted by the plaintiff.

By their nature building contracts will often be of an intricate and indefinite nature involving the performance of a variety of different obligations. As stated in Rushbrooke v O’Sullivan  the attitude of the Courts towards their enforcement has not always be consistent but the dominant view is that they should rarely be enforced. In practice, the likelihood of obtaining specific performance hinges on two main issues; primarily the certainty of the terms of the contract and to a lesser extent the degree of supervision which an order would require.

The leading case on the matter is Wolverhampton Corporation v Emmons where the three necessary conditions for  and order of specific performance to build or repair. First the work in question must be defined in the contract, secondly the plaintiff must have a substantial interest in the performance of the contract and damage must not be an appropriate remedy and thirdly, the defendant must have by the contract obtained possession of the land on which the work is contracted to be done.

In Redland bricks v Morris it was said that the Court must be careful to see that the defendant knows exactly in fact what he has to do. It has been stated that this requirement of sufficient definition does not mean that the contract must be so specific that it leaves no doubt and  Spry has suggested that the requirement should be that the obligations in question must be at least so clear that it will be possible for the court to determine whether the acts of the parties do or do not amount to part performance.

Clearly where the defendant is in possession of the lands specific performance may often be the preferred option as the plaintiff could not employ another builder without committing a trespass.  The Courts will be more willing to grant specific performance where supervision is not required. This was the case in Co-op Insurance v Argyll Stores.

As a general rule contracts which involve the performance of personal services will not be specifically enforced. This is due to a combination of the Courts dislike for supervision and their unwillingness to compel individuals to work together. However, as was said in Lift Manufacturers v Irish Life Assurance this is not a rigid ban.

These issues were examined in detail in CH Giles & Co v Morris where it was that just because an element of personal service was involved in the contract did not automatically exclude it from specific performance.  The matter is one of balance of advantage and disadvantage in relation to the particular obligations in question.

There are strong policy reservations against specific performance of employment contracts. However, in exceptional cases such as Hill v Parsons & Co Ltd the courts will enforce a contract. In De Francesco v Barnum a 14 year old girl entered into a contract to learn stage dancing. Her contract of employment prevented her from marrying and accepting other work. The court held that the contract was not able to be specifically performed.

In Ryan v Mutual Tontine Assoc  a lease of a service flat provided that the lessors should provide a porter who was to be 'constantly in attendance'. It was held that this undertaking could not be specifically enforced. It would require 'that constant superintendence by the court which the court has always in such cases declined to give'.

In Posner v Scott-Lewis The court granted an application for specific performance of a lessor's covenant to employ a resident porter for certain duties. The court distinguished Ryan v Mutual Tontine, where supervision of the execution of the undertaking had been required. Here neither personal services, nor a continuous series of acts, were required, but merely the execution of an agreement containing provisions for such services.

In recent times, the ‘Keep Open’ clauses of contracts between supermarkets and shopping centres have become a key area for specific performance. In Co-operative Insurance Society Ltd v Argyll Stores the Co-operative Insurance Society Ltd (CIS) owned the freehold of a shopping centre and they let the anchor unit to Argyll Stores as a supermarket, for 35 years from 1979, with a covenant to ‘keep open the demised premises for retail trade’. In 1995, the store was making a loss and Argyll closed, despite the protests of the Co-op. The Co-op argued that they should be awarded specific performance, on the ground that it was necessary to keep a store open in an otherwise depressed area.

The trial judge refused a specific performance order. The Court of Appeal granted specific performance by a majority, because there was considerable difficulty proving a loss suffered and Argyll had acted with ‘unmitigated commercial cynicism’.

The House of Lords allowed Argyll Store’s appeal and said the judge’s exercise of discretion was correct in refusing an award of specific performance. Damages were the appropriate remedy. There were a number of relevant considerations. First, it was settled practice that no order would make someone run a business. Second, enormous losses would result from being forced to run a trade. Third, framing the order would be unduly difficult. Fourth, wasteful litigation over compliance could result. Fifth, it was oppressive to have to run a business under threat of contempt of court. Sixth, it was against the public interest to require a business to be run if compensation was a plausible alternative.

Lord Hoffmann gave the leading judgment.

“

The purpose of the law of contract is not to punish wrongdoing but to satisfy the expectations of the party entitled to performance... The exercise of the discretion as to whether or not to grant specific performance starts from the fact that the covenant has been broken. Both landlord and tenant in this case are large sophisticated commercial organisations and I have no doubt that both were perfectly aware that the remedy for breach of the covenant was likely to be limited to an award of damages. The interests of both were purely financial: there was no element of personal breach of faith... No doubt there was an effect on the businesses of other traders in the Centre, but Argyll had made no promises to them and it is not suggested that CIS warranted to other tenants that Argyll would remain. Their departure, with or without the consent of CIS, was a commercial risk which the tenants were able to deploy in negotiations for the next rent review.

There are various defence which may be put forward when a claim for specific performance is made, the majority of which are discretionary in nature.

Lack of Mutuality

It has been traditionally accepted that a court would not grant specific performance at the suit of one party when it could not do so at the suit of another and that in order to obtain a decree of specific performance, the contract must be mutually enforceable.

In O’Regan v White it was stated that generally speaking, at any rate, it would not be even handed justice to compel specific performance against one party where the same remedy would not be available against the other in respect of matter to be performed by him under the contract.

One question which has provoked controversy is whether the question of mutuality is to be determined at the time the contract was entered in to or at the time of judgement. In Price v Strange the Court of Appeal held that the time at which the mutual availability of specifc performance must be considered is the time of judgement and said that the correct principle is that the Court will not compel a defendant to perform his obligation speciofically of it cannot at the same time ensure that any unperformed obligations of the plaintiff will be specifically performed.

Misrepresentation

The fact that a contract was induced by reason of a misrepresentation will usually be a defence for an action for specific performance. Any misrepresentation which justifies rescission will suffice and specific performance may even be refused where there is no right to rescind.

Misrepresentation will only provide a defence to an action for specific performance where it has induced the defendant to enter into the contract and he has been prejudiced as a result although it may not be necessary to prove that the misrepresentation provided the sole motivation for the defendants decision to enter into the agreement.

If the defendant has entered into the material contract or has elected not to rescind in reliance on misleading statements or actions of the plaintiff, specific performance is refused either if circumstances of unfairness render it unreasonable to grant relief or if in view of the error or misunderstanding of the defendant and the hardship that may be suffered by him it is unreasonable to grant relief.

Mistake

In certain circumstances, mistake will constitute a defence to an action for specific performance. In determining whether specific performance should be refused on this ground the court will often be primarily influenced by the unfairness or hardship caused by any misapprehension on mistake or hardship caused by the mistake on the part of the defendant.

The mistake may be of such proportions that it prevents a valid contract coming in to existence at all; in these circumstances clearly no order of specific performance can be made. However, it is also necessary to consider the types of mistake which although they do not prevent the contract from being made, may be of such a nature that a Court will in the exercise of its discretion refuse to grant specific performance.

There will also be types of mistake which are neither serious enough to justify rescission nor to provide a good defence in an action for specific performance. This can be seen in Ferguson v Merchant Banking.

Where a defendant seeks to rely on mistake as a defence often a crucial question will be whether the plaintiff contributed in any way to the misunderstanding. In Tamplin v James the mistake was purely the defendants fault and so specific performance was granted.  This was adopted in O’Neill v Ryan in this jurisdiction.

In Stewart v Kennedy it was stated that while a court may refuse specific performance in cases of mistake not caused or contributed to by the plaintiff it has acted in this manner because it would be unreasonable to compel the defendant to carry out his obligation.

Hardship

A Court may refuse to order specific performance where to do so would inflict unnecessary hardship on the defendant even where the plaintiff is not responsible for this.  This was seen in Lavan v Walsh.

While most cases require the hardship to have existed at the time of the contract, in exceptional cases, supervening hardship may be relied upon, as was seen ion Patel v Ali.

Impossibility and Frustration

A Court will not make an order of specifc performance compelling a party to a contract to perfrom his obligation where it will not be possible for him to comply with the order which the court proposes to make.

National Carriers Ltd v Panalpina (Northern) Ltd [ “Frustration of a contract takes place when there supervenes an event (without default of either party and for which the contract makes no sufficient provision) which so significantly changes the nature (not merely the expense or onerousness) of the outstanding contractual rights and/or obligations from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances; in such case the law declares both parties to be discharged from further performance