Specific Performance

Specific Performance

Terms:


Specific Performance:
A court ordered remedy that requires the breaching party to actually perform on the contract.


Specific performance is an equitable remedy where the court orders the breaching party to actually perform on the contract.

Typically, specific performance will be awarded when damages are not an adequate remedy, as in cases where the subject matter of the contract is unique or where damages cannot be measured with reasonable certainty.

In contracts for the sale of goods, the test for determining a buyer’s right to specific performance, according to the U.C.C., is whether or not the goods that are being contracted for are unique. See U.C.C. 2-716 (1).

Therefore, if the buyer buys a unique item from the seller and the seller breaches, specific performance will be awarded and the seller will have to produce the item that the buyer had bought. For example:

Tucker is a car buff and he designs a custom made car that he commissions General Motors to build for him. G.M. breaches. In this case, because the item is unique, the court will award Tucker specific performance and order G.M. to deliver the car to Tucker.

In the event that the buyer breaches, specific performance is awarded in the form of lost profits that the seller would have made from full performance by the buyer. For example:

Tucker is a car buff and he designs a custom made car that he commissions General Motors to build for him. G.M. builds the car but Tucker refuses to accept and pay for it. In this instance, because the item was designed and built specifically for Tucker, specific performance will be ordered and G.M. will be able to recover the profits it lost because of Tucker’s breach.

Please note that where an item is unique, the buyer who breaches the contract will be liable for lost profits even if the seller sells the item to someone else. With ordinary goods, if the seller covers and sells to someone else, the amount that the seller earns from covering will be deducted from the damages that the buyer in breach owes.

So, for example, if Tucker orders a standard General Motors car that G.M. mass produces and then breaches, whatever profit G.M earns by selling the car to someone else will be subtracted from the amount of damages Tucker has to pay G.M. If the item is unique, the buyer in breach will have to pay the full measure of lost profits, even if the seller covers. The rationale here is that, if the item is unique and more that one person wants   it, the seller could have sold more that one of the item and the buyer in breach still cost the seller the profits from the original sale. For example:

Tucker is a car buff and he designs a custom made car that he commissions General Motors to build for him. G.M. builds the car but Tucker refuses to accept and pay for it. While the car is in the showroom waiting for Tucker to pick it up, Henry sees it and decides he would like to buy it. After Tucker breaches the contract, G.M. sells the car to Henry. In this case, even though G.M. sold the car and recovered the profits from the car, Tucker will have to pay for G.M.’s lost profits anyway because G.M. could have sold a second car to Henry. The understanding is that Henry would have ordered his own car had Tucker accepted his car. Therefore, Tucker’s breach cost G.M. the sale of a second unique car and so he will have to pay G.M. the full measure of their lost profits.

As far as contracts for the sale of real property are concerned, a buyer of real estate is entitled to specific performance which would require the seller in breach to deliver the title deed on the land to the buyer, thereby giving the buyer ownership of the property. Specific performance is applicable to contracts for the sale of real estate because real estate is considered unique. In the event that the buyer breaches, the seller can get specific performance where the court will order the buyer to take title to the land and pay the contract price.

As far as employment contracts are concerned, typically, specific performance is not available as a remedy because courts will not force somebody to perform a service against their will. However, what the court will do is place an injunction on the breaching party that prohibits him from providing his services to anybody else for as long as the contract with the original injured party would have lasted. For example:

The Metro Opera House enters into a contract with Andre, under which Andre will perform a concert on December 31, 2003, and Metro will pay Andre $25,000. On December 20th, Andre signs a contract with the Grand Old Opera House, under which, Andre will perform a concert on December 31, 2003, and the Grand Old Opera House will pay Andre $35,000. After signing the contract, Andre informs Metro that he will not perform for them on December 31st. In a suit against Andre by Metro, the court will not force Andre to perform for Metro. However, what the court can, and probably will, do is prohibit Andre from performing anywhere else on December 31, 2003.