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- Topic9 - Specific Performance
Topic9 - Specific Performance
- By Student at Law
- Published 20/05/2007
- LPAB 2006-07
- Unrated
Specific performance and injuctions are remedies for the enforcement of contractual obligations in equity, if damages is inadequate the court will order specific performance - ‘jurisdiction to order specific performance’.
* Specific performance is ‘in specie’ distinguishing it from damages which is awarded in substitution for actual performance.
* These equitable remedies can be ordered even though a breach of contract has not yet occurred: Urban Traders Pty Ltd v Proceris Pty Ltd [2005]
Nature of specific performance
Specific Performance is ‘in personam’ in nature meaning that it is carried out against the person - Richard West & Partners (Inverness) Ltd v Dick [1969]; as opposed to damages which are ‘in rem’ which are enforced on the property when it comes to carrying out and performing.
* Specific Performance is carried out in two distinct senses:
1. Specific performance in the proper sense: meaning that it is an executory rather than executed contract (contract enetered into requires something further to be done for the transaction to be completed –i.e. for the sale and purchase of land – simply enetering the contract does not make you an owner of the land).
JC Williamson Ltd v Lukey & Mulholland (1931); Dixon J explains it is a remedy to compel the execution in specie of a contract which requires some definite thing to be done before transaction is complete and rights settled.
2. Relief analogous to specific performance: It is pre-supposive that the contract is executed - an order in that sense is to compel the defendant to carry out obligations in those terms: Burns Philp Trust Co Ltd v Kwikasair Freightlines Ltd [1963].
Jurisdictional factors precluding an order for specific performance
* Binding contract not for valuable consideration: A court has no jurisdiction to grant specific performance of a promise not supported by consideration, even if the parties executed a deed (only deeds with consideration can be enforceable by specific performance), due to the maxim EQUITY WILL NOT ASSIST A VOLUNTEER: Ellenborough, Towry Law v Burne [1903]
- Consideration cannot be nominal which is determined by circumstances in each case, needs to be considerable consideration otherwise court considers to be a volunteer: Colman v Sarrel (1789).
* Inadequacy of damages at Common Law: If a plaintiff can be adequately compensated by an award of damages then in common law, the court has no jurisdiction to order specific performance - Beswick v Beswick [1968].
1. Contracts for the sale of personalty: In most, but not all, cases common law damages will be an adequate remedy for contracts for the sale of personalty with the result that courts do not have jurisdiction to order specific performance of such contracts (i.e. you get what was promised in contract).
Fells v Reed (1796) - found damages to be inadequate if, there is something unique about it (unique painting etc.), if it is harder to assess the value, or if the defendant is broke - court can’t get money out of him.
2. Land Contracts: Contracts involving land have almost invariably been seen as ones where damages at common law are inadequate - court sees land as unique and therefore damages are not good enough:
Pianta v National Finance & Trustees Australasia v Bonner [1970]; Dickson J looks at in in the vendors perspective in Dougan v Ley “When a vendor sells land he wants more than a sum of money, he also divests himself of a legal interest in the land and the obligations associated with it therefore damages inadequate remedy”.
3. Contracts to pay and lend money: Generally is adequately compensated by damages (e.g. A pays B $100), though in a case where the obligation is for A to pay C $100, damages under common
law is inadequate because damages would usually be nominal, therefore justice will not be met: Beswick v Beswick.
Discretionary factors for refusing an order of specific performance
* Personal service contracts: Equity will not enforce a contract if to do so would result in compelling the defendant to maintain a personal relationship with the plaintiff - it is undesireable to maintain people in relationships against their will. This does not mean that the court will not enforce a contract that states to enter into a personal services contract: Giles v Morris [1972].
An odd case that enforces a personal contract is: Turner v Australasian Coal and Shale Employees Federation (1984).
* Constant Court Supervision: Court will refuse specific performance for contracts that are not clearly defined and laid out due to the need for constant court supervision: JC Williamson v Lukey & Mulholland;
In Cooperative Insurance Society v Argyll Stores (Holdings) Ltd, Hotham L said, ‘in constant court supervision cases…one can put the cases into two categories…
1. is when the obligation is of an on-going type (i.e. a lease of a shop)
2. when the obligation is a performance of a once-off act.
This does not conflict with contracts void for uncertainty because this degree of uncertainty is much higher: Tito v Waddell (No 2) [1977]
* Hardship: An order for specific performance would be refused if such an order would result in genuine hardship (mere hardship is not enough) upon the defendant - court must look at the unconscionable hardship to the plaintiff; unconscionable hardship to the defendant must be over and above unconscionable hardship of the plaintiff if specific performance is refused: Dowsett v Reid (1912). Hardship falls to be answered as at the time when the order would be granted, not at the time of the contract.
Hardship can also be awarded to a third party - Patel v Ali [1984] – in this case, apart from the hardship to Mrs. Ali there was hardship in these circumstances to her children – a third party - third parties must have some relationship with the party seeking a defence by the third party rule.
In terms of a contract hardship cannot be claimed where consideration is inadequate: Falcke v Gray (1859).
* Laches: Delay by the plaintiff in commencing or prosecuting an application for specific performance will lead the court to deny the application - this delay must cause prejudicial outcomes for the defendant which would not hav been present had the proceedings been bought punctually.
Lindsay Petroleum Co v Hurd (1874) outlines; ‘the clock starts to run from the time the plaintiff knows the facts which base his claim for equitable relied – i.e. the time the breach of the contract occurred.
Lamshed v Lamshed (1963) - leading case on delay- if action is not brought promptly, defendant is left in state of uncertainty- prejudice to the defendant.
* Vitiating factors: Equitable relief will be refused if the contract is affected by vitiating factors due to the defendant’s conduct or actions - contracts induced by defendant’s misrepresentation, unconscionable behaviour, undue influence etc. will not be enforced in equity.
Contracts that are unconscionable or unjust within the terms of statutory regime, such as the Contracts Review Act or Trade Practices Act, will also not be specifically enforced.
* Lack of Mutality: For a plaintiff to be able to succeed in specific performance the remedy must be mutually available ( if as a principle within the contract – only one party could get specific performance as a remedy, then it would be unavailable completely - it must be available for both for it to be available as a remedy.
Mutality must be present at the time of the hearing: Price v Strange [1978].
However, if specific performance is unavailable to ‘B’ due to or attributable to his/her own conduct then specific performance may be granted to ‘A’.
* Plaintiff in Substantial Breach and/or Not Ready, Willing & Able to Perform: Plaintiff must be in a position ready, willing and able to complete a contract in order to be able to be granted specific performance - if plaintiff’s breach formed the basis for a valid termination by the defendant, equitable relief will not be given: Mehmet v Benson (1965).
The effect of an order for specific performance
If equitable relief is actually ordered but compliance with it becomes impossible the court can award equitable damages.
* First, get the court that granted specific performance to formally vacate it (set it aside) - you cannot sue for damages immediately, you must relieve the defendant first of the order and then wait till he is not bound by the order: Johnson v Agnew [1980].
* Specific performance is ‘in specie’ distinguishing it from damages which is awarded in substitution for actual performance.
* These equitable remedies can be ordered even though a breach of contract has not yet occurred: Urban Traders Pty Ltd v Proceris Pty Ltd [2005]
Nature of specific performance
Specific Performance is ‘in personam’ in nature meaning that it is carried out against the person - Richard West & Partners (Inverness) Ltd v Dick [1969]; as opposed to damages which are ‘in rem’ which are enforced on the property when it comes to carrying out and performing.
* Specific Performance is carried out in two distinct senses:
1. Specific performance in the proper sense: meaning that it is an executory rather than executed contract (contract enetered into requires something further to be done for the transaction to be completed –i.e. for the sale and purchase of land – simply enetering the contract does not make you an owner of the land).
JC Williamson Ltd v Lukey & Mulholland (1931); Dixon J explains it is a remedy to compel the execution in specie of a contract which requires some definite thing to be done before transaction is complete and rights settled.
2. Relief analogous to specific performance: It is pre-supposive that the contract is executed - an order in that sense is to compel the defendant to carry out obligations in those terms: Burns Philp Trust Co Ltd v Kwikasair Freightlines Ltd [1963].
- Specific performance, unlike damages, is not available ‘as of right’. It can be refused on either jurisdictional grounds: Court has no jurisdiction to hear the case under s 68 of Supreme Court Act - where if the court of equity refuses specific performance, then the court of equity can substitute the order for an order of damages rather than having to start all over again to persue the remedy or damages, eliminating the need for 2 different proceedings - court doesn’t have the power to award damages in lieu of specific perf you MUST start all over again;
Jurisdictional factors precluding an order for specific performance
* Binding contract not for valuable consideration: A court has no jurisdiction to grant specific performance of a promise not supported by consideration, even if the parties executed a deed (only deeds with consideration can be enforceable by specific performance), due to the maxim EQUITY WILL NOT ASSIST A VOLUNTEER: Ellenborough, Towry Law v Burne [1903]
- Consideration cannot be nominal which is determined by circumstances in each case, needs to be considerable consideration otherwise court considers to be a volunteer: Colman v Sarrel (1789).
* Inadequacy of damages at Common Law: If a plaintiff can be adequately compensated by an award of damages then in common law, the court has no jurisdiction to order specific performance - Beswick v Beswick [1968].
1. Contracts for the sale of personalty: In most, but not all, cases common law damages will be an adequate remedy for contracts for the sale of personalty with the result that courts do not have jurisdiction to order specific performance of such contracts (i.e. you get what was promised in contract).
Fells v Reed (1796) - found damages to be inadequate if, there is something unique about it (unique painting etc.), if it is harder to assess the value, or if the defendant is broke - court can’t get money out of him.
2. Land Contracts: Contracts involving land have almost invariably been seen as ones where damages at common law are inadequate - court sees land as unique and therefore damages are not good enough:
Pianta v National Finance & Trustees Australasia v Bonner [1970]; Dickson J looks at in in the vendors perspective in Dougan v Ley “When a vendor sells land he wants more than a sum of money, he also divests himself of a legal interest in the land and the obligations associated with it therefore damages inadequate remedy”.
3. Contracts to pay and lend money: Generally is adequately compensated by damages (e.g. A pays B $100), though in a case where the obligation is for A to pay C $100, damages under common
Discretionary factors for refusing an order of specific performance
* Personal service contracts: Equity will not enforce a contract if to do so would result in compelling the defendant to maintain a personal relationship with the plaintiff - it is undesireable to maintain people in relationships against their will. This does not mean that the court will not enforce a contract that states to enter into a personal services contract: Giles v Morris [1972].
An odd case that enforces a personal contract is: Turner v Australasian Coal and Shale Employees Federation (1984).
* Constant Court Supervision: Court will refuse specific performance for contracts that are not clearly defined and laid out due to the need for constant court supervision: JC Williamson v Lukey & Mulholland;
In Cooperative Insurance Society v Argyll Stores (Holdings) Ltd, Hotham L said, ‘in constant court supervision cases…one can put the cases into two categories…
1. is when the obligation is of an on-going type (i.e. a lease of a shop)
2. when the obligation is a performance of a once-off act.
This does not conflict with contracts void for uncertainty because this degree of uncertainty is much higher: Tito v Waddell (No 2) [1977]
* Hardship: An order for specific performance would be refused if such an order would result in genuine hardship (mere hardship is not enough) upon the defendant - court must look at the unconscionable hardship to the plaintiff; unconscionable hardship to the defendant must be over and above unconscionable hardship of the plaintiff if specific performance is refused: Dowsett v Reid (1912). Hardship falls to be answered as at the time when the order would be granted, not at the time of the contract.
Hardship can also be awarded to a third party - Patel v Ali [1984] – in this case, apart from the hardship to Mrs. Ali there was hardship in these circumstances to her children – a third party - third parties must have some relationship with the party seeking a defence by the third party rule.
In terms of a contract hardship cannot be claimed where consideration is inadequate: Falcke v Gray (1859).
* Laches: Delay by the plaintiff in commencing or prosecuting an application for specific performance will lead the court to deny the application - this delay must cause prejudicial outcomes for the defendant which would not hav been present had the proceedings been bought punctually.
Lindsay Petroleum Co v Hurd (1874) outlines; ‘the clock starts to run from the time the plaintiff knows the facts which base his claim for equitable relied – i.e. the time the breach of the contract occurred.
Lamshed v Lamshed (1963) - leading case on delay- if action is not brought promptly, defendant is left in state of uncertainty- prejudice to the defendant.
* Vitiating factors: Equitable relief will be refused if the contract is affected by vitiating factors due to the defendant’s conduct or actions - contracts induced by defendant’s misrepresentation, unconscionable behaviour, undue influence etc. will not be enforced in equity.
Contracts that are unconscionable or unjust within the terms of statutory regime, such as the Contracts Review Act or Trade Practices Act, will also not be specifically enforced.
* Lack of Mutality: For a plaintiff to be able to succeed in specific performance the remedy must be mutually available ( if as a principle within the contract – only one party could get specific performance as a remedy, then it would be unavailable completely - it must be available for both for it to be available as a remedy.
Mutality must be present at the time of the hearing: Price v Strange [1978].
However, if specific performance is unavailable to ‘B’ due to or attributable to his/her own conduct then specific performance may be granted to ‘A’.
* Plaintiff in Substantial Breach and/or Not Ready, Willing & Able to Perform: Plaintiff must be in a position ready, willing and able to complete a contract in order to be able to be granted specific performance - if plaintiff’s breach formed the basis for a valid termination by the defendant, equitable relief will not be given: Mehmet v Benson (1965).
The effect of an order for specific performance
If equitable relief is actually ordered but compliance with it becomes impossible the court can award equitable damages.
* First, get the court that granted specific performance to formally vacate it (set it aside) - you cannot sue for damages immediately, you must relieve the defendant first of the order and then wait till he is not bound by the order: Johnson v Agnew [1980].
