When running a business, contracts become an integral part of your daily work. However, parties to a contract may sometimes fail to hold up their end of the contract, leading to disputes and leading to disputes and potential financial losses or operational disruptions for the affected party.
When contractual disputes arise, one potential legal remedy available to the non-breaching party is specific performance. This remedy requires the breaching party to fulfill their contractual obligations exactly as outlined in the contract, rather than paying monetary damages. For specific performance to be applicable, the following requirements must be fulfilled.
1. The contract terms must be fair for both parties
The court considers whether the contract terms are equitable and not overly burdensome to either party. The agreement must have been negotiated in good faith, with both parties having relatively equal bargaining power and receiving fair consideration. If the contract terms are unconscionable or heavily favor one party at the expense of the other, courts will be reluctant to grant specific performance.
2. Monetary damages are insufficient
For specific performance to be granted, the non-breaching party must demonstrate that monetary compensation would not adequately remedy their loss. This typically occurs with unique goods or property that cannot be easily replaced in the market. For example, the sale of a particular piece of real estate, rare artwork or custom-manufactured equipment may warrant specific performance because no amount of money could secure an identical substitute.
3. The terms must be sufficiently definite and precise
The ordered performance must be sufficiently definite and precise for a court to enforce without requiring continuous supervision. The contract terms need to be clear and specific enough that the court can determine exactly what performance is required and verify when it has been completed. If the contract terms are too vague or would require constant court monitoring to better ensure compliance (such as long-term service contracts or complex ongoing obligations), courts will typically decline to order specific performance.
Legal guidance is important to help understand the applicability of specific performance as a remedy and to assess whether your contractual dispute meets these essential requirements for seeking this form of relief.