Key Takeaways

  • Specific performance in real estate is a court-ordered remedy that forces the breaching party to fulfill contract obligations, typically when monetary compensation is inadequate.
  • It is most often used in real estate due to the unique and irreplaceable nature of properties.
  • Courts exercise discretion when granting specific performance and consider contract clarity, intent, timing, and whether monetary damages are insufficient.
  • Buyers or sellers may file such suits, depending on which party breaches.
  • States vary on enforceability and requirements; some require precise performance clauses or clear intent to make time of the essence.

A suit for specific performance of contract often relates to the buying and selling of real estate. If a property buyer gets cold feet and doesn't want to go through with a deal, then the seller is entitled to file a lawsuit to oblige the buyer to carry through with the terms and conditions of the contract they signed. It is important to note that this is not permissible in all states. In Pennsylvania, for example, state laws pertaining to real estate vary greatly.

An Equitable Remedy at the Court's Discretion

One of the possible solutions in this situation is a specific performance of contract suit. This is also referred to as an equitable remedy. It allows the court to use its judgment as to whether the nonperforming party can be ordered to carry out the obligations laid out in the breached contract. In the case of real estate, this means the court can compel a buyer with cold feet to go through with the deal.

Specific performance is a solution that equity courts can implement. It means making sure two parties keep the promises they've made to each other. As a discretionary form of relief, it also means a party can only claim this remedy by persuading the court that it's the only possible option.

Legal Requirements and Challenges of Seeking Specific Performance

Courts do not grant specific performance in real estate cases automatically. To succeed in such a claim, the party seeking relief must prove several elements:

  • A valid, enforceable contract exists, clearly identifying the property and outlining the essential terms.
  • The non-breaching party has fulfilled or is willing to fulfill their obligations under the agreement.
  • The breaching party has refused without legal justification to close or perform as required.
  • Monetary damages would be inadequate, often because real estate is considered unique and irreplaceable.

However, specific performance is not guaranteed. Courts may deny the request if:

  • The contract terms are vague or ambiguous.
  • There is evidence of bad faith, fraud, or coercion.
  • The requesting party delayed too long in filing, making performance impractical.

Real estate contracts often contain "time is of the essence" clauses, which can significantly influence court decisions. If this clause is included, failing to perform by the deadline may be treated as a breach that voids the contract, affecting eligibility for specific performance​​.

Circumstances in Which Specific Performance of Contract Can Be Used

Section 12 of the Specific Relief Act of 1877 lays down clear boundaries as to when someone can make a claim on the performance of a contract. This is a right implemented at the court's discretion. The court will always assume that a breach of contract related to immovable property cannot be compensated for in monetary terms. This assumption can be rebutted in court, however, and each case will be debated on its own merits.

In such cases, the court will look not at the letter of the law but at the substance of the agreement being considered. Where specific time frames were mentioned in a contract, for example, the court will need to determine several factors, including:

  • Whether the people involved intend to complete the transaction in a time frame that would be considered reasonable.
  • Whether the fact that time is of the essence was expressed clearly.
  • Whether the suit for specific performance was filed within a reasonable time.

The definition of “reasonable time” varies and depends on each situation and the facts surrounding each case.

If parties wish to remove the option of a suit for specific performance of contract, they can do so by stating it explicitly in the contract. In cases like this, the court will settle the liquidated damages as specified in the contract.

Suits for specific performance of contract are uncommon and seen as extraordinary remedies. One example of an extreme case is someone being obliged to sell their house when they don't want to. However, courts do admit that in cases in which one person intended to sell or buy a property, a breach of contract cannot always be compensated for in monetary terms. This is because each piece of real estate is unique, with its own set of benefits. Therefore, it is difficult to determine the exact amount of money lost by the party that did not breach the contract.

If a non-breaching party decides to pursue specific performance as a remedy, they are unlikely to be able to also seek monetary compensation. The laws between various states differ on this, but a choice must generally be made between these two possible remedies.

In cases in which the property seller is able but unwilling to fulfill the contract's terms, the buyer can file a lawsuit on the grounds of specific performance. The courts might be sympathetic to the buyer's cause because every piece of land is unique, and financial compensation would, therefore, not be adequate. The seller will then be ordered to adhere to the initial contract and sell the land to the buyer.

Specific Performance in Real Estate Transactions: Common Scenarios

Specific performance is most commonly pursued in real estate when:

  • A buyer backs out after signing a purchase agreement, and the seller seeks to compel the sale.
  • A seller refuses to close after accepting an offer, prompting the buyer to enforce the contract.
  • There are disputes over contingencies or delays, and one party insists on following through per the original terms.

Courts are typically sympathetic to buyers seeking specific performance because real property is unique. A seller cannot simply offer another property as a substitute. However, sellers may also use specific performance when a buyer fails to pay after accepting the terms and contingencies have been cleared​.

State-Specific Variations in Real Estate Enforcement

The availability and success of specific performance claims depend heavily on state law. For example:

  • In California, real estate contracts are presumed to be specifically enforceable due to the unique nature of land. However, the court will examine whether the seller was ready, willing, and able to perform.
  • In Pennsylvania, as noted, enforcement varies and may depend on local precedent and the contract's specific terms.
  • In New York, contracts must be "sufficiently definite," and the moving party must demonstrate they fulfilled all conditions precedent to enforcement.

Because laws vary by jurisdiction, it's crucial for parties entering into real estate contracts to understand the enforceability of specific performance and seek legal guidance accordingly​​.

Frequently Asked Questions

  • What is specific performance in real estate?
    It’s a legal remedy where a court orders a party to fulfill their obligations under a real estate contract, usually because monetary compensation is inadequate.
  • Can both buyers and sellers seek specific performance?
    Yes. Buyers can sue sellers who refuse to close, and sellers can sue buyers who back out without justification.
  • What makes a property unique enough for specific performance?
    Real estate is considered inherently unique due to location, features, and market conditions, making it hard to replace with monetary compensation.
  • Is specific performance available in all states?
    Not always. State laws vary in terms of enforceability, requirements, and judicial discretion.
  • Can I get both damages and specific performance?
    Usually, courts require plaintiffs to choose one. Specific performance is equitable relief, whereas damages are legal remedies, and they are rarely granted together.

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