Suit for Specific Performance of Contract
A suit for specific performance of contract often relates to the buying and selling of real estate.3 min read
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.
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.
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