knowledge | 27 April 2020 |
COVID-19: The Doctrine of Specific Performance
Can a party seek specific performance of a contract that has run into difficulties as a result of COVID-19?
An order of specific performance requires a party to a contract to carry out its legal obligations under that contract. It is an equitable remedy which may be granted where damages would not be an adequate remedy for breach of contract.
The remedy is often associated with contracts for the sale of land. It is less likely to be granted for other types of property such as goods. An award of damages will usually suffice here as the goods can be purchased elsewhere. However, there may be circumstances where this is not true if the item in question is rare, unique or otherwise unavailable. Specific performance may be granted of contracts for particular services, including building contracts, provided certain criteria are satisfied.
It is a discretionary remedy and may be refused on a number of grounds such as:
- Where the plaintiff is guilty of inequitable conduct;
- Where the plaintiff is in breach of its obligations under the contract;
- Where the order would result in hardship for the defendant or a third party;
- Where the contract was induced by misrepresentation or mistake;
- Where a contract would require ongoing supervision by the court;
- Where specific performance would be unavailable to the defendant against the plaintiff. This is described as a “want of mutuality”.
In addition, the court will not grant specific performance where performance of the contract is impossible. However, if an event has simply made performance of the contract more onerous, the order may be granted if it is in fact still possible to perform the contract.
A party seeking specific performance must establish to the court that there is a valid and binding contract between the parties supported by consideration. In relation to a contract for the sale or other disposition of land there should be a memorandum or note of the relevant agreement in writing signed by the party against whom the action is brought or that person’s authorised agent. This is to comply with section 51(1) of the Land and Conveyancing Law Reform Act 2009, the current incarnation of a requirement previously contained in the Statute of Frauds. If such a note is not available, a plaintiff may seek to rely on the doctrine of part performance under section 51(2) of that Act. Also, a defendant will not be permitted to rely on the requirements of section 51(1), if to do so would allow the statute to be used as an instrument of fraud as that is what that provision is designed to prevent.
Case-law distinguishes specific performance of an agreement for the sale of land from the specific performance of a building agreement. In the leading case on enforcement of building contracts, Claystone v Larkin1 Laffoy J stated that as a general rule the courts would not endorse specific performance of a building contract. She recognised an exception to that rule, however, and outlined the three criteria a plaintiff is required to establish to bring itself within that exception. These are that:
- the building work for which specific performance is sought is defined by contract, to allow the court to see the exact nature of the work in question;
- the plaintiff has a substantial interest in having the contract performed, which is of such a nature that it could not be adequately compensated for breach of contract by damages; and
- the defendant is in possession of the land on which the work is contracted to be done.
How can we help?
The Disputes Group at McCann FitzGerald is ready and willing to assist clients in addressing all of their concerns at this difficult time, whether that arises in respect of regulatory and/or litigation issues business may face in responding to Covid-19. Alternatively, your usual contact in McCann FitzGerald will be pleased to provide further information.
-  IEHC 89.
This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.