January 2016: A recent High Court decision may provide assistance to businesses seeking to enforce compliance with contractual obligations before there has been an actual breach of contract. In this case, the court made an order for specific performance of a contractual obligation to carry out building works in relation to leasehold property.

This appears to be the first authority that the court may, before the time for performance of a contractual obligation, order specific performance requiring the defendant to take steps to achieve the prescribed result.

In this case, the leaseholder of the site was obliged to build a car park, providing 280 car parking spaces for use by the claimants and the tenant of the site. However, the leaseholder had not started the work and it became obvious that there would not be sufficient time for the car park to be completed by the required date. Rather than wait until that date, the claimant wanted to seek a remedy against the leaseholder now.

Although the court could not order the leaseholder to provide the car park ahead of the required date, it did require them to take certain steps now (for example, applying for planning permission) to ensure that the car park could be completed as soon as possible. The defendant leaseholder was also, effectively, granted an additional two years to complete the building works.

What is specific performance?

Specific performance is a decree by the court to compel a party to perform his contractual obligations. It is a remedy available for breach of contract, although relief can be sought before any breach of contract has occurred.

When a party seeks specific performance of a contractual obligation, it does not need to specify reasons for exercising its contractual rights. Specific performance may be granted in addition to, or instead of, damages.

However, specific performance is not available where damages would be an adequate remedy. Therefore, specific performance is generally only available where the subject matter of the contract is unique and the injured party would be unable to obtain a substitute or replacement item.

As a general rule, specific performance will not be ordered if the performance would require constant supervision by the court over a period of time or if the obligations are not clearly defined. Courts will also, generally, not grant specific performance in relation to a contract for personal services (such as employment contracts) because such an order would restrict an individual’s freedom.

Exercise of discretion

The court has broad discretion to award specific performance. In exercising this discretion, it takes into account factors such as:

  • Whether performance could be possible.
  • Any delay in seeking the order.
  • Whether the claimant is prepared to perform his side of the contract.
  • Whether the person against whom the order is sought would suffer hardship in performing.
  • Whether the respondent has suffered hardship since entering into the contract, whether or not that hardship was caused by the claimant or is related to the subject matter of the contract.
  • The difference between the benefits the order would give to one party and the cost of performance to the other.
  • Whether any third party rights would be affected.
  • Whether the contract lacks adequate consideration.

The content of this Business Briefing is for information only and does not constitute legal advice. It states the law as at January 2016. We recommend that specific professional advice is obtained on any particular matter. We do not accept responsibility for any loss arising as a result of the use of the information contained in this briefing.