Picture this. You’ve just signed a commercial contract that will partner your business with a new supplier, helping you to scale your offering, meet your forecasted targets and even potentially meet your stretch targets. There’s a lot riding on the contract but you’ve done your due diligence and you’ve had your commercial solicitor review the agreement with a fine-tooth comb to ensure that everything is as it should be.
But what if your supplier is delayed? What if they don’t meet their first deadline? Or their second? This is where a specific performance order could come into play.
In this article we explain what is meant by specific performance, how it could apply to your circumstances, and how, even despite the other party not meeting their part of the contract, you may still be able to move things forward.
- What is specific performance?
- What factors are considered when deciding on a specific performance order?
- Are you still entitled to damages if you obtain an order for specific performance?
- Are there circumstances where specific performance is not available as a remedy?
- Examples of when the court has ordered specific performance
- Is applying for an order for specific performance right for my situation?
What is specific performance?
Specific performance is a type of remedy in contract law which is discretionary in nature – in other words, it’s up to the court to use their discretion as to whether making an order for specific performance is appropriate in the circumstances. The idea behind it is that any order in this regard is meant to compel a party to perform their positive contractual obligations, i.e. to make them do what they promised they would do in the first place.
It’s worth highlighting that you don’t necessarily need to wait until there has been an actual breach of contract before investigating this possible remedy, and there is some case law which supports that point – this will be discussed in more detail below.
What factors are considered when deciding on a specific performance order?
As mentioned above, the court enjoys a broad discretion as to whether to award an order for specific performance. In exercising this discretion, it takes into account factors such as:
- Whether performance could be possible.
- If there has been any delay in seeking the order.
- Whether you are prepared to perform your side of the contract, if you’re the one making the claim (i.e. you are the claimant).
- Whether the person against whom the order is sought (the defendant) would suffer hardship in performing.
- Whether the defendant has suffered hardship since entering into the contract, whether or not that hardship was caused by you as 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 (a balancing exercise).
- Whether any third-party rights would be affected.
- Whether the contract lacks adequate consideration.
Are you still entitled to damages if you obtain an order for specific performance?
Damages are still available as a remedy in addition to an order for specific performance if the court considers it appropriate. However, in cases where damages would be an adequate standalone remedy, the court will not make an order for specific performance. In order to establish that damages aren’t adequate, you would usually have to show that either:
- The subject matter of the contract in question is unique, that there is no market substitute, or
- That damages would be financially ineffective (however, even if damages may not provide complete compensation for this reason, the court might still consider damages to be an adequate remedy).
Are there circumstances where specific performance is not available as a remedy?
Broadly speaking, specific performance will not be ordered if the contract requires continuous duties that might require constant supervision by the court over a period of time, or if the obligations in the contract are not sufficiently precise. 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.
Examples of when the court has ordered specific performance
In 2015, the High Court issued a decision which may be supportive to businesses seeking to enforce compliance with contractual obligations before there has been an actual breach of contract.
In this case (Airport Industrial GP Ltd & another v Heathrow Airport Ltd & another  EWHC 3753 (Ch)), the court made an order for specific performance of a contractual obligation to carry out building works in relation to leasehold property.
Interestingly, this appears to be the first authority that suggests that the court may, before the time for performance of a contractual obligation, order specific performance requiring the defendant in a case to take steps to achieve the prescribed result.
In the Airport Industrial case, the leaseholder of the site in question was obliged to build a car park, providing 280 car parking spaces for use by the claimants and the tenant of the site. However, as time passed by, the leaseholder had not started the work and it became increasingly 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 with immediate effect.
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 (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.
Is applying for an order for specific performance right for my situation?
We understand that contractual remedies can be a technically complex minefield, which is why we have a highly skilled team of business dispute lawyers on hand to help with providing you with the right advice and support if you need further guidance. Don’t hesitate to reach out and benefit from our expertise today.