There are many different types of orders you can ask a Court for. The most common in business disputes is where one party asks for an order that the other pay them money (damages or debt claims). Sometimes you might ask the Court to declare that a particular interpretation of a Contract is correct (a declaration). Other times you might ask the Court to restrain someone from doing something (an injunction).
Specific performance is where you ask a Court to force someone to complete a particular agreement in a particular way. For example, if you got into a contract to buy some land, and the seller tried to pull out without a lawful excuse, you might consider asking the Court for “specific performance” – forcing them to go through with the sale by attending completion and signing the necessary transfers.
What do you Need to Prove?
In Australia, specific performance orders aren't available just by choice – you have to meet certain criteria to be able to ask the Court for that kind of order. You will almost always need to show these things:
A Binding Contract
You can't compel someone to fulfil their obligations under a contract if that contract doesn't exist. It's not always 100% clear whether a binding contract is in place. While a formal document signed by both parties is generally fine, not all contracts are signed, and many aren't even in writing at all. So the starting point is that you must demonstrate the existence of a binding contract.
Actual or Anticipated Breach
The Court won't start making orders just because you have a nebulous concern that the other party might not turn up on settlement day. There either needs to be:
- An actual breach – they have already failed to perform the obligation in question; or
- An anticipatory breach – they have clearly indicated that they do not intend to perform the obligation in question.
That Damages are Insufficient
This requirement is where many specific performance claims fall apart – because it's quite difficult to meet. More often than not, getting a pile of money is sufficient to compensate you for any loss you might suffer as a result of a breach. This is why “damages” or “debt” claims are the most common in commercial litigation – it's the simplest remedy and it's easy to measure.
If you ordered 100 cubic metres of concrete from someone and they failed to turn up, you could probably just go and get it from someone else. That might cost you more money, and they might have to pay the difference if you sued them, but you wouldn't likely convince the Court to force them to turn up with the concrete.
So when are damages insufficient? The most common argument is that the transaction has some unique quality or element that cannot be replicated, and cannot be compensated. Take a piece of land as an example – each block of land is different from all others. They have different views, aspects, sizes, frontages and characteristics. While there are similarities, no single piece of land is exactly the same as another. Land is, therefore, sometimes considered unique enough to mean that damages would not compensate you for a failed purchase.
Another example might be artwork or fine arts – each is unique and money will never properly give you compensation for not owning the relevant thing.
The Obligations are Clear
Finally, it needs to be obvious what the other party is supposed to do. If it isn't, then it makes it quite hard for the Court to give an order for compliance. So even if you get over the “we have a contract” hurdle, if your contract isn't in writing and there is doubt about its terms, you might struggle to come up with a clear articulation of precisely what the other party should be made to do.
Could it Happen to you in Normal Day-to-Day Business?
Truthfully, specific performance orders aren't that common. However, they do happen. If you are dealing with land, unique items, or things that cannot be easily replicated then it's worth being aware of these principles in case a transaction goes awry. If you are dealing with things that are fairly readily replaceable, then opportunities for specific performance might not need to be at the top of your concerns.
A Final Warning
It's common to “pull the trigger” immediately when another party breaches a contract, and simply terminate. If there is any chance you might prefer to seek a specific performance order, then terminating is a bad plan. After all – how can you compel a party to comply with a contract after it's been terminated? Answer: you can't. At the very least, get solid legal advice about your options before terminating a contract – which is generally a good idea anyway.