Specific performance is an equitable remedy in which a court orders a defaulting party to fulfill a contractual agreement. This type of relief is sought when a party cannot be adequately compensated for monetary loss due to the complexity or uniqueness of the breached obligations. In simple terms, specific performance requires the breaching party to “do what they said they would do” in the contract.
When Is Specific Performance an Option?
Courts are typically unwilling to award specific performance as a remedy, but they may do so in certain circumstances. Generally, specific performance will be ordered when the contract involves unique items or services that cannot be reasonably replaced. For example, a court may order specific performance to enforce an agreement for the purchase or sale of a parcel of land if its location or even its quality makes it unique. It may also be available in contracts involving personal services such as professional contracts, employment agreements, or contracts of art. When the remedies of damages, restitution or cancellation are inadequate to fully restore the breaching party to their pre-contract status, then courts may choose to offer specific performance as an alternative remedy.
Example of Specific Performance at Work
One notable example of specific performance is the case of the Northern Trust Bank v. Protek International Corp. In this matter, Protek was in breach of a loan agreement by failing to repay $9.7 million to Northern Trust. Instead of awarding damages, the court ordered Protek to complete the terms of the loan. Protek was required to transfer two of its subsidiaries, their assets, and the rights of a license, back to Northern Trust until the loan was repaid.
The Bottom Line
Specific performance is an equitable remedy used when monetary damages cannot sufficiently compensate a party for loss due to breach of contract. This type of remedy can be requested by a non-defaulting party in cases involving unique items or services, such as real estate sales or employment contracts. In such cases, the court may order the breaching party to fulfill the obligations of the contract before any losses are recovered.