Specific Performance: Obtaining this Equitable Remedy in Singapore
What is Specific Performance?
Specific performance is a court order requiring a party in breach (or threatening to be in breach) of a binding contract to perform their obligations under the contract. It is a special remedy that is awarded by the court when no other remedy (such as damages) will adequately compensate the other party.
Specific performance is an equitable remedy, which means that it is awarded at the discretion of the court. Parties are not automatically entitled to it.
Specific performance vs injunction
An injunction is a court order to restrain a party from doing a specific act.
Although a party can potentially seek both remedies in the same case, an injunction will not be granted if it would have the same effect as granting specific performance and specific performance would not be a suitable remedy for that case. This is because, depending on the situation, an order for specific performance can have the same effect as an order for an injunction.
An example of this is Page One Records, Ltd v Britton which involved a contract to exclusively hire the plaintiff record company as the defendant band’s manager. But after the relationship between the company and the band soured, the band tried to get a replacement manager. The company then applied for an injunction to prevent the band from hiring a new manager.
The court denied the injunction as it had the same effect as granting an order of specific performance to require the band to continue hiring the company as their manager when the band had lost confidence in it (see the section on contracts for personal service below for more information).
When is Specific Performance Awarded?
The most common reason courts grant specific performance is because the subject of the contract is unique and damages cannot adequately compensate for it.
Therefore, specific performance is most commonly granted in situations concerning the sale of land (such as property), as land is considered unique.
For example, each property has its own unique address, location and views. Even if the seller of a property is more than happy to compensate the buyer for the property’s purchase price in order to call off the deal, the buyer cannot simply use this amount of money to buy a different property with the exact same address, location and/or views.
The buyer would therefore have a high chance (although this is not guaranteed) of getting an order of specific performance to compel the seller to continue with the property sale.
Obtaining specific performance in contracts for the provision of goods and services
There are express statutory provisions that allow the court to exercise its discretion to grant specific performance for contracts for the provision of goods and services.
For example, section 52(1) of the Sale of Goods Act provides for specific performance as a remedy for a breach of contract to deliver “specific” or “ascertained” goods. According to the Sale of Goods Act, “specific goods” are goods that have been identified and agreed on at the time a contract of sale is made.
The court has also clarified that the goods in question must also be in existence at the time of the contract for specific performance to be available, even if those goods are not yet within the seller’s ownership.
In addition, for cases of suppliers of goods or services who have engaged in unfair practices, the court is also empowered by section 7(4) of the Consumer Protection Fair Trading Act to grant specific performance against these suppliers if the court views specific performance as an appropriate remedy for the consumer.
When will Specific Performance be Unlikely to be Awarded?
1. When damages are adequate to compensate the non-breaching party
A court is unlikely to award specific performance where damages would be sufficient to compensate the non-breaching party. Damages are an award of money to compensate the innocent party. Its purpose is to place the non-breaching party in the position they would have been in had the contract been performed.
Whether the damages are sufficient depends on the specific details of the case. However, where there are provisions in the contract for liquidated damages (pre-determined compensation amounts in the event of a breach), this may constitute evidence that the parties regarded damages as adequate and if so, the court is unlikely to grant specific performance.
It is important to note that a claim relating to under-compensation alone may not be sufficient grounds for an order of specific performance.
In the case of Lee Chee Wei v Tan Hor Peow Victor, the claimant wanted specific performance to enforce a sale of his shares in a company at the agreed price due to the subsequent fall in the value of his shares. The courts rejected this as a reason to grant specific performance as the amount of damages he received could be adjusted to take this into account.
2. Severe hardship for the party who has to perform the contract
The court will also not order specific performance where it would result in severe hardship to the person who has to perform the contract. This applies even in property sales cases.
In the case of EC Investment, specific performance was not granted to order the seller to sell the property to the buyer at the agreed contract price. Such an order was found to be unjust as the sale would be at an undervalue, which would cause undue financial hardship to not only the seller but also to a third-party involved (the second mortgagee of the property).
3. Where constant supervision would be required by the courts
Specific performance is generally not granted in contracts where subsequent supervision from the courts is required to ensure that the contract is performed satisfactorily by the party being compelled to perform the contract.
For instance, the court could compel a store owner to continue operating his store, but they cannot enforce the manner in which he conducts business e.g. whether he keeps it stocked or provides competent staff to ensure it is run up to standard.
4. Contracts for personal service
Specific performance is generally not granted in contracts involving personal service. These contracts, such as employment contracts, involve the maintenance of a relationship of trust between the contracting parties, which is difficult to do if one party is unwilling to.
However, the Singapore court has not ruled out specific performance entirely for service contracts, notably in the case of appointment contracts. The Court of Appeal has stated that “[w]here a person has a right by contract to appoint a director, such a right may be enforced by an order of specific performance.”
5. Invalid contract
If one party was induced to enter into a contract by mistake, misrepresentation, undue influence or the like, specific performance cannot be upheld as the contract will have no legal effect. Specific performance will also not be granted where performing the contract involves carrying out an illegal activity.
Non-Compliance with an Order of Specific Performance
Failure to comply with a court’s order for specific performance is a serious offence. A defendant who fails to comply with a specific performance order can be found guilty of contempt of court and can be either fined up to $100,000 and/or jailed for up to 3 years.
In most cases, an award of damages will be sufficient to compensate the party seeking specific performance. Specific performance is not readily granted by the court and is usually reserved for exceptional cases.
If you are the aggrieved party in a contractual dispute, you should consult a lawyer for specific advice on what might be the most ideal remedy (or remedies) in your case.
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