When one party breaches a contract, there are several remedies available to the non-breaching party. In many cases, monetary damages are adequate to compensate the innocent party for losses suffered from the breach. However, monetary damages are not sufficient in all situations. Specific performance is an equitable remedy ordered by the court where monetary compensation is deemed insufficient to compensate the injured party. Specific performance requires actual performance of the terms of the contract. In order to obtain specific performance of the contract, the non-breaching party must demonstrate that certain factors are present in the contract.
Prerequisites for Specific Performance
For a court to award specific performance, the following prerequisites must be met: (1) a valid contract exists; (2) the terms of the agreement are fair and certain; (3) the plaintiff did not engage in inequitable conduct; (4)there must be an absence of hardship to the defendant or the public outweighing the benefit to the plaintiff from performance of the contract; and (5) there is no remedy at law adequate to compensate the plaintiff. As to the last requirement, courts usually find that where the sale of real estate is involved there is no adequate remedy at law.
In How v. Fulkerson, 22 Ariz. 467, 528 P.2d 853 (App. 1974), the purchasers of a trailer park filed suit for specific performance of the contract for sale. The defendant seller rejected the plaintiff’s offer to buy the real property and made a counteroffer. The plaintiffs provided a postdated check to the agent and performed all of their obligations under the contract. The defendants rejected the check and did not perform their obligations pursuant to the sale. While the demand for specific performance was rejected in the trial court, the appellate court ruled that the plaintiffs satisfied the requirements for specific performance. Namely, a valid contract was formed notwithstanding the postdated check, and the terms of the contract were certain and fair. Moreover, because the subject matter of the contract was real property, no other remedy at law existed to adequately compensate the plaintiffs.
Specific Performance for Real Property
Specific performance is considered a remedy in certain contexts where monetary damages cannot compensate for the non-breaching party’s injury. For example: (1) contracts where the subject of the contract is so “unique” that the value of the subject cannot be quantified by a court or (2) contracts for the sale of real property. In sales of real property, a monetary remedy may be deemed inadequate given the unique nature of real estate.
Chernoff Law handles business and real estate litigation matters throughout Arizona. Contact us by calling 480-719-7307 to discuss your legal matter.