Situations When Fraud Will Prevent an Award of Specific Performance

Specific performance is available as a remedy to enforce contracts for the sale of real estate because land is unique and monetary damages often are an inadequate remedy. However, to prevent fraud and overreaching, Arizona law requires the non-breaching party to show that they were able to perform their part of a contract before a decree of specific performance will be granted.

A buyer must actually show that he is ready, willing, and able to perform his end of the bargain under the contract. Nelson v. Cannon, 616 P.2d 56, 126 Ariz. 381 (App. 1980). However, the law does not require a buyer to complete a futile act, so if the seller indicates it is no longer willing to sell the property, the buyer does not actually have to tender payment.

However, even when a buyer is ready, willing and able to perform, an award of specific performance may be unavailable when a seller no longer has legal title to a property. In Canton v. Monaco Partnership, 156 Ariz. 468, 753 P.2d 158 (App. 1987), Monaco Partnership entered into a contract for the sale of a condominium, and offered the buyer excellent financing. Before closing, Monaco sold the property to a third party, and informed Canton the contract was no longer valid. Canton would have had to pay a higher purchase price and a much higher financing rate if he wished to buy the condo from the new owner.

The trail court awarded Canton the condo by a decree of specific performance, but the Arizona Court of Appeals reversed. The Court of Appeals refused to affirm specific performance against a seller in a land contract when the seller no longer had title to the land he contracted to convey. This was the case even when the want of title was due to the seller’s own action in conveying the title to a third party.

Specific performance will not be granted when that performance depends on the assent or actions of a third party that is not a party to the action. Also, in this particular case monetary damages could have adequately compensated Canton for his loss of advantageous financing, making specific performance inappropriate.

Chernoff Law handles business and real estate litigation matters, including disagreements arising out of the purchase or sale of real estate in Arizona. Contact us to discuss your case with an experienced real estate attorney.