(10) Specific Performance

What is specific performance?

An equitable remedy in which the court issues a mandatory injunction ordering the defendant to perform the contract.

What interest does specific performance protect?

The plaintiff's expectancy under the contract.

When is specific performance most commonly available?

In contracts for the sale of land and contracts involving unique goods.

Why is specific performance commonly available for land sale contracts?

Because land is considered unique.

When is specific performance available for chattel sale contracts?

When the goods are unique or suitable replacement goods are unavailable.

Why is specific performance usually unavailable in ordinary contract cases?

Because damages provide an adequate remedy at law.

What mnemonic identifies the requirements for specific performance?

CHARLES ATLAS EARNS MUCH CASH DELIVERING ELEPHANTS.

What does the first "C" in the specific performance mnemonic represent?

A valid contract.

What three issues determine whether a valid contract exists for specific performance?

Definite and certain terms, adequate consideration, and compliance with the Statute of Frauds.

Why must contract terms be definite before specific performance is granted?

The court must know exactly what performance to order.

Must consideration be adequate before specific performance will be granted?

Yes.

How can partial performance affect the Statute of Frauds?

Partial performance may satisfy the Statute of Frauds.

What does the "A" in the mnemonic represent?

Adequacy of the legal remedy.

Why is land considered to have no adequate legal remedy?

Because every parcel of land is unique.

Why may unique chattels qualify for specific performance?

Because money damages cannot adequately replace them.

When does multiplicity of suits support specific performance?

When repeated lawsuits would otherwise be necessary.

How can a fiduciary relationship support specific performance?

Because damages may not adequately remedy the breach of trust.

Why do speculative damages favor specific performance?

Because damages cannot be calculated with reasonable certainty.

What does the first "E" in the mnemonic represent?

Enforceability of the decree.

What three jurisdictional bases may support enforcement of a specific performance decree?

In personam, quasi in rem, and in rem.

Why may a court deny specific performance based on hardship?

Because enforcement would impose an unreasonable hardship.

Can personal service contracts ordinarily be specifically enforced?

No.

Why are personal service contracts generally not specifically enforced?

Because courts will not supervise ongoing personal performance.

What does the "M" in the mnemonic represent?

Mutuality of remedy.

What was the traditional rule regarding mutuality of remedy?

Specific performance had to be available to both parties.

What is the modern rule regarding mutuality?

Mutuality of obligation or performance is sufficient.

What does the second "C" in the mnemonic represent?

Conditions.

Before obtaining specific performance, what must the plaintiff establish regarding conditions?

That all conditions precedent have been satisfied.

How does a "time is of the essence" clause affect specific performance?

Failure to comply bars specific performance unless the clause is waived.

What does the "D" in the mnemonic represent?

Defenses.

What equitable defense bars specific performance because of unreasonable delay?

Laches.

When does prejudice not have to be shown for laches?

When the delay equals the applicable statute of limitations.

What equitable defense bars relief because the plaintiff acted improperly?

Unclean hands.

How does a bona fide purchaser affect specific performance?

A BFP may defeat the remedy.

May the Statute of Frauds be asserted as a defense to specific performance?

Yes.

Can mistake serve as a defense to specific performance?

Yes.

Can misrepresentation serve as a defense to specific performance?

Yes, if it is material.

Why may unconscionable terms prevent specific performance?

Because equity will not enforce grossly unfair agreements.

Give an example of an unconscionable contract term.

Grossly inadequate consideration.

What does the final "E" in the mnemonic represent?

Equitable conversion.

To what contracts does equitable conversion apply?

Executory land sale contracts.

When does equitable conversion occur?

When the executory land sale contract is executed.

What equitable interest does the buyer receive under equitable conversion?

Equitable title.

What title does the seller retain under equitable conversion?

Legal title until closing.

What contract right does the seller retain after equitable conversion?

The right to receive the purchase price.

What phrase summarizes equitable conversion?

"Equity considers done what ought to be done."

What happens if the vendor dies before closing?

The vendor's devisee holds legal title in trust for the vendee, who may seek specific performance.

Who receives the purchase price if the vendor dies before closing?

The vendor's legatee.

Who must be joined in a specific performance action if the vendor dies?

The administrator and the heirs or devisees.

What happens if the vendee dies before closing?

The vendee's equitable interest passes to the vendee's devisee.

Who pays the purchase price if the vendee dies before closing?

The vendee's administrator.

Who receives title if the vendee dies before closing?

The vendee's devisee.

Who must be joined when the vendee dies before closing?

The administrator and the heirs receiving the real property.

What happens if both the vendor and vendee die before closing?

All four representatives are joined so title and the purchase money can be transferred appropriately.

How does the majority rule treat equitable conversion under an option contract?

It does not occur until the option is exercised.

Under the majority rule, if the seller dies before the option is exercised, who receives the land?

The seller's devisee.

Under the majority rule, whom does the buyer sue for specific performance after exercising the option?

The seller's devisee.

How does the minority rule treat equitable conversion under an option contract?

Exercise of the option relates back to the date the option contract was made.

Under the minority rule, what happens to the seller's interest after the option is exercised?

It becomes personal property consisting of the purchase price.

Under the minority rule, who receives the purchase price if the seller dies?

The seller's legatee.

What is the majority rule regarding the risk of loss before closing?

The buyer bears the risk of loss even if the seller remains in possession.

What is the minority rule regarding the risk of loss before closing?

The seller bears the risk until possession or title passes.

Which rule regarding risk of loss does California follow?

The minority rule placing the risk on the seller until possession or title passes.

Under the majority rule, who receives insurance proceeds if the property is destroyed before closing?

The buyer.

What equitable remedy may the buyer assert to obtain insurance proceeds under the majority rule?

A constructive trust.

Under the minority rule, who receives insurance proceeds if the property is destroyed before closing?

The seller.

Testable Issue: Why is specific performance ordinarily available for land sale contracts?

Because land is unique and damages are an inadequate remedy.

Testable Issue: What is the difference between the traditional and modern mutuality rules?

The traditional rule required mutuality of remedy, while the modern rule requires only mutuality of obligation or performance.

Testable Issue: What is equitable conversion?

The doctrine that gives the buyer equitable title and the seller a right to the purchase price once an executory land sale contract is formed.

Testable Issue: How does California differ from the majority regarding the risk of loss before closing?

California follows the minority rule placing the risk on the seller until title or possession passes.

Essay Rule: How should you analyze a specific performance question?

Determine whether there is a valid contract, analyze whether damages are inadequate, determine whether the decree is enforceable, analyze mutuality, conditions precedent, and defenses, and finally discuss equitable conversion and risk of loss if an executory land sale contract is involved.

Master Synthesis: What must a plaintiff establish to obtain specific performance?

A valid contract, an inadequate legal remedy, an enforceable decree, satisfaction of conditions precedent, no applicable equitable defenses, and, when applicable, entitlement under the doctrine of equitable conversion.