10.2.1.1 Specific Performance and the Right to Break a Contract Introduction | rauvinj | November 01, 2012

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10.2.1.1 Specific Performance and the Right to Break a Contract Introduction

Original Creator: Kessler, Gilmore & Kronman Current Version: rauvinj
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No legal system can get very far without providing an answer to the question of what is to happen when A, without legal excuse, fails to perform his contractual obligation. Shall A, in situations in which this is factually possible, be forced to live up to his bond, to carry out his promised engagement? Or shall A, even when performance is not only possible but desired by the aggrieved party, be allowed to refuse to do whatever it is he has promised to do and be quit of his obligation on paying B a sum of money to compensate him for whatever loss he may have suffered by reason of A's breach? The answers that have been provided to this question arc strikingly diverse, not only from one legal system to another, but, through time, within the same system. Thus, for example, it has often been said that, by way of contrast to the common law system, "in general in civil-law countries today what we call specific performance is the rule." R. Pound, An Introduction to the Philosophy of Law 240 (1922). There is undoubtedly some truth to Dean Pound's observation, at least at the level of black-letter principle. But its truth must be taken well-salted. In a well-known article, Professor Dawson has convincingly demonstrated that there is no single "rule" common to the "civil-law countries" and that the "rule" in each country is hedged about with various exceptions and procedural requirements that tend to minimize the differences, in practical application, between the civil-law rule and its common law antithesis. Dawson, Specific Performance in France and Germany, 57 Mich. L. Rev. 495 (1959). (Professor Dawson's article, whose range is broader than its title suggests, traces the development of the specific performance idea in Roman Law, classical, post-classical and medieval, and discusses the implications of the great variety of civil law theories for American law.)

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It is true, or at any rate a truism, that in Anglo-American law, from at least the seventeenth century, specific performance has been regarded as an exceptional remedy in equity, available only when a judgment at law for money damages is, on some theory, "inadequate." Why the English courts should initially have adopted this posture is obscure; like so much else in our history it may have been one of the accidental by-products of the long struggle for jurisdiction between the common law courts and their rivals. In Bromage v. Genning, 1 Rolle 368 (K.B. 1616), it appeared that proceedings had been instituted in a court in Wales to compel the defendant, Genning, to execute a lease, as he had covenanted to do. A prohibition against the proceedings in Wales was sought in King's Bench. In the King's Bench proceeding, Lord Coke is reported to have said that

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this would subvert the intention of the covenantor when he intends it to be at his election either to lose the damages or to make the lease, and they wish to compel him to make the lease against his will; and so it is if a man binds himself in an obligation to enfeoff another, he cannot be compelled to make the feoffment.

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For the historical background of Bromage v. Genning, see J. Dawson & W. Harvey, Contracts and Contract Remedies 102-103 (2d ed. 1969).

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Quite different approaches have been suggested. Thus in 2 J. Story, Equity Jurisprudence 25 (1836), the learned Justice, after having explained the generally accepted limitations on the specific performance remedy, went on to comment:

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The truth is that, upon the principles of natural justice, Courts of Equity might proceed much farther, and insist upon decreeing a specific performance of all bona fide contracts; since that is a remedy, to which Courts of Law are inadequate. There is no pretense for the complaints sometimes made by the common lawyers, that such relief in Equity would wholly subvert the remedies by action on the case and actions of covenant; for it is against conscience, that a party should have a right of election, whether he would perform his covenant, or only pay damages for the breach of it. But, on the other hand, there is no reasonable objection to allowing the party injured by the breach to have an election, either to take damages at law, or to have a specific performance in Equity; the remedies being concurrent, but not coextensive with each other.

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The Story approach has recently been defended on economic grounds in an article by Professor Alan Schwartz, The Case for Specific Performance, 89 Yale L.J. 271 (1979). After a lengthy and informative discussion of the problem, Professor Schwartz concludes:

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The compensation goal of contract law can be achieved by requiring the promisor to pay damages or by requiring the promisor to render the promised performance. Under current law, a promisee is entitled to a damage award as of right but the court retains discretion to decide whether specific performance should be granted. Because specific performance is a superior method for achieving the compensation goal, promisees should be able to obtain specific performance on request. An expanded specific performance remedy would not generate greater transaction costs than the damage remedy involves, nor would its increased use interfere unduly with the liberty interests of promisors. . . . If the law is committed to putting disappointed promisees in as good a position as they would have been had their promisors performed, specific performance should be available as a matter of course to those promisees who request it.

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ld. at 305-306.

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A half century after Story, we seem, with Holmes, to be back in Coke's seventeenth-century universe. In his lecture on the "Elements of Contract" in The Common Law 235-236 (M. Howe ed. 1963), Holmes, after making the point that the legal effect of a binding promise is that the promisor "takes the risk of the event, within certain defined limits, as between himself and the promisee," goes on to say:

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If it be proper to state the common-law meaning of promise and contract in this way, it has the advantage of freeing the subject from the superfluous theory that contract is a qualified subjection of one will to another, a kind of limited slavery. It might he so regarded if the law compelled men to perform their contracts, or if it allowed promisees to exercise such compulsion. If, when a man promised to labor for another, the law made him do it, his relation to his promisee might be called a servitude ad hoc with some truth. But that is what the law never does. It never interferes until a promise has been broken, and therefore cannot possibly be performed according to its tenor. It is true that in some instances equity does what is called compelling specific performance. But, in the first place, I am speaking of the common law, and in the next, this only means that equity compels the performance of certain elements of the total promise which lire still capable of performance. For instance, take a promise to convey land within a certain time, a court of equity is not in the habit of interfering until the time has gone by, so that the promise cannot be performed as made. But if the conveyance is more important than the time, and the promisee prefers to have it late rather than never, the law may compel the performance of that. Not literally compel even in that case, however, but put the promisor in prison unless he will convey. This remedy is an exceptional one. The only universal consequence of a legally binding promise is, that the law makes the promisor pay damages if the promised event does not come to pass. In every case it leaves him free from interference until the time for fulfillment has gone by, and therefore free to break his contract if he chooses.

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Holmes' point that "the law . . . never interferes until a promise has been broken" would need some revision in the light of subsequent developments. The idea of declaratory relief was, of course, unknown at the time he wrote. Nor does Holmes seem to consider in this-context the effect of the doctrine of anticipatory breach. Perhaps, as a Massachusetts lawyer, he was influenced by the fact that the Massachusetts court had recently rejected anticipatory breach doctrine in Daniels v. Newton, infra p. 1270.

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Holmes' observation that the law will put a recalcitrant promisor in prison if he refuses to obey an order of specific performance also stands in need of qualification. Since Holmes wrote, the harsh common law remedy of imprisonment for debt has been abolished in all jurisdictions, generally by statute or constitutional provision, and most of the abolishing statutes are "broad enough to prevent imprisonment as a remedy to compel performance of an equitable decree for payment of the price," 5A Corbin §1145, n.76. However, where the performance ordered is something other than the payment of a money debt, a failure to comply may still be treated as a contempt, and where it is, the promisor can be imprisoned (in theory at least) until he agrees to perform. This marks an important difference between specific performance and money damages: unlike a decree of specific performance, an award of damages is in form a judgment of law, a declaration of the rights of the litigants, and not a direct order to the losing party. If the judgment is not paid, the plaintiff must obtain the help of the state (typically, the local sheriff) in order to collect, and in attempting to satisfy his claim, may seize the defendant's property but not his person.

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It is not surprising that Holmes should have approved of the remarks attributed to Lord Coke in Bromage v. Genning. In his address, The Path of the Law, delivered in 1897, after restating what was basically the position he had taken in the passage from The Common Law just quoted, Holmes commented that

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such a mode of looking at the matter stinks in the nostrils of those who think it advantageous to get as much ethics into the law as they can. It was good enough for Lord Coke, however, and here as in many other cases, I am content to abide with him.

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After stating Bromage v. Genning, Holmes went on: "This goes further than we should go now, but it shows what I venture to say has been the common law point of view from the beginning. . . ." Collected Legal Papers 175 (1920). In this, as in other instances, Holmes, the scholar, and Holmes, the judge, were not always on the same wavelength. In Jones v. Parker, 163 Mass. 564, 40 N.E. 1044 (1895), which acquired a modest vogue as a leading case, the action was to compel specific performance of a covenant to complete a building by installing an adequate heating and lighting system and then to lease it to the plaintiff. Per Holmes, J.:

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It does not need argument to show that the covenant is valid. Whether it should be enforced specifically admits of more doubt, the question being whether it is certain enough for that purpose (Fry, Spec. Perf. §§380-386) and whether a decree for specific performance would not call on the court to do more than it is in the habit of undertaking. [Citations omitted.] We are of the opinion that specific performance should be decreed. . . . There is no universal rule that courts of equity never will enforce a contract which requires some building to be done. They have enforced such con- tracts from the earliest days to the present time [citing inter alia, a case from the Yearbooks and 2 J. Story, Equity Jurisprudence §§72S-728].

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163 Mass. at 566-567. Bromage v. Genning is not cited in the Jones v. Parker opinion.

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One of the first things that the first-year student of Contracts learns is that the "exceptional" remedy of specific performance is routinely available for the enforcement of land contracts, both in the vendee's suit to compel conveyance and in the vendor's action to recover the price. The traditional explanation of this result is that damages at law would never be an adequate remedy since each Blackacre is unique; thus land can never be valued as goods are. Professor Dawson, in the article referred to earlier, comments skeptically that: "The adequacy test . . . as framed and usually applied . . . is arbitrary and irrational. It fades out completely in contracts for the sale of land, through the artificial but useful 'presumption' that it is impossible to value interests in land." 57 Mich. L. Rev. at 532. How much sense the "uniqueness of Blackacre" idea[6] ever made is questionable. It certainly makes less sense when translated into the brave new world of Levittown in which land seems to have become fungible as wheat or corn or oil.

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Recognizing that some parcels are more unique than others, courts have in recent years shown a marginally greater willingness to deny specific performance of contracts for the sale of real property, on the ground that the plaintiff has an adequate remedy at law. See Watkins v. Paul, 95 Idaho 499, 511 P.2d 781 (1974); Suchan v. Rutherford, 90 Idaho 288, 410 P.2d 434 (1966); Duckworth v. Michel, 172 Wash. 234, 19 P.2d 914 (1933). It is interesting to note that in the two Idaho cases emphasis was placed on the fact that the purchaser intended to resell the property rather than to use it himself. The rule that land contracts are specifically enforceable still holds true in the main, but seems to be giving way, here and there, out of a recognition, perhaps, that the purchase even of a residence is today in large part a speculative investment.

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However, if the doctrine of specific performance has lost some of the rigor it once had in the case of land contracts, it appears to be gaining ground in other areas where the doctrine traditionally was thought unworkable. For example, courts have in the past expressed great reluctance to compel the specific performance of an action that by its nature would take a long time or require skill in its execution. The courts, it was said, have neither the time nor the expert judgment to supervise such an undertaking and can therefore do no more, in cases of this kind, than award the plaintiff his damages. For a classic statement of this view, see Edelen v. Samuels, 103 S. W. 360, 126 Ky. 295 (1907). How far we have come from this view of the matter can be seen by a glance at Eastern Rolling Mill Co. v. Michlovitz, digested infra p. 1094 (ordering the specific performance of a long-term output contract), or City Stores Co. v. Ammerman, digested infra p. 1089 (specifically enforcing a contract to grant the plaintiff a lease in the defendant's newly constructed shopping center on terms "at least equal" to those offered the defendant's other major lessees). Twenty years ago Professor Corbin noted that the cases "have been numerous in which a decree has been refused on the ground that the performance required is one of long duration and its enforcement would involve long continued supervision by the court." Acknowledging that "at times this may still be a sufficient reason for refusal," Professor Corbin went on to argue that

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in many such cases the decree may be so constructed as to put an effective economic and moral pressure on the defendant, and the character of the performance rendered by the defendant can be determined by means of periodical reports to the court, with the aid and advice of expert advisers and masters in chancery. The court can count on the production of the necessary evidence by the parties in whose behalf the decree is rendered.

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5A Corbin §1171. This is the modem view, and its growing acceptance has certainly lowered the threshold to specific performance in areas where the doctrine previously had little application.[7]

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Expanding in certain respects, contracting in others, the doctrine of specific performance continues to lead an unsettled life, and in recent years scholars have redoubled their efforts to identify its rationale and explain its limits. In the materials that follow, we shall begin with a nostalgic look at one of the great moments of nineteenth-century jurisprudence, and then consider a few modern instances of the ebb and flow of doctrine in this traditionally confused area of the law.

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[6] The uniqueness of Blackacre may not have had as much to do with the traditional availability of specific performance for land contracts as we are accustomed to think. Professor David Cohen has speculated that before the nineteenth century, many purchasers bought land in order to obtain the voting rights and other political privileges that went with it — an objective that could be guaranteed only if contracts for the sale of land were specifically enforceable. If Professor Cohen is right. we should look for the origins of the rule in the system of feudal tenures, not in the principle de gustibus non est disputandum, which belongs to a later and more individualistic age. See Cohen. The Relationship of Contractual Remedies to Political and Social Status: A Preliminary Inquiry. 32 U. Toronto L.J. 31 (1982).

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[7] See Comment 1 to §2-716 of the Uniform Commercial Code and the Introductory Note preceding the discussion of specific performance in the Second Restatement of Contracts both of which endorse a "more liberal attitude" toward the application of the doctrine. For a review of this development, see Van Hecke, Changing Emphasis in Specific Performance, 40 N.C.L. Rev. 1 (1961).

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October 23, 2016

10.2.1.1 Specific Performance and the Right to Break a Contract Introduction

10.2.1.1 Specific Performance and the Right to Break a Contract Introduction

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