For most instances of a breach of a contract, damages are sought as a remedy. Usually, the payment of money is sufficient for the person harmed by the breach. However, this is not always the case. If this is true, a special remedy known as specific performance may be ordered by the court.
Existence and Breach of Contract
In order for specific performance to be possible, it must be shown that a valid contract was entered into and that there was a breach of that contract. Contracts do not need to be in writing to be enforceable, though it is usually advisable to form written contracts, particularly when it comes to business-related matters. In order to establish the existence of a contract, the following must be proven:
- Both parties demonstrated an intent to be bound by the terms of the agreement;
- The terms were sufficiently definite to be specifically enforced; and
- Both parties received consideration.
A breach of contract may occur if one party does not perform on time, does not perform according to the terms of the agreement, or fails to perform altogether. The breach must also be material. The court examines several factors in determining whether a breach is material, including the following:
- The extent the non-breaching party will be deprived of a benefit reasonably expected;
- The extent to which the obligations of the contract have already been completed (if few or none of the obligations have been met, the more likely it is that the breach is material); and
- The extent to which the breaching party comported with the standards of good faith and fair dealing.
If a valid contract was materially breached, the court will then turn its attention to the issue of damages.
Order to Perform
Specific performance is an equitable remedy for breach of contract, used when money damages would be inadequate. It forces a breaching party to perform the contractual duties exactly and absolutely, under the terms originally agreed to by the parties. Specific performance is more common in real estate transactions because real estate is considered unique. If a person contracts to sell a house and then decides not to, a money award may not be adequate due to the house’s unique character.
Specific performance may also be used in business relationships, particularly if the goods that a business deals in are unique or rare. However, specific performance is generally not available for contracts where services are to be rendered. This is because courts will not force people to perform services against their will. However, if this situation arises, the court can order an injunction that prohibits the breaching party from performing services for the period that was contracted for.
For example, a club owner contracts with a band to perform on December 31st. In November, the band books another show on December 31st and informs the club owner that they will not be performing for her club. The court can order an injunction that keeps the band from performing for anyone other than the club owner on December 31st.
Helping Your Business
For business owners, a breach of contract is often a very serious issue because it poses a risk to the success and profitability of the business. For more information about the remedies available for a breach of contract, speak with the experienced attorneys at the Philadelphia Small Business Law Center.