Not Doing What You're Supposed To - Contracts and Specific Performance Law

As always, please review this blog's disclaimer before reading this post by following the link at the top of this page or by clicking on this link.  As always, any legal principles discussed apply only to the Commonwealth of Virginia.

Introduction

Back when I was in law school, a friend of mine hired a home contractor to do some work on his house.  The contractor backed out at the last minute, and the friend contacted me to ask if I knew how to make the contractor do the work.  When I explained that my friend would need to hire a new contractor, get the work done, and then sue this contractor for any difference in cost paid, and any loss of use he may have suffered while waiting, my friend was indignant.  "I don't want money from the guy," he said, "I just want him to do the work he signed a contract to do.  I went through a lot of effort to find this contractor, and I very much want him to be the one to do it."  My friend was very upset when I explained that, all that being true, he still couldn't force the contractor to do the work.  I recommended that he consider consulting an attorney to make sure I was right, since I was, after all, not a lawyer yet, so I have no idea if he actually did, or how that turned out, but now that I am a practicing attorney, I am more certain than I was then that what I told him was correct.

The fact is, in a breach of contract case, there are two types of remedies that can be awarded - a money judgment or "specific performance."  The types are exactly as they sound.  A money judgment is a judgment saying that the breaching party owes the other party a certain amount of money.  A specific performance order requires the breaching party to perform under the terms of the contract under penalty of contempt.

Specific performance is very rarely awarded, and almost all breach of contract claims end with a money judgment (assuming that a wrongful breach is found to have occurred).  In this blog post I will attempt to explain why specific performance is so rarely awarded, and what situations might be those in which a specific performance award is possible.

Law vs. Equity - Judgments vs. Injunctions

You see, there are two general types of court orders - judgments, and injunctions.  I'm using those terms very loosely, but that's basically how it breaks down.  In general, a judgment is a ruling by a court that one person owes another person a certain amount of money (or that they do not owe any money).  An injunction requires a person to do something, or not to do something.  A judgment does not order someone to actually pay the money they owe (and post-judgment collections is a whole other blog post for the future), so violating a judgment does not subject you to a contempt of court finding, while violating an injunction does.

All of this used to be somewhat simple to follow because every state and the federal government had two entirely separate court systems to deal with these types of cases.  Courts sitting "in equity" would issue injunctions and similar such orders that had to be followed under penalty of contempt.  Courts sitting "in law" or "common law courts" would issue money judgments.  The court you were in front of was a good determiner of what kind of order you would get.  This all got muddled when, decades ago, jurisdictions started abolishing the distinction between the two courts and lumping the courts together (although it's worth noting this didn't happen in Virginia until 2006).  Today, there is no separate equity and law court, meaning that in a single lawsuit, you can seek both legal and equitable relief.  Many of the distinctions between law and equity, however, especially in terms of what relief you can seek, still exist.  Equitable relief is still injunctive, and legal relief is still judgments.

So, how does this relate to contract law?  Well, centuries ago a rule developed in the equity courts referred to as "adequacy of remedy at law."  The idea is that if you could sue someone in the common law court for the exact same thing you were suing them for in the equity court, and get a money judgment, and if that money judgment is actually paid you would sufficiently be "made whole," then you could not get equitable relief.  In other words, if you could sue someone for money damages, then the equity courts were closed to you.  Even though the equity courts are gone, this rule is one that still survives.  If you can get a judgment that, if paid, would fully make up for what you have lost, then you cannot get an injunction.

So, as you've probably guessed, money damages for a contract come in the form of a judgment, while specific performance comes in the form of an injunction.  In other words, in the old system, if you sued for breach of contract in the common law court, you were seeking money damages, and if you sued for breach of contract in the equity court, you were seeking specific performance.  As a result, the equity rule of adequacy of the remedy at law applied to specific performance, and still does.  If you can get a money judgment that will sufficiently make you whole from the breach of contract, then a court will not order specific performance.

What makes a remedy at law "adequate"?

So, your next question might be, how would a remedy at law be "adequate"?  Remember, first of all, that this doctrine assumes that you will be able to collect your judgment, regardless of the likelihood of that actually happening, so the fact that a judgment is not enforceable by contempt does not come into the adequacy calculation.  Adequacy basically comes down to a simple question.  Can you quantify, with an actual number, the value of what you have lost due to the breach?  In other words, are your losses entirely tangible?

Again, uncertainties don't speak to adequacy.  You can get estimates, expert witnesses can testify as to long term losses, interest rates, etc.  There is a way to quantify almost everything.  Differences in quality, time loss, etc. are all quantifiable losses.  If there is any way at all to quantify all of your losses, then you have an adequate remedy at law, and you will not be awarded specific performance.

So when isn't a remedy at law "adequate"?

So, you might read the above and think "well, gee, to some degree everything's quantifiable, so why even have a specific performance doctrine?"  As you might guess, there must be something "special" about what you are losing due to the breach in order for a remedy at law to be inadequate.  For example, maybe you contracted to buy something that was particularly unique.  Courts consider tracts of real estate, for example, to always be unique, so if a seller has an inexcusable default in a contract to sell their house, you might be able to get a court order to require the seller to go through with the sale.  You will find similar situations with antiques, particular artworks, etc.

Maybe you've contracted for services, and the person you contracted with is the only contractor performing that service within a reasonable distance?  Then, the service might be considered unique, since you cannot replace the service, so the loss would not be readily quantified and a specific performance award might be in order.

Marital agreements are usually considered to be enforceable by specific performance as well.  This is because when forming the contract, that the person named be the one performing the duties laid out, as opposed to just that those duties get done, is considered to be a central component of the agreement.

Those are just some examples, and there are more, but you should understand that by and large the comment I started this section with is right.  A vast majority of damages are quantifiable, and as a result, a vast majority of breaches of contract are only remediable with a money judgment.

Conclusion

When someone breaches a contract with you, it is normal to want them to remedy the breach themselves.  The law, however, places a premium on issuing money judgments over issuing injunctive orders which coerce someone into taking action.  As a result, it is very rare that you will get a court to actually order someone to perform under the conditions of a contract.  If you are involved in a contract dispute and want to seek or defend against specific performance or money damages, please feel free to call (703)281-0134 or e-mail sleven@thebaldwinlawfirm.com to set up an initial consultation with me.  Your consultation is free for up to half an hour!