General Equity Corporation (General) entered into a contract with renowned artis
ID: 379762 • Letter: G
Question
General Equity Corporation (General) entered into a contract with renowned artist Halla, who agreed to create artwork for General’s main office building. Under the terms of the written agreement, Halla was to complete the creation and installation of the artwork within one year from April 15 - the date the parties signed the agreement. Unfortunately, Halla delayed creating any artwork and missed the one-year deadline. Finally, on May 1 Halla informed General that he was refusing to create or install any art for its building and that he would not complete his obligations pursuant to the parties’ agreement. Meanwhile, General placed its main office building on the market, and on May 1 signed an agreement to sell the office building to Ideal Investments, Inc. for $12 million. The closing date for this sale was set for May 30. On May 25, Jewel Funds Company discovered that the building was being sold, and submitted an offer to purchase it for $15 million to General. General accepted the offer from Jewel Funds Company, and on May 29, General contacted Ideal Investments, Inc. and informed it that they were canceling the sale to Ideal Investments, Inc. because they had received a better offer from Jewel Funds Company. General refused Ideal Investment’s request to complete the sale according to the parties’ original agreement. Two lawsuits arose out of this set of facts: 1. General filed a lawsuit against Halla and asked the court to award it the remedy of specific performance; and 2. Ideal filed a lawsuit against General and asked the court to award it the remedy of specific performance. Define the term specific performance, and explain how and when this remedy typically is used by the courts. Then, discuss and explain how the court is likely to decide in each of these two lawsuits. What other remedies court the court award in each case? Why? Discuss your answers in detail.
Explanation / Answer
Specific performance is a specialized remedy used by courts when no other remedy (such as money) will adequately compensate the other party. In specific performance, if a legal remedy will put the injured party in the position where he or she would have enjoyed or had the contract been fully performed, then the court will use that option instead.
Like for example, if John offers to buy Jamie's house and Jamie accepts, but later decides to keep the property. Since real estate is considered to be unique and as there is no other piece of property or house exactly like Jamie's, John may be entitled to specific performance on the contract. Jamie would be compelled to go through with the sale.
The most common reason courts grant specific performance is that the subject of the contract is unique, when it's not merely a matter of money or where the true amount of damages is unclear. When a contract is for the sale of a unique property, for instance, mere money damages may not remedy the purchaser's situation, then courts use the remedy of specific performance. Courts will enforce specific performance only if the underlying contract was fair and equitable.
1) In this case, Holla and General underwent an agreement. But, the party (Holla) on whom this contractual obligation rests must not fails to discharge such obligation, yet Holla failed to discharge his duty. In case of his failure, the other party (General) will have a right sue for performance of the contract. Hence it comes under specific performance.
2) In the second case, there is no contractual obligation, since the closing date for the sale is May 30th. In the other words, General can change their mind regarding the sale till the closing time, in case he gets a better offer. In this case, General rejected the Ideal's offer on May 29 (a day before closing) and accepted a better offer from Jewel Funds. Hence, court's ruling will be in favor of General.
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