UNIT 2:SPECIFIC PERFORMANCE

CONTENTS

1.0      Introduction

2.0      Objectives

3.0      Main content

3.1        Nature of the remedy

3.2       Discretionary nature of the remedy

3.3       Circumstances in which the remedy will be granted or refused

3.4       Doctrine of part performance

3.5       Grounds for refusal of the remedy

4.0      Conclusion

5.0      Summary

6.0      Tutor-Marked Assignments

7.0      References / Further Reading

1.0     INTRODUCTION

In the last unit, we considered the equitable doctrine of injunction. In this unit, we will consider another equitable remedy – specific performance. The equitable doctrine of specific performance is particularly important in the realm of the law of contract. The exercise of the jurisdiction to grant the remedy dates back to the reign of Edward IV. See Story on Equity (3rd  ed.) p.305.  It may be stated that the development of the remedy by the Chancery Court is, perhaps, one of the earliest forays made by the court in its bid to provide a better and more remedial justice where the remedy provided at common law was found defective or inadequate.

2.0     OBJECTIVES

By the end of this unit you should be able to:

(i)       Describe the nature of the remedy;

(ii)      List the circumstances in which the remedy will be granted or refused;

(iii)      Explain the doctrine of part performance; and

(iv)      List the grounds for refusal of the remedy.

3.0     MAIN CONTENT

3.1     Nature of the Remedy

There is no right, either at law or in equity, which permits a party to a contract to breach the con- tract, though the power to do so is not so much denied. However, whenever this power is exer- cised or resorted to by a contracting party, the attendant consequences at law may be different from those in equity if it is a contract in which specific performance is the appropriate remedy. At common law contract is a 'personal agreement' between two parties, and because of the per- sonal nature and character of the relationship thus evolved, in the eyes of the common law, either of the contracting parties may unilaterally decide to breach the contract. The only remedy pro- vided at common law, for such course of conduct is payment of damages by the guilty party to the innocent party. Whether damages are adequate for the wrongful act is not within the consid- eration of the common law.

On the contrary Courts of Equity deemed such a course in many instances inadequate for the purposes of justice; and, considering it a violation of moral and equitable duties, they did not he- sitate to interpose, and require from the conscience of the offending party a strict performance of what he could not, without manifest wrong or fraud, refuse. Therefore, the position in equity is that the court, in the exercise of its equitable jurisdiction, will in certain circumstances compel parties to a contract freely entered into, to perform their obligations according to the terms of the contract and to respect the sanctity of the contractual relationship created by their acts. If equity had not interfered in this way, it would have been possible in many cases for parties to a contract to buy off their duties under the contract to the detriment of innocent parties.

In Greene v. West Cheshire Rly. Co. (1871) L.R. 13 Eq. Cas. 44 at 50-51. James Bacon V. C. ob- served:

'The plaintiff has performed his part of the contract; the company have made and opened their railway, and they now refused to perform the other part of that contract, by force of which alone they acquired possession of the plaintiffs land. A more direct, wilful, and de- termined violation of a plain contract cannot be suggested. No excuse is offered for it, no suggestion that it is impracticable, or even that it is inconvenient', for the company to per- form their part of the contract of which the plaintiffhas performed his; but what they say is, that the plaintiff may, by an action at law, recover against them in money such amount of damages as a jury may think he has sustained by their wilful breach of their contract; and that, therefore, a Court of Equity will not entertain his complaint. I do not understand that the law, as administered in this court, countenances any such defence. If that were the law, the great majority of the cases in which this court has exercised its authority for the purpose of compel- ling specific performance of contracts might be readily disposed of, because in the great majority of cases a payment in money might satisfy the wrong which the breach of such contracts inflicts.'

Thus, specific performance is an order of the court by which a party to a contract is compelled to specifically fulfil his obligations in accordance with the terms of the contract. As will be seen below, the remedy ‘shows the extent of the power of equity to assist the common law, limited only by canons of common sense and the practical limitations on the power to oversee and administer specific performance decrees.’  Per Lord Up- john in Beswick v. Beswick (1967) 2 All E.R. 1197 at 1220.

The Question of Damages

Courts of equity do not profess to decree specific performance of contracts of every description. It is only where the legal remedy is inadequate or defective that it becomes necessary for Courts of Equity to interfere. See Flint v. Brandon (1803)8 Ves 159. Thus, the equitable remedy of specific performance was invented to meet cases where the ordinary remedy by an action for damages is not an adequate compensation for breach of contract. See Ryan v. Mutual Tontine Association (1893) 1 Ch. 126; Williams v. Smith & Ors. (1948) 19 N.L.R. 21.

In Greene v. West Cheshire Rly. Co. (1871) L.R. 13 Eq. 44, the court decreed specific performance of an agreement although it was clear that the plaintiff had a concurrent remedy in damages. In Hutton v. Watling (1948) Ch. 26, Jenkins J. observed that the jurisdiction to grant specific performance of a contract for the sale of land is to be founded not on the equitable interest in the land whi9h the contract is regarded as confer- ring upon the purchaser, but on the simple ground that damages will not afford an adequate remedy.

There are certain classes of contracts which by statute, must be in writing otherwise, such contracts are unenforceable and, therefore, no action for damages  will lie at law for a breach of such contracts. But in equity, specific performance of such contracts may be granted provided there is sufficient act of part- performance. Similarly, stipulation as to time in contracts provides another illustration where the common law will recognize the right of a party to repudiate a contract or claim damages for its breach, but, on the contrary, equity may grant specific performance of the same contract in favour of the other party to the contract. At common law, time is of the essence of the contract. If a party to a contract fails to perform his obligation under the contract within the time stipulated in the contract, the other party is entitled to repu- diate the contract or claim damages; but in equity, time is not of essence of the contract and equity may grant specific performance of the contract in favour of the party against whom an action for damages may lie at law. Thus a guilty party at law may, in certain circumstances, be entitled to specific performance in equity.

3.2     Discretionary nature of the remedy

‘Indeed, the dominant principle has always been that equity will only grant specific performance if under all the circumstances, it is just and equitable so to do.’ Per Lord Parker of Waddington in Stickney v. Keeble (1915) A.C. 386 at 419.  This brings out the discretionary nature of the remedy. As stated by Rig- by L.J. in Scott v. Alvarez (1895) 2 Ch. 603 at 615 C.A, from the very first, when specific performance was introduced it has been treated as a question of discretion whether it is better to interfere and give a re- medy which the common law knows nothing at all about, or to leave the parties to their rights in a court of law.

Unlike the common law remedies, specific performance cannot be claimed as of right; this is true of the early development of equity jurisdiction but, for a long time now, the correctness of the statement is no longer absolute. In many cases, the circumstances and the rules under which spe- cific performance will be decreed are so well established that the court, exercising equitable ju- risdiction, cannot afford to exercise any inconsistent judicial discretion. See Behnke v. Bede Shipping Co. (1927) 1 K.B. 649. In Smith v. Colbourne (1914) 2 Ch. 533 at 541, it was argued that specific performance should not be granted in respect of a contract for the sale of certain building because the title was too doubtful to be forced upon the purchaser. Cozens-Hardy, M.R observed that the courts have in modern times not listened with favour to such a defence. 'It is the duty of the court, unless in very exceptional circumstances, to decide the rights between the vendor and the purchaser, even though a third person not a party to the action will not be bound by the decisions'.

In general, the exercise of the jurisdiction is still subject to the overriding inherent discretion of the court which must be judiciously exercised.

3.3     Circumstances in which the remedy will be granted or refused

The remedy is available in a variety of contractual relationships; whether or not it will be granted depends on the nature and character of the contract, its subject-matter and other numerous but varying factors which the Courts of Equity have established purposely to ensure that the exercise of the jurisdiction meets with the requirements of rational justice and fair-play.

1. Existence of Valid Contract

The grant of the remedy presupposes a valid contract; where this is non-existent the remedy will not be granted. See Geore Mitchell v. Sherriff J. Charaff (1942) 8 W.A.C.A. 99, 102. In Tella v. Akere (1959) W.N.L.R. 26, it was clear from the evidence before the court that the alleged contract for the sale of land, for which specific performance was being sought, did not in fact exist.

Similarly in Savage v. Uwechia (1961) 1 All E.R. 830,  the Privy Council allowed the appeal against the decision of Federal Supreme Court granting specific performance of a contract on the ground that the agreement upon which the order of specific performance was based was not suf- ficient to constitute a contract for the sale of land. See further, Bansedun v. Iyabo (1962) 2 All N.L.R. 7.

Neither will the court grant specific performance of a contract whose terms are inconclusive, un- certain or ambiguous. See Bansedun v. Iyabo (supra); Johnson v. Humphrey (1946) 1 All E.R. 460. For, it is not within the jurisdiction of the court to make a contract for parties. See Stimpson v. Gray (1929) 1 Ch. 629.  However, where the alleged inconclusiveness or uncertainty can be understood by reference to the context of the agreement, specific performance of the agreement may be granted. See Jojo v. Cole (1939) 5 WACA 99.

In Ohiaeri v. Yussuf & Ors. (2009) 6 NWLR (Pt. 1137) p. 207, the court held that:

“An action for specific performance arises once there exists a contract coupled with circumstances which make it equitable to grant a decree of same. A contract for the sale of land attracts a greater justification for a decree of specific performance because as opposed to other types of contract, the land may have a special and peculiar value to the purchaser. In the instant case, the 1st and 2nd res- pondents had every justification to claim for specific performance.”

2. Illegality

Equity will not decree specific performance of a contract that is void for illegality. Here, equity

follows the law. In Canfailla v. Chahin (1939) 5 W.A.C.A 104, the West African Court of Appeal held that a contract to erect a building contravening the provisions of a legal enactment was il- legal and could not be enforced. Nor will the court decree specific performance of a contract that affects adversely the public morality or general policy of the law of the land. See further Stevens v. Gourley (1859) 7 C.B. (N.S.) 99; 141 E.R 752; Barclays Bank D.C.O. v. Hassan (1961) All NLR. 836; Corbett v. S.E. & Chatham Rly. (1906) 2. Ch. 12.

It must be noted that where a party claiming specific performance relies on a document or memo- randum which is merely unenforceable but not illegal, such unenforceability is not a bar to a de- cree of specific performance unless the invalidity or unenforceability is pleaded by the defendant. See Barclays Bank D.C.O. v. Hassan (supra) at 840. But where document is void for illegality the court will refuse to give effect to it although illegality has not been pleaded; the court cannot close its eyes to a transaction if it is illegal. See Banwo v. A. G. Leventis (1960) L. L. R. 78, 86.

3. Consideration

Since equity will not assist a volunteer, want of consideration is a complete bar to a decree of specific performance. See Kuri v. Kuri (1923) 4 N.L.R. 78. As Lord Hardwicke stated in Penn v. Lord Baltimore (1750) 1 Ves. Ser 444, 'the court never decrees specifically without a consider- ation.' Consideration is an essential requirement for the validity of a simple contract, absence of it renders such contract void at law and in equity. See Savage v. Uwechia (1961) I All E. R. 830, 832, P.C. Here, equity follows the law and will not grant a decree for specific perfor- mance. Even where the contract is under seal, being a voluntary contract, specific performance will    not    be    decreed    and    parties    will    be    left    to    their   legal    remedies.    See Earl of Aylesford v. Morris (1873) L.R. 8 Ch. App 484, 490.

It is a settled rule of equity that inadequacy of consideration is not a bar action for specific per- formance although equity regards a gross inadequacy of consideration as an indication that the parties were not at arms' length. See Earl of Aylesford v. Morris (1873) L.R. 8 Ch. App 484.

Earlier authorities tended to accept the view that inadequacy of consideration is a ground for refusing specific performance. However, Lord Eldon in Coles v. Trecothick (1804) 9 Ves. 234, 236 and the House of Lords in Callaghan v. Callaghan (1841) 8 Ch. & Fin. 374, laid down the rule that before inadequacy of consideration could operate as a bar, the inadequacy must be so great as to prove or constitute evidence of fraud or that the consideration is so grossly inadequate as to lead to the inference that the parties could not have intended to execute the contract. Such circumstances could also raise a presumption of undue influence, a branch of equitable fraud, as to render enforcement of the contract inequitable.

In Mia Sons Ltd. v. Afrotec (1991) 5 MWLR (Pt. 194) p.724, it was held that a collateral con- tract for which valuable consideration has been given and which is different, distinct and sever- able from a main contract between the parties, is one on which the court can make an order of specific performance.

SELF ASSESSMENT EXERCISE 1

List the circumstances in which the remedy of specific performance will be granted or refused.

3.4     Doctrine of Part Performance

At law, certain contracts are required to be in writing; non-compliance with this requirement renders such contracts unenforceable. However, equity takes a more flexible view and will en- force a contract within this class by an order of specific performance, if the contract is one to which the equitable doctrine of part-performance applies. The exercise of this jurisdiction pro- vides an illustration for the maxim that 'equity looks at the intent rather than the form.'

Basis of the Doctrine

Section 67(1) of the Property and Conveyancing Law (Western Nigeria), 1959 provides that 'no action may be brought upon any contract for the sale or other disposition of land or any interest in land unless the agreement upon which such action is brought or some memorandum or note thereof is in writing and signed by the party to be charged or by some other person thereunto by him lawfully authorised.' Section 67(2) of the Law recognises the existence of the doctrine of part-performance by providing that 'this section applies to contracts whether made before or after the commencement of this law and does not affect the law relating to part performance, or sales by the court.'

The above provision in 'form' and substance is a re-enactment of Section 4, Statute of Frauds 1677 (an English Statute of general application, applicable in Nigeria, except in the Western and the Mid-western States). The Lagos State has similar provision in Section 5 of the Law Reform (Contracts) Act, 1961. It is evident, from the above statutory requirements that a contract relating to sale of land or to the disposition of any interest in land is not enforceable at law by either party to the contract unless the contract is evidenced in writing.

The effect of non-compliance with the statutory requirement is not to avoid the contract. In 1883, Lord Blackburn in Maddison v. Alderson  (1883) 8 App. Cas. 467 at 488 said: 'It is now finally settled that the true construction of the Statute of Frauds is not to render the contracts within it void, still less illegal but is to render the kind of evidence required indispensable when it is sought to enforce the contract.' In the same case, Lord Selbourne observed as follows: 'it has been determined at law (and in this respect there can be no difference between law and equity) that the 4th section of the Statute of Frauds does not avoid parol contracts but only bars the legal remedies by which they might otherwise be enforced. The object of the statute is to prevent the fraudulent setting-up of pretended agreements, and then supporting them by perjury.' See Story on Equity (3rd ed.) p.317.

To this extent, equity follows the law, and regards itself as bound by the provisions of the sta- tute. But at the same time equity will not allow the statute to be used as an engine for fraud; therefore, in certain cases equity would decree specific performance of a contract for the sale or other disposition of interest in land, even if the contract is not in writing as required by the sta- tute provided there is sufficient act of part-performance. For, it is possible for two parties to have freely entered into an oral agreement for the sale of land, and for one of the parties to rely on the statute as a defence if and when called upon to perform his own part of the contract.

Application of the Doctrine

A party relying on the doctrine of part performance must plead such facts and circumstances which will bring his case within it and must show by oral testimony or otherwise that the acts alleged by him amount in law to part performance. Before the application of the doctrine the fol- lowing well-established conditions must be satisfied.

(i) The acts of part performance must be unequivocally and exclusively referable to, and denote the existence of, the alleged tract. See the following cases: Maddison v. Alderson (1883) 8 App. Cas. 467 at 475; Rawlinson v. Ames (1925) Ch. 96; and Wusamotu Shelle v. Kaletu Rossek (1938) 14 N.L.R. 80.

(ii) The Acts must be such as to render it a fraud in the Defendant to take advantage of the con- tract not being in writing. Much as equity follows the law it will not allow a statute designed to prevent fraud to be used as an instrument for fraud. However, the act of part-performance relied upon must show the equities arising from the relationship of the parties subsequent to the con- tract and that if specific performance of the oral contract is not granted, such equities will render it a fraud in the defendant to take advantage of the contract not being in writing. The equities arise not out of the contract itself but out of the altered position caused by the acts of the parties done in execution of the contract. See Maddison v. Alderson (supra) at 475; Chaproniere v. Lam- bert (1917) Ch. D. 356 at 359.

(iii)  The  contract to which the  Acts  of Part  Performance denote must  be capable of being enforced by a decree of specific Performance

This condition exemplifies the limit of equitable remedy of specific performance in general and that of the doctrine of part-performance in particular. The doctrine of part performance is confined to contracts relating to disposition of land or interest in land. It has no application either to contract of service or contract of guarantee; such contracts are not capable of being specifically performed and equity does not act in vain. See Britain v. Rossiter (1879) 11 Q.B.D. 123; and Apara v. United Africa Company Ltd. (1951) 20 N.L.R. 17.

(iv) The parol evidence which is let in by the act of Part Performance must establish a finally concluded contract

The equities resulting from the acts of part performance done in execution of the oral contract are the factors compelling the court to decree specific performance of the contract; therefore, such acts of part performance upon which the equities are premised, must let in proper parol evidence of a concluded contract for which specific performance is sought. See Maddison v. Alder- son (supra) at 475. The parol agreement need not set out the terms so long as the minds of the parties are at one upon matters which are essential and are cardinal to every agreement in rela- tion to land.' See Adefarasin, J. in African Coastal Shipping Service Ltd v. Nigerian ports Au- thority (supra). However, the parties must have gone beyond the stage negotiation. See Rossiter v. Miller (1878) 3 App. cas. 1124; and Marshall v. Berridge (1881) L.R. 19 Ch.D. 233.

(v) The Act of Part Performance relied upon must have been done by the plaintiff and not by the defendant. See Caton v. Caton (1865) L.R. 1 Ch. app. 137. In Ekpanya v. Akpan (1989) 2 NWLR (Pt. 101) p. 86, it was held that the basis of the doctrine is that the plaintiff having altered his po- sition on the faith of the contract, acquires an equity against the defendant. Thus, the part- performance must be by the plaintiff. Therefore, for the plaintiff to rely on part-performance, he must have been allowed to alter his position for the worse by carrying out acts in performance of the contract. Equity will then come to his aid arising from the changed position.

3.5      Grounds for refusal of the Remedy

There are certain contracts whose performance will not be compelled by a decree of specific per- formance. This is not because the court lacks jurisdiction to award the decree in these cases, but because the contracts by their nature are not enforceable by a decree of specific performance. Contracts falling within this class are those whose performance or execution requires the court's constant and continuous supervision; thus, imposing too great a burden upon the court if the court is to ensure that compliance with its orders is not stultified. Therefore, the court will not ordinari- ly decree specific performance of a contract the prosecution of which it cannot supervise. See Blackett v. Bates (1865) L.R. 1 Ch. 124; Powell Duffryn Steam Coal Co. v. TaffVale Railway Col. (1874) L.R. 9 Ch. 331.

Thus, specific performance will not be granted in contracts involving the construction of a rail- way, the management of a brewery, the management of a colliery or the construction of a water- way; or any contract of similar nature. See Wheatley v. Westminster Brynibo Coal Co. (1869) 9 Eq. Cas. 538 at 552. Generally, specific performance will not be granted in the following cases.

1. Contract to build
2. Contracts of personal service
3. Contracts determinable at will
4. Contracts to refer to arbitration
5. Contracts specifically enforceable only in part
6. Contracts relating to real and personal property
7. Contracts lacking in mutuality
8. Misrepresentation and mistake
9. Misdescription
10. Compensation and condition of sale
11. Lapse of time
12. Unclean hands
13. Hardship

See the case of Ohiwerei v. Okosun (2003) 11 NWLR (Pt. 832) p.463 where it held as follows:

1. Specific performance is a decree issued by a court which compels a contracting party to do that which he has promised to do. It is a remedy for breach of contract provided by equity to meet those cases where the common law remedy of damages is inadequate.
2. The equitable doctrine of specific performance is discretionary because the dominant prin- ciple has always been that equity will only grant if under all circumstances, it is just and equita- ble to do so. The remedy is available in a variety of contractual relationships. Whether or not it will be granted depends on the nature of the contract. Before the remedy of specific performance can be granted, there must be a valid contract. The court will not grant specific performance on a contract whose terms are inconclusive, uncertain or ambiguous. Also, a court will not decree spe- cific performance of a contract that is void for illegality. Where no consideration is furnished, specific performance of the contract will not be granted.
3. A court cannot decree specific performance until a contract would form the basis of the decree of specific performance.
4. The doctrine of part-performance will only apply upon fulfilment of the following condi- tions:

(a)       The act of part performance must be definite and refer exclusively to and denote the existence of the alleged contract.

(b)       The act must be such as to render it a fraud on the part of the defendent to take ad- vantage of the contract not being in writing.

(c)       The contract to which the acts of part performance denote must be capable of being

enforced by a decree of specific performance.

(d)       The parol evidence which is let in by the act of part performance must establish a finally concluded contract.

(e)        The act of part performance relied upon must have been done by the plaintiff and not by the defendant.

5. Under the doctrine of part-paerfoemance, a party who has partly performed a contract can enforce it, notwithstanding the fact that there is no written evidence of the contract. The doctrine is based on the principle that the plaintiff having altered his position on the faith of the contract, acquires an equity against the defendant. Thus, part performance must be by the plaintiff. There- fore, for the plaintiff to rely on part-performance, he must have been allowed to alter his position for the worse by carrying out acts in performance of the contract. Equity will now come to his aid, arising from his changed position.

4.0     CONCLUSION

The position in equity is that the court, in the exercise of its equitable jurisdiction, will in certain circumstances, compel parties to a contract freely entered into, to perform their obligations ac- cording to the terms of the contract and to respect the sanctity of the contractual relationship created by their acts. If equity had not interfered in this way, it would have been possible in many cases for parties to a contract to buy off their duties under the contract to the detriment of inno- cent parties.

5.0     SUMMARY

In this unit, we looked at the remedy of specific performance. You should now be able to: de- scribe the nature of the remedy; list the circumstances in which the remedy will be granted or re- fused; explain the doctrine of part performance; and list the grounds for refusal of the remedy.

6.0     TUTOR-MARKED ASSIGNMENT

What do you understand by the doctrine of part performance?

7.0     REFERENCES / FURTHER READING

Hackney J., (1987) Understanding Equity and Trusts; London: Fontana press

Jegede M. I. (2007rep.) Principles of Equity; Ibadan: Unique Design/Prints

Nwagbara Chigozie (2004 Rev.Ed.) Selected Cases on Land Law, Equity, Trusts, Taxation, Banking and Conflict of Laws; Lagos: CI Publications.