CAN PARTIES CONTRACT OUT OF SPECIFIC PERFORMANCE. LEGAL OPINION ON SPECIFIC PERFORMANCE ISSUE(S) Is it legally possible for parties to contract out of specific performance? THE LAW Specific performance is an order of the court requiring the defendant to carry out his obligations under an instrument (contract) according to its terms. It is a discretionary remedy. Specific performance as a general rule is granted where the common law remedy of damages is inadequate. If damages will put the plaintiff in the position where he would have been in had the instrument/contract been performed, equity will not intervene and thus specific performance will not be granted. There are however instances where the court will decline to grant specific performance even though the damages awardable are inadequate. Here the court will be taking into account special circumstances surrounding a case, inter alia, the conduct of the plaintiff that may disentitle him to the remedy of specific performance. This is the discretionary nature of equitable remedies. Much as the court has that leeway, it is notable however that discretion shall only be exercised under well settled principles. Further and as a general rule the award of specific performance is available only to parties to a contract; those who can be sued or sue for specific performance. However the exception is if it is shown that a third party involved in the transaction is not a bona fide purchaser for value without notice, that is, he has contributed to the breach by one party, in which case he can be enjoined as a party in such proceedings. Specific performance is granted for enforcement of positive contractual obligations. The party in breach of the obligations imposed on him by a contract will be ordered to take positive steps to remedy a wrong or to do something that he has failed to do. It follows therefore that matters for specific performance must be heard and determined before specific performance is granted. CONTRACTS THAT ARE SPECIFICALLY ENFORCEABLE. Contracts related to land. It is admitted in equity that damages will be inadequate compensation to a purchaser, mortgagee, charge etc when the subject matter of dispute is land. The uniqueness of land places it at a privileged position and thus any contract as long as it relates to land is specifically enforceable. Contracts related to personality/chattels of unique value are specifically enforceable. It must be shown that the chattel is a rare commodity or of unusual beauty and that damages will be inadequate as compensation. If the article/chattel is an ordinary article of commerce, then specific performance will not be ordered. Contract to pay money to a third party will ordinarily attract the award of specific performance. In such circumstances the discretion of the court is checked. Contract to secure loan and money is lent before mortgagor executes the mortgage deeds calls for specific performance. In a situation like this the mortgagee can obtain an order of the court ordering the mortgagor to execute the instrument. Usually the banks will rely on the loan agreement as there is a clause in the loan agreement that the mortgagor when called upon to do so by the mortgagee shall sign the mortgage. Default therefore on the part of the mortgagor cannot be countenanced and specific performance will be ordered as against him. Where a contract is with a company to take up and pay for debentures, the contract may be specifically enforceable . CONTRACTS THAT ARE NOT SPECIFICALLY ENFORCEABLE. A contract requiring constant supervision is not specifically enforceable. The rationale is that equity does not act in vain and accordingly the court will be reluctant to grant specific performance if the contract requires constant supervision; the court may find it difficult to ensure that the contract is supervised. The limbs of contracts falling under this category are contracts for building. As a general rule specific performance will not be granted in respect of a contract to build or repair. However the courts have developed in-roads into this general rule where three basic conditions are met : firstly, the building plan must be sufficiently defined by the contract (by providing detailed building plans) and the builder must have provided everything; secondly, the plaintiff must have substantial interest in the performance of the contract such that damages would not compensate him for the defendant’s failure to build; thirdly, the defendant must be in possession of the land so that the Plaintiff cannot employ another person to build without committing a trespass. Contracts involving personal skill are not specifically enforceable. The rationale is that the court will be unwilling to decide subsequently applications that the contract has not been properly performed. These contracts involve personal service and once an employee has fallen out of favour of his employer, it will be impracticable to grant specific performance since that will amount to forcing a person to remain in the relationship of employer-employee when there is an indication that they no longer want to continue with the relationship . Contracts lacking mutuality. The rule is that where specific performance is available to one party, it must be available to the other party. The remedy must be available to both the seller and the buyer and either party can sue or be sued under contract. therefore, specific performance cannot be ordered against a person lacking capacity because of lack of mutuality. However, there are certain contracts that may be specifically enforced in part (part-performance). If there exists matters that can be isolated from the contract (severance of contract), then they can be severed and enforced specifically. Even so, if those matters are actually dependent on one another, then severance is not possible and consequently the contract cannot be enforced in part. If in the contract, certain matters may be legal while others are illegal, so long as they are not dependent, they can be severed and the legal matters specifically enforced. Agreements without consideration An agreement where one party has not provided consideration will not be specifically performed. This is because equity will only come to the aid of a bona fide purchaser for value without notice as opposed to a volunteer. OTHER FACTORS TO CONSIDER BEFORE GRANT OF THE EQUITABLE REMEDY OF SPECIFIC PERFORMANCE/ DEFENCES. a) Hardship. It is not mere inconvenience but hardship that amounts on injustice . The hardship could either be to the plaintiff, the defendant or to a third party. Worth to note that financial inability to complete the contract as hardship is insufficient for one to escape specific performance. b) Where there is no effective contract—prerequisites of contract have not been met. c) The absence of writing for land transactions—section 3 (3) of Law of Contract Act is echoed here. d) Where the plaintiff is guilty of some conduct that would disentitle him from getting the remedy of specific performance. e) Fundamental mistake. If the mistake is of such a nature that it precludes the consensus ad idem, it will be sufficient rationale to ground refusal of specific performance to a deserving party. Specific performance will still be unavailable whether caused solely by the defendant or not or whether in any way induced by the plaintiff if granting specific performance will occasion hardship amounting to injustice. f) Misrepresentation may also remove the remedy of specific performance from the ambit of the party affected, so does misdescription. g) Laches. Should a party be guilty of laches by sleeping on his rights, the courts may most likely be unready to grant specific performance. h) Illegality. If performance of a contract will occasion or lead to a perpetuation of an illegality, the courts will not order for specific performance. i) Defective title. If the title sought to be conveyed/transferred is defective, the courts may not order for specific performance. APPLICATION OF THE LEGAL PRINCIPLES THE ISSUE IN POINT. In summary, the whole question will turn on one fundamental point, what is the nature of the contract the parties intend to enter into, is it one that is specifically enforceable or not. If the answer is in the negative, then the parties should examine whether the contract still falls under the territory of exceptions to the general rules. If not, specific performance will not pose any problem since the courts will not award it anyway. Put slightly differently, if the contract is generally unenforceable specifically but falls within the exceptions, the implication is that it is, in effect, enforceable and attracts specific performance as a remedy. If the answer to the prefacing question, that is whether the contract is specifically enforceable is in the affirmative, or if the contract falls within the exceptions to the generally unenforceable contracts, the parties may: a) Opt to give a provision for damages as sufficient compensation in lieu of specific performance in case of default of either party. My view is based on the fact that since the court shall be looking at all the surrounding circumstances, it is highly probable that it shall find specific performance as an inappropriate remedy in the face of definite provision for damages. Besides, courts give effect to contractual obligations as contained in an instrument; they don’t write contracts for the parties. b) Another way addressing the issue is by bringing the foregoing ‘defences to specific performance’ within the domain of the contract. The contract shall provide explicitly that ‘’specific performance may not be available to either party in case of …then enumerate the above defences”. c) Alternatively, include a provision in a paragraph dealing with breach of the obligations to the effect that….provided that it shall be a defence for a party in breach of the conditions/obligations to show that….then here enumerate the above points. It is also necessarily for the parties to bear in mind and interrogate issues of bargaining power vis a vis consumer protection especially under the evolving jurisprudence on consumer protection. CONCLUSION It is foreseeable that the court may frown at explicit provisions that bars specific performance especially where the parties do not have equal bargaining power and to the extent that the courts may feel that such provision is one-sided, doubts may arise as to how the courts will address this issue. Rather than going this uncharted paths, I would propose the adoption of the above alternatives.