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Specific performance of a contract

By George Coucounis

A party to an agreement is expected to honour the obligations undertaken and to comply with the terms agreed. Transactions depend on the compliance of the parties with their agreement, the performance of which indicates good faith and proper business behaviour. When a contract is broken, the innocent party may claim an order for the specific performance of the agreement and/or damages for any loss or damage he has suffered as a result of the breach. The agreement may be commercial, sale of property, rentals, providing services, sale of goods or shares in a company, building agreement, employment and any other type of contract. The Court has a wide discretion to order the specific performance of a contract in favour of the innocent party and against the one in breach, such discretion can only be exercised if the agreement is not void, is in writing, signed by the parties and the Court considers having regard to all the circumstances that the enforcement of specific performance of the contract would not be unreasonable or otherwise inequitable or impracticable. In order for the Court to examine this possibility, the plaintiff must claim this remedy in his action and through his behaviour not to make the granting of specific performance practically inapplicable.

Compensation will be the alternative remedy available to the innocent party for the damage caused to him, which naturally arises in the usual course of things from such breach or which the parties knew when they made the contract to be likely to result from the breach of it. Such compensation is not to be given for any remote or indirect loss or damage sustained by reason of the breach. The innocent party must not only claim damages in his pleading, but he must also prove them during the trial. Failure to do so will result to the adjudication of nominal damages of a small amount. Any stipulation in the contract pre-estimating the amount to be paid in case of a breach will be considered as a penalty and the Court will adjudicate reasonable compensation not exceeding in any event the maximum amount named in the agreement. It seems that a claim for specific performance should ordinarily be included in the pleading of the innocent party, who must avoid any conduct which will indicate his intention to claim only damages.

The aforesaid legal principles were examined by the Supreme Court in a recent judgment where the innocent party claimed the refund of £3million with interest as a result of a breach. The issue was discussed from the point of view of whether the relevant clause in the agreement was a promissory condition or a condition subsequent. The Court decided that the relevant clause was not a condition subsequent, since the intention of the parties upon the non occurrence of the event mentioned in the agreement was not to avoid the contract or bring it to an end without any consequence to them. It was a proper enforceable contract which could be specifically enforced. The plaintiff did not include such a remedy in his action and proceeded to claim the return of the said amount without proving the damages suffered. He claimed the amount mentioned in the agreement, but according to the law he was under an obligation to medicate his damage and due to the breach, he was not entitled to the full compensation pre-estimated. Since there was a breach, he was entitled to claim and prove the damages suffered resulting from the breach. The Court of first instance awarded him only with nominal damages of €100, finding that he failed to prove his damages. Even though the Supreme Court agreed with the reasoning of the Court of first instance, it corrected the judgment, since the plaintiff proved a specific item of damages to the amount of €11.548 and issued a judgment accordingly. The Court considered further that even if the plaintiff had made a claim for the specific performance of the contract, under the circumstances he couldn’t have succeeded, since due to his conduct, the specific performance became practically impossible.

George Coucounis is a lawyer and leading partner of George Coucounis LLC, a legal firm based in Larnaca -Cyprus
E-mail: coucounis.law@cytanet.com.cy  |  www.coucounislaw.com | tel.:- 24818288.

 

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