This article is written by Nikita Desai. It explains the concept of contract law remedy of specific performance available for the parties in the event of a breach of the contract’s terms in the United States. The basic essential elements of a valid contract, governing laws of the Uniform Commercial Code and Restatement (Second) of Contracts, historical background, and different forms of available remedies for different kinds of contracts such as land, goods, and personal services are also explained within the article with relevant case laws.

Introduction

In a world where everything is about give and take, it is obvious that there are rules and regulations in place to govern those needs for exchanges. When any individual or business needs their work to be done or needs something/someone to do the work, those individuals or businesses will pay money to other individuals or businesses in exchange for their services. For smooth transactions in the work, contracts are formed by the parties for certain durations. These contracts are evidentiary proof that both parties have agreed to do something for each other in exchange for something.

For example, imagine you own a pharmaceutical company in California. Your successful business completed 10 years, and to celebrate your success, you decided to give a present (gift), say shoes, to all of your employees. To receive those shoes, you enter into a contract with a shoe manufacturer for a certain amount of money, say $5000. The contract specifies the date, duration, and number of shoes that are to be delivered to your company for your employees.  This agreement of an exchange, i.e., shoes in exchange for money, is called a contract. An agreement for something in exchange for something.

However, do you know what happens when any one party to this contract decides to break the contract? Well, when either of the parties decides to break or breach the contract terms, then the other party suffers the harm or loss for the duration of the time and the work that they have committed. Individuals or businesses can breach or break a contract for various reasons, and whenever that happens, the opposite party has to take a fall.

So, what is the solution to this? Have you ever wondered? Well, to prevent any unfair, unjust, or unreasonable harm or loss suffered by the party who did not break the contract, the United States government has provided its citizens with certain remedies as rules and regulations. These laws in place make sure that none of the parties to the contract suffers injustice. These laws in place help the party who suffered harm or loss seek help from the courts of the United States.

One of the most common forms of help sought by businesses and individuals of businesses is the remedy of specific performance. Under this remedy of specific performance, the court can order an individual or business to do something or not do specific actions or activities. 

Let us know and understand more about what contracts and the remedy of specific performance in a contract are all about.

Overview of US Contract Law

A contract is a form of agreement or a promise (either oral or in writing) made between two people or businesses. This creates a legal duty for each party to do what each party agrees to do for each other. If parties do not fulfill their obligations towards each other, the law can make them fulfill their duties/obligations. The law of contract in the U.S. is generally governed by common law and each state has its own rules. 

A contract is considered to be a valid contract only when the basic essential elements required in the agreement are present therewith. The essential elements of a contract are required to make the contract legally enforceable in a court of law. The essential elements include

• Mutual Assent: Mutual assent is an important element required in the formation of a valid contract. Both parties must agree willingly to the terms of the contract, i.e., with free will and without undue influence.

For example, imagine a scenario where you want to sell your bicycle to your friend Sarah for $100 and Sarah agrees to the same. You both shake your hands and make a deal for the exchange. This shake of hands for the deal shows your’s and Sarah mutual consent and mutual assent to the contract for selling and buying the bicycle. This is an oral contract that is valid and enforceable.

• Offer and Acceptance: The offer and acceptance element is covered under UCC 2-206 Offer and Acceptance in the Formation of Contracts. One party must make an offer, and the other party must accept the offer made therewith to form a valid contract.

For example, imagine a scenario where you offer to sell your Television to your friend Josh for $400 and your friend Josh says, ‘I accept your offer.’ This exchange of the intention of selling (offer) and buying (acceptance) television is called the offer and acceptance element of a valid contract. 

• Consideration: Without consideration, the contract cannot be made enforceable. It means there must be something of value that is to be exchanged between the parties, and it should be adequate in its capacity. 

For example, imagine you went to a supermarket store to buy groceries. In exchange for the grocery you purchase, you pay the bill at the supermarket store with either cash or a card. Here, you are the buyer and the supermarket store is the seller. Now, this exchange of groceries and money is considered as consideration (give and take). It is a promise in exchange for something. This consideration is a real and fair promise. 

• Capacity: The element of capacity refers to the ability of an individual or a business to make reasonable decisions based on facts and considerations. It means the parties should be of a certain age and sound mind to make the contract; otherwise, it is considered to be an invalid contract.

For example, the parties entering into the contract should be of a certain age, say 18 years or above, or must be of a sound mind, say mentally stable enough to make decisions. If the parties lack such a capacity, then the contract is considered invalid. 

• Legality: The element of legality states that anything, such as a transaction, document, object, person, or person’s actions, must be in accordance with the laws. It means that whatever anyone does or does not do should also be aligned with the laws.

For example, if you ask one of your friends to steal a car for $1000, then that is considered illegal, hence an invalid contract. However, if you ask one of your friends to paint a picture for $1000, then that is considered legal, hence a valid contract.

Before we dive into more detail about the concept of specific performance, it is important to understand and have a look at the unwritten symbolic rules of laws on which the whole legal fraternity, in general, is constructed. Let us understand these symbolic rules according to contract laws. 

Contracts are three-dimensional. This means there are three different levels of contract law. This level is categorized as

• Doctrine: The doctrine level of dimension is the rules of the contract law. These are used by judges to make decisions in court. These are found in cases, statutes, and guidebooks such as Restatement of the Law Second, Contracts. 

For example, consider the principle of offer and acceptance in contract law. According to the principle of offer and acceptance, for a valid contract to be formed and exist, there must be a clear and concise offer made by one party to the other party. This offer from one party must be accepted by the other party to whom it is made. If a dispute arises in this contract and is presented before the court of law to decide whether such a contract is a valid contract or not, the judges of the court refer to the doctrine or principle of offer and acceptance for reaching a reasonable decision. 

• Facts: The factual level of dimension is the way in which the rules are applied by the courts to a disputed case. The decision sets the course for the parties involved and also sets an example for the general public.

For example, imagine a scenario where Company A and Company B are bound by a valid contract of offer and acceptance. Company A promises to sell 2000 pairs of shoes to Company B at a specific date and time. However, Company A failed to perform its promise of offer, i.e., to supply the agreed 2000 shoe pieces. Company B takes legal action against Company A for failure to perform its duty. When the case is filed before the court of law, the court applies the doctrine of breach of contract. The Court analyzes whether the contract of offer and acceptance is a valid contract or not. When the court is satisfied that the contract signed by the parties is valid, it further analyzes the facts of the case to determine whether Company A’s failure to deliver the agreed consignment constitutes a breach of contract or not, or a breach of the doctrine or not.

• Theory: The theory level of dimension is the reasoning behind the legal doctrine. Judges and lawyers use common sense, history, economics (theory of efficient breach), and philosophy to figure out how to apply contract law to a disputed case. Efficient breach theory in contract law means that one party has a right to breach the contract terms and pay damages to the other party in reasonable, unavoidable circumstances. This is because breaching is economically more beneficial than fulfilling the contract terms.

For example,  imagine a scenario where Company A (seller) and Company B (buyer) are bound by a valid contract of sale of rare collectible items. The specifications of the contract mentioned a specific delivery date for these rare collectible items. However, unforeseen circumstances come into play. Due to these unforeseen circumstances, the seller was not able to deliver those rare collectible items according to the terms of the contract. Frustrated with the delay in delivery, the buyer decided to terminate the contract between them. Later, Company B sued Company A for damages.

When the theory level of dimension comes into play, the courts and judges may rely on the economic theory of efficient breach of contract law, historical context, and philosophy theory. The Court would ask the following questions

• Whether Company B was economically right in breaching the contract terms or not. 
• Whether every rule has been enforced in the precedent cases or not. The Court would look at how the law was developed over time.
• Whether the applications of the current rules are fair and efficient in respect of the disputed case or not.
• Whether it was okay for Company B to cancel the deal with Company A and receive the (damages) money or not.

If the court is satisfied that the breach of the contract by one party was just, fair, and equitable in the long run, then the court would allow for such a breach of the contract by Company B.

Also, different rules in place help the courts and the government decide if these promises (contracts) are valid and enforceable in the eyes of the law or not. Therefore, contracts in the United States are mainly governed by three main laws

• State statutory laws: These are the government-made laws enacted by a legislature and are in the form of acts. 
• Common laws: These common laws are also known as judge-made laws, which are primarily based on past cases.
• Private laws: private laws are also known as private agreements that are made between two people who are exchanging promises to each other. These can be more significant than the rules of state laws. 

What is specific performance in a contract 

A specific performance in the contract law is a clause of a remedy. In the specific performance of a contract, the court orders the breaching party (aggrieved party) to attempt to fulfill the unfulfilled terms of the agreement, or, in other words, the court orders the breaching party to fulfill the contractual obligations. 

A remedy is a solution offered by the courts to the aggrieved party to help the aggrieved party win a lawsuit against the breaching party. The parties who wish to enter into a contractual agreement put this clause in the agreement. This clause provides the involved parties with security or protects the parties in the event of a breach.

Why the remedy of specific performance is granted by the court

When two parties sign an agreement or contract, the parties are there to fulfill the legal obligations that each party has promised to the other party in exchange for some consideration. But what happens when either one of the parties fails to keep                                                                                                                                                                                                                                                     the promise made to the other party? Well, when one party to the contractual agreement fails to perform their legal duty, promise, or obligation towards the other party, then there is a violation of the contract. This violation to perform the duty is known as a breach of contract.

So, what happens when there is a breach in the terms of the agreement? Well, to deal with those breaches in the contracts, there are governing laws made by the U.S. government for resolving such disputes. The main goal of contract law is to place the aggrieved party in such a position as if the breach of the contract never took place. Therefore, the aggrieved has a right to seek remedy. The remedy enforces the legal rights of the aggrieved party. 

In a specific performance remedy, the court orders the defendant or the breaching party to complete the terms of the contract that was breached by him/her. When one party breaches the contract and the court is satisfied that damages will not compensate for the loss, injury, or pain suffered by the aggrieved party, then under such circumstances, the court will choose to award the coercive remedy of a court order (specific performance) to the aggrieved party. 

It means that the remedy of specific performance in the contract law is only given by the court to the non-breaching party when the court believes that paying with money will not be able to compensate the non-breaching party. This is because the non-breaching party was supposed to benefit from the contractual agreement, and paying money will not bring justice to the non-breaching party. 

Specific performance as a part of equitable remedy

A remedy of specific performance is a form of alternative remedy awarded by the court to the non-breaching party under the contract law. Specific performance is part of an equitable remedy. Let us understand the gist of an equitable remedy.

Equitable remedy

An equitable remedy is developed by the courts based on changing societal norms rather than on the precedent of common law. The equitable remedy is based on what is considered to be right, fair, equal, and just for society and by society. This form of remedy does not follow the strict rules of the common law.

For example,  imagine a scenario where you hired an individual named Zino to fix the sink pipe in your house. You both signed the agreement. In respect of that agreement, you paid $20 to Zino in advance. However, Zino breaks the agreement and does not arrive at your house to fix the sink pipe.

So, if we go by the equitable remedy, you have a right to recover $20 from Zino that you paid in advance to fix the sink pipe in your house, or Zino has to fulfill the act of service as agreed in the agreement. The Court awards this remedy to undo the mistake created by the breaching party (Zino) for not fulfilling his obligations. The Court will try to compensate you for the loss or harm suffered because of Zino’s breach of contract.

The equitable form of remedy is different from the legal remedy because of its historical origins. 

• Legal remedy: Monetary relief is a form of legal remedy. The Court awards the monetary remedy to the aggrieved party as their legal right. Through this, the aggrieved party is compensated for the loss and injury suffered by him/her because of the breach of the contract.
• Equitable remedy: On the other hand, in an equitable remedy, the court orders the breaching party to fulfill part of his/her obligations.

Let us take the same example of Zino as previously discussed above. If we go by the legal remedy, then under such circumstances, the court will order Zino to pay only compensation to you, i.e., $20. If we go by the equitable remedy, then under such circumstances, the court may order Zino to pay $20, and on top of that $20 that you will receive from Zino, the court will award Zino to fulfill his obligations to fix the sink pipe in your house.

Equitable remedy in England and United States

An equitable remedy is developed by the courts based on changing societal norms rather than on the precedent of common law. The equitable remedy is based on what is considered to be right, fair, equal, and just for society and by society. This form of remedy does not follow the strict rules of the common law.

The legal system of coercive remedies or equity remedies in the United States has its roots in the history of England. Let us understand how.

History of England

In the earlier days of justice in England, when one party breached the terms of the agreement, the non-breaching party took the route of the courts of law. During that time, only Courts of Law existed that applied the rules of common law by providing monetary remedies. This Court of Law, however, could not provide fair justice to the parties in the disputed case in certain circumstances. 

For example, if a trespasser breaches the property of a landowner, the landowner will only receive damages from the judgment. There is no guarantee from the judgment that the trespasser will not trespass again on the property of the landowner. In cases like this, the non-breaching parties pleaded and relied on the Chancellor of the Supreme Administrative Officer of England for equitable relief. This Chancellor, with his political power, could offer a non-breaching party fair justice. There were no jury trials. However, these pleas were not considered to be legal or judicial. From this point on, the Court of Chancery, or the Court of Equity, was developed in England. Pleas from the non-breaching party were decided by the Chancellor in this court, where the Courts of Law failed to provide the right remedy.

In the Court of Equity, the Chancellor provided a court order to enforce their decisions, such as fines or jail time for contempt of court. It also granted relief that was coercive. Where the Court of Law dealt with property issues, the Court of Equity, on the other hand, provided fair justice to the non-breaching party.

History of the United States

In the U.S. Courts today, both the Federal Courts and the State Courts handle cases where the remedies in a judgment are a remedy of law or equity remedies. However, there is a difference between the two remedies in the U.S. courts. Before granting any of the relief to the non-breaching party, the court also considers the public interest at large, even though the general public is not directly connected with the case. Deciding whether such justice is fair or not is of utmost importance. 

Granting equitable relief is entirely based on the choice of the courts, depending on the fairness of each case. It does not depend on the non-breaching party. Before granting equity relief, the court also checks whether the legal remedies (money relief) are enough or not. On the other hand, granting legal remedies does not entirely depend on the discretion of the court. It also depends on the circumstances of each case and the non-breaching party that is asking for the legal remedies. 

In cases where both remedies are involved, i.e., equitable or legal, the Supreme Court of the U.S. has preserved the right to a jury trial involving common law lawsuits, in concurrence with the Seventh Amendment to the U.S. Constitution. 

Coercive remedy of court order of specific performance and injunctive relief

Specific performance remedies are also known as coercive remedies. To award the coercive remedy to the non-breaching party, the court will adopt two routes:

• The route of court order for a specific performance.
• The route of court order for injunctive relief.

The route of court order of specific performance

By now, we are aware of what the specific performance remedy of a contract is, as discussed in the heading What is specific performance in a contract law? However, are you aware of where the remedy of specific performance is most popularly awarded by the courts? Well, the remedy of specific performance is awarded by the court when the disputed case is mostly related to real estate. Let us understand this through the infamous Napkin case through which the agreement between the two parties was concluded to be a valid contract. A court order for specific performance was granted to fulfill the terms of the agreement by the court.

The Napkin case (specific performance of private agreements)

Significance of the case

• The case of Lucy v. Zehmer (1954) was decided by the Supreme Court of Virginia through Archibald C. Buchanan. This famous case is related to a private agreement for the sale of land.
• This case is about the enforceability of the contract or agreement based on the outward appearance of the contract. It means that the exterior declaration of motive and intent, if and when observed by an outside party to the contract, was adequate to make the contract lawfully binding.
• The case established the objective theory of contract formation. It means that for deciding whether a contract is a valid contract or not, the court also assesses the external factors and actions of the parties to make an agreement.
• The case also dealt with various criticisms such as many legal experts questioning the accuracy of the objective theory. The legal experts also believed that the court ignored the fact of the plaintiff’s history of making questionable deals to buy the defendant’s property before the filing of the case. The legal experts believed that considering the historical context of the deal is also of utmost importance, as the theory of objective might leave out the important factors at play. 

Facts of the case

• The defendant in this case, A.H. Zehmer, and his wife owned a farm known as Ferguson Farm in Dinwiddie County, Virginia.
• The plaintiff in this case, W.O. Lucy, had known the defendant for many years and also verbally expressed the desire to purchase the defendant’s farm.
• Before the lawsuit, many years ago, the defendant orally agreed to sell the farm to the plaintiff. However, later on, the defendant declined the sale of the land.
• In December 1952, both the plaintiff and the defendant discussed the possible sale of the farm to a restaurant. Both the plaintiff and the defendant were under heavy influence of alcohol.
• The defendant wrote a note on the back of the restaurant’s receipt stating that he would sell the land on the farm to the plaintiff for $50,000. This note was even signed by the defendant and his wife. 
• However, the next day, the defendant assured her wife that his intent to sell the farm was merely a joke. The same statement was even testified to by the defendant in court.
• On the next day, however, the plaintiff hired an attorney to examine the note signed by the defendant. The attorney found the note to be clear and valid. The plaintiff then wrote a letter to the defendant, asking him to finalize the deal. 
• In reply to that letter, the defendant assured the plaintiff that his intention was never to sell the farm. The defendant also assured that the note signed by him and his wife was merely written and intended as a joke.

The issue involved in the case

• Whether a contract or an agreement based on the external expression of intent or manifestations of the parties is considered to be a valid contract or not.

Judgment of the Court

• The Supreme Court of Virginia held that all the presented evidence suggested that the defendant was not too drunk in his capacity to make the agreement. The Court stated that the circumstances were not such that the defendant could not understand the nature and consequences of his actions and decisions, i.e., when the defendant signed the agreement.
• The Court stated that because of the circumstances of the situation, the plaintiff believed the agreement to be a serious business deal and a good-faith sale of the farm. For the plaintiff, the agreement was not merely a joke. 
• The Court stated that a person cannot merely admit that the sentence uttered by him/her was a joke. This is because such sentences and actions hold power that would result in the other person believing that the intention was to form a valid agreement. 
• The Court referred to the Restatement (First) of Contracts (now referred to as Restatement of Law Second, Contracts) and stated that the mental assent element is not a requirement to form a valid contract. If one party’s words or actions have logical reasoning, then what the party secretly thinks is not of importance unless the other party knows about the first party’s intention. 

“The mental assent of the parties is not requisite for the formation of a contract. If the words or other acts of one of the parties have but on reasonable meaning, his undisclosed intention is immaterial except when an unreasonable meaning which he attaches to his manifestations is known to the other party.”

• The Court also stated that the plaintiff has a right to remedy for specific performance of contracts. It means that the court orders the defendant to fulfill his end of the bargain, i.e., to sell the farm as promised in the agreement. 

The route of injunctive relief

The coercive remedy of injunctive relief is also referred to as an injunction. In injunctive relief, the court orders the breaching party to refrain from doing specific acts or requires the breaching party to do a specific act in a certain way. The injunctive relief remedy is awarded by the court only when there are no other remedies applicable to the disputed cases for the breach of the contract. The remedy is also awarded when the court is satisfied that, in the absence of injunctive relief, the non-breaching party will suffer irrevocable and irreparable harm. The injunctive relief binds not only the breaching party but also their offices, agents, employees, attorneys, or any other person or business actively involved with the breaching party.

Do you know why the court awards injunctive remedies during a breach of contract, and what would happen if one did not follow the order? The Court awards injunctive relief during such a breach in the contract to prevent any future wrongdoing by the breaching party. Injunctive relief is always awarded by the court before pronouncing the final decision in the disputed case. When the breaching party does not obey the order of injunctive relief granted by the court, then under such circumstances, the breaching party would amount to an act of contempt of the court. Also, injunctive relief is only granted in the extreme circumstances of the disputed case.

For example, let’s say you want to hire a builder to construct your new house in a suburban area of L.A. You find a builder, and you enter into a contractual agreement with the builder. There are specific terms and clauses curtailed in the agreement, such as using A-grade materials for constructing the house. However, instead of using A-grade materials, the builder used cheap construction materials to construct your new house. 

Aggrieved by this, when you file a lawsuit against the builder, you can ask the court to grant the remedy of injunctive relief. In injunctive relief, the court will order the builder to stop using cheap materials and instead use the A-grade material as agreed upon in the agreement for the construction of the house. As injunctive relief is the most suitable remedy for the kind of situation in this disputed case, the court will award the remedy. This is because if the remedy of injunctive relief is not awarded to you by the court, then in the absence of such a remedy, you will suffer irreparable harm, i.e., a poorly constructed house. 

Now, if the builder does not follow the order of injunction and still uses cheap materials to construct the house, then the builder could be in trouble for contempt of court. Therefore, the remedy of injunctive relief is only awarded in specific circumstances to prevent the breaching party from causing more harm in the future.

What are the conditions for receiving a remedy of specific performance by a non-breaching party

To receive a remedy of specific performance, even the non-breaching party has to fulfill certain conditions. This includes

• The condition is to prove that the contract between the parties is valid. 
• The injured party needs to prove to the court that the injured party has lived up to the terms of the contracts and the breaching party has not. 
• The Court also needs to be satisfied with the fact that awarding the remedy of money (legal remedy) will not provide equal justice.

The specific performance of the contract is ordered by the court for other commodities in the marketplace, apart from real estate, which is considered distinctive or unique. This includes

• Works of art.
• Custom-made products.
• Goods in short supply.

California law states that the specific performance of a contract to a non-breaching party can be awarded in the following circumstances of the case.

• When the remedy of specific performance is adequate to compensate for the loss of the injured party.
• When the non-breaching party has fulfilled its obligations.
• When the non-breaching party promises to fulfill the current and future obligations.

Refusal of the court to grant specific performance

There are certain circumstances in place where the court refuses to grant the order of specific performance to the injured party. This includes:

• When the order of specific performance can cause severe hardships for the breaching party, even though specific performance is a default remedy in real estate, then the court can refuse to grant a specific performance remedy. One such case is Patel v. Ali (1984). The case was decided by the England and Wales High Court of Justice, Chancery Division.
• When the order of specific performance is unfair, unjust, unreasonable, and contrary to the good conscience principle.
• The order of specific performance is refused when there is a lack of fair consideration, and the contract is voidable.
• When other remedies, such as damages, are sufficient to provide justice to the breaching party.
• When the plaintiff or the non-breaching party itself has unclean hands, it means the non-breaching party itself is responsible for dishonesty and wrongful acts.
• When the order of specific performance is impossible to grant, the court is unable to force the breaching party to act in a certain way following the disputed contract terms.
• When the terms of the contract are unclear and unambiguous or cannot be enforced properly by the court.
• When the contract is terminated at will, as it has such a clause engraved by the parties to it.
• The order of specific performance is refused when it involves a personal performance of service such as a personal task.
• When the contract requires constant monitoring from the parties involved under it, then the court refuses the order of specific performance.
• The order of specific performance is refused when the court is satisfied that neither party performed each of their duties adequately, as mentioned in the disputed agreement. 

Forms of contracts where courts award specific performance remedy

A contract is something every individual or business uses to shield themselves and their businesses in the event of a breach. A contract is not of a single type. There are various contracts that people sign to govern their activities and conduct their businesses. The forms of contracts include

• Contracts for land.
• Contracts for goods.
• Contracts for personal services.

Before we dive into the concepts of different forms of contracts such as of land, goods and personal services, let us first understand the laws that govern the remedy of specific performance for different forms of contracts.

Governing laws for the remedy of specific performance in different forms of contract in the United States

Various other laws at play govern the rules of remedy of specific performance for different forms of contracts in the United States. This includes

• The Restatement of Law, Second Contracts.
• The Uniform Commercial Code (UCC).
• The United Nations Convention on Contracts for the International Sales of Goods (Vienna, 1980) (CISG).

The Restatement of Law, Second Contracts

The Restatements of Law (guidebooks) are on numerous subjects of law. The Restatement of Law acts as a guidebook that is designed to simplify the existing rules of law. The main purpose of the Restatement of Law is to “address the uncertainty that arises in the rules of law. It is to further guide the courts and the lawyers to determine what the law was.”  Each Restatement of Law is organized by a reporter or reporters, who draft proposals, provide feedback, and try to alter the criticism faced by those proposed rules. 

For the contract law, the rules are found in Restatement of the Law Second, Contracts. It is also known as the Restatement (Second) of Contracts. It is published by the American Law Institute (ALI). Before the Restatement (First) of Contracts was published in the year 1932 and the Restatement (Second) of Contracts was published in the year 1981.

Most of the basic rules and regulations of the common law of contracts are defined in the Restatement (Second) of Contracts. This is the ultimate guidebook on how to draft agreements. It also provides clear basic ideas about the contract law. The courts in the U.S. rely on and refer to the Restatement (Second) of Contracts. When the state appellate court is presented with difficulty in choosing which doctrine to apply to the disputed case, the courts often rely on the Restatement (Second) of Contracts for a safer option.  The Restatement (Second) of Contracts is the work of the reporters Robert Braucher, Harvard Law School, and E. Allan Farnsworth, Columbia University School of Law.

The Uniform Commercial Code (UCC)

The Uniform Commercial Code (UCC) provides a set of rules or principles of contract law in the form of ‘Articles’. The UCC is adopted by nearly every state (50 states) and is binding on all the courts of the United States. The UCC was adopted in the U.S. in 1953. The UCC supersedes any common law rules that are inconsistent with it. The UCC covers rules regarding different types of contracts, especially in business. The UCC represents the statute that governs contract law. To address the issue of commercial relations that arose in the United States, the UCC was formed.

The UCC is the combined effort of the ALI and the National Conference of Commissioners on Uniform State Levels (NCCUSL). The Commission is also known as the Uniform Law Commission (ULC). The ULC drafted more than 200 uniform rules of law in various fields of law.

Article 1- General Provisions (2001) and Article 2- Sales (2002) are the two main articles that deal with the laws of contracts.  If the terms of the agreement or contract do not involve the goods or the sale of the goods, then such an agreement is not considered a contractual transaction for the sale of goods and is not covered under Article 2 of the UCC. However, such contractual transactions (for example, the sale of land or employment services) are still covered by the common law of the state in the U.S.

The provisions of Article 9 Secured Transactions (2010) deal with the security interest agreement that governs the contracts that assign the right to payment. The contracts that are associated with business activities or any particular activities in general are regulated by the State or Federal Law of the United States.

To harmonize the UCC and the Restatement (First) of Contracts, the Restatement (Second) of Contracts was adopted. However, the major importance is still of the Restatement (Second) of Contracts, even though it does not involve contracts regarding the sale of goods. The Restatement (Second) of Contracts is also not governed by the UCC.

The United Nations Convention on Contracts for the International Sales of Goods (Vienna, 1980) (CISG): 

The United Nations Convention on Contracts for the International Sales of Goods (CISG) deals with international agreements. The United States joined this convention in the year 1998. This convention governs the law of contracts on a global scale.

The main goal of the CISG is to enable a “modern, uniform, and fair regime for contracts for the international sale of goods.” The CISG helps to provide uniformity and certainty in commercial transactions or commercial exchanges while also reducing the cost of transactions.

The CISG provides a set of rules only for selling goods between businesses internationally. It means the rules of contracts are only applicable when businesses are from different countries. The CISG does not cover the rules of sale of goods to consumers, services, or any other specific types of goods. The second part of the CISG deals with the formation of contracts, and the third part of the CISG deals with the duties of the parties that are involved in the contract.

Contracts for land 

A contract for the sale of land is also referred to as a contract for deed when one buys the land from the other. The contract of deed states that when a buyer purchases the land in question, the buyer will immediately receive the land for its use, and the payment in respect of that land can be made by the buyer in installments over some time. However, the legal ownership or rightful title to the land in question still belongs to the seller, unless the whole payment is made by the buyer. A contract for the sale of land has many names. It can be referred to as a land contract, a land sales contract, or an installment contract.

Do you know why the land in question or the land sale contract is considered unique? The sale of the land in question is considered a special kind of real estate contract because, in such a contract, the seller provides a loan to the buyer. This loan provided by the seller is then used by the buyer to purchase the land at the agreed price and enjoy the rights of a landowner. Later, the buyer repays the loan to the seller in installments. Once the total amount of the loan, including the interest, is recovered by the seller and paid by the buyer, then the legal ownership of the land is shifted to the buyer. 

To shift the title of ownership from the seller to the buyer, both parties sign the agreement. This agreement is called a deed or contract for deed. The buyer is also required to pay a down payment to the seller. This is to shift the legal title towards the buyer.

Traditionally, whenever there was a breach of the contract of the land by either of the parties to the agreement, the courts majorly used to award legal relief to the injured party, i.e., the remedy of money as a form of compensation. The remedy of equitable relief was rarely awarded by the courts. 

The equitable remedy was awarded by the courts only when the legal remedy proved to be inadequate for serving fair justice to the non-breaching party. The inadequacy was for the fact that the property in dispute was considered unique. Also, today, to obtain specific performance, the goods in question should have unique characteristics and be under special circumstances. This is discussed further in detail in the heading The Buyer’s Right to Replevin. 

Traditionally, in the contract of sale of land, the land in question was considered to be unique and the remedy awarded by the courts was automatically equitable relief, i.e., of specific performance. However, land involving personal property was not cut to the mark. This is because there was no presumption of uniqueness for personal property. Also, the burden of proof falls on the non-breaching party to prove why the legal remedies were inadequate as a form of relief.

Loveless v. Diehl (I and II) (Specific performance in contract of land)

Significance of the case

• The case of Loveless v. Diehl (1963) was decided by the Supreme Court of Arkansas. Here, the court ordered the remedy of equitable relief of specific performance in a real estate contract dispute, i.e., a contract for the sale of land.
• In addition to the contract for the sale of land, the agreement included an Option Contract. The option contract allows the party to purchase or sell the land at a specific price and time. This type of contract is upheld for consideration for 3 months in the UCC if it is in writing and signed by the merchant.
• The case emphasizes the decision of the Supreme Court of Arkansas in considering when the remedy of specific performance or the principle of equitable relief should be granted to the parties in dispute for the breach of the contract for the sale of land.
• The case emphasizes how important it is for the parties to fulfill their part of the obligations to prevent the events of the breach and how the opinions of the court could differ to grant the remedy of specific performance.

Facts of the case

• The Loveless (husband and wife) owned a dairy farm in Arkansas, and they were the defendants (sellers) in the case.
• On December 15, 1936, the Diehls (Husband and wife) leased the dairy farm of the Loveless for 3 years for $100 per month and they were plaintiffs (buyers) in the case. The contract for the sale of land was made in writing.
• The lease agreement had a clause of open contract that allowed the Diehls to purchase the farm from the loveless for $21,000 at any given time of the lease agreement.
• The Diehls purchased the land and made certain improvements on it for a total value of $5000 during their lease terms. Along with that, farm equipment was also purchased by Diehls from Loveless for a value of $1500. A promissory note was executed for this value, which was never paid by the Diehls.
• During the lease terms, Diehls wanted to purchase the dairy farm by invoking the option contract. They even conveyed this information (desire to purchase the land) to the Loveless two weeks before the expiration of the lease agreement and requested the deed. However, Diehls was not financially strong enough to purchase the land. 
• Instead, Diehls listed the dairy farm of the Loveless for sale. The sale of the dairy farm was more valuable than what the Diehls initially purchased. This was done to cover the cost of improvements made by them on the dairy farm.
• Before the expiry of the lease agreement made between the two parties, i.e., Diehls and Loveless, the Dielhs found a purchaser for the dairy farm. The name of the purchaser was Dr. J.W. Hart. The third-party purchaser (Dr. J.W. Hart) and the Diehls signed the agreement. 
• Dr. J.W. Hart agreed to purchase the land for a value of $22,000. Out of this value, $21,000 was to be paid to Loveless and $1,000 to the Diehls. However, Loveless told the third-party purchaser that they did not intend to sell the farm to the Diehls.
• The deal with Dr. J.W. Hart fell through, and the value of $22,000 was not returned to the Loveless. 
• The Diehls removed certain improvements, nearing the end of a lease agreement. Later, the dairy farm was forcefully taken from the Diehls by the Loveless.
• A suit was filed by the Diehls against the Loveless for breach of contract for the sale of land in the Chancery Court. The suit was for the specific performance of the Option Contract or the damages. In the counterclaim, Loveless argued that the Diehls breached the promissory note. 
• An appeal was filed by the Loveless (sellers) from this decree in the Supreme Court of Arkansas. Even a counter-appeal was filed by the Diehls (buyers) in the Supreme Court of Arkansas. The Petition from Diehls was reheard by the Supreme Court of Arkansans

Issues involved in the case

• Whether the specific performance of the option contract was a valid decision or not.
• Whether the award of damages ($21,000 rent value of the land) to the Loveless and interest on the unpaid purchase price to the Dielhs during the period between the lease expiry and entry of decree was a valid decision or not.
• Whether forcefully acquiring possession of the land by the Loveless waived the right of Diehls from repossessing the farm equipment of promissory note or not.

Judgment of the Court

• The Chancery Court held the judgment in favor of the Diehls (buyers) and ordered the specific performance of the option contract and monetary damages as a form of compensation to the Loveless (sellers). The decision was based on the belief that monetary relief would provide adequate justice to the non-breaching party (sellers).
• However, the Supreme Court of Arkansas reversed the decision of the Chancery Court for specific performance. Instead of awarding monetary damages to Loveless, the remedy was awarded to the Diehls. However, this decision was changed in the rehearing of the petition filed by the Diehls. 
• The Supreme Court of Arkansas, regarding the petition filed by the Diehls against the order of damages, reconsidered and stated that the order of specific performance of Option Contract was legally valid. This is because of the terms of the agreement entered into by the contracting party. This idea was based on the legal principle (doctrine dimension theory of contract law).
• The Supreme Court of Arkansas, however, stated that the equitable remedy of specific performance is provided at the option of the court where the court is satisfied that the contract entered into by the parties was in writing, fair, certain, just, for valuable consideration, and without hardships.
• The Supreme Court of Arkansas stated that the buyers improved the land with their considerable time and money, and therefore specific performance was a must remedy to prevent injustice. 
• The Supreme Court of Arkansas stated that the value of the property after the improvement was much higher than the contract value of the land made by the sellers and the buyers. This is indicated by the seller’s resistance to the enforcement of the suit. This idea was based on the equitable principle. Therefore, the specific performance of the option contract was valid, and the case went in favor of Diehls.
• The Supreme Court of Arkansas stated that the award of damages ($21,000 rent value of the land) to the Loveless and interest on the unpaid purchase price to the Dielhs during the period between the lease expiry and entry of the decree was a valid decision because the buyer fulfilled its obligations to make a valid tender. The Court explained that there is a difference between tender with concurrent duties and tender with the duty of only one party.
• The Supreme Court of Arkansas upheld the decision of the Chancery Court and stated that the repossession of the farm equipment did not waive the right of the Diehls to enforce the promissory note.  

Contracts for goods 

Every state in the United States has its own rules and regulations that govern the sale of goods contracts. The United States does not have a national law for the sale of goods contracts. The lack of laws at the national level sometimes creates problems in conducting contracts of goods for small businesses. 

For example, due to the lack of national laws, unfair practices easily make their way into small businesses. This also makes it difficult to settle disagreements between small businesses and their large business partners. To resolve such problems the government of the United States took some steps of possible solutions. The U.S. enacted the Small Business Act in 1953. This Act then created the Small Business Administration, which assists small businesses during times of crises and difficulties.

Let us understand the contracts for goods according to the UCC.

The buyer’s right to replevin

The UCC 2-716- Buyer’s Right to Specific Performance, or Replevin, governs the provision regarding specific performance under sales of goods contracts. UCC 2-716 is also known as Buyer’s Right to Replevin. The main purpose of this provision is to broaden the applicability of specific performance. Let us have a look at what Section 2-716 has to state. 

UCC 2-716 states that the buyer or the non-breaching party can receive a specific performance remedy under the following conditions.

• The Courts can grant the “specific performance regarding the goods when those goods in question are unique or in special circumstances.”

This means the goods involved in the agreement or the contract of goods should be of special quality, along with the situation also being special. The goods do not need to be specific. 

This provision states that specific performance remedies can be granted even if the goods are replaceable. If the goods meet the requirements of unique quality and special circumstances, then the court can make the breaching party fulfill the breached terms of the contract of goods instead of just paying the breaching party the damages.

• The Courts can grant “specific performance at its discretion, including deciding the terms and conditions as to payment of the price, damages, or other relief as the court deems just”

This means that when the specific performance is awarded by the court to the breaching party, the court can decide on the details of the terms and conditions of the agreement the breaching party needs to fulfill. The Court has the right to decide on how the price should be paid, if any damages need to be paid or fulfilled, or any other relief the court thinks is fit for prevailing justice.

• The Courts can grant “specific performance to the buyer or replevin regarding the goods identified in the contract if, after reasonable effort, the buyer is unable to cover for such goods or the circumstances reasonably indicate that such effort will be unavailing or if the goods are shipped in reservation and security interest regarding the goods is made or tendered.”

This means that the courts can grant the specific performance or replevin to the buyer under certain situations, as follows:

• When the buyer is unable to find the replacement of the goods after a reasonable effort is made and that is mentioned in the agreement bought by the parties to the court. 
• When the reasonable circumstances of the case indicate that the buyer will not be able to replace the goods as mentioned in the contract. This is because attempting to find the goods for replacement remains unsuccessful.
• When the goods are shipped with a reservation.
• When the goods are shipped with security interest and the interest is settled.

For example, imagine you want to purchase a rare painting from a seller. This painting is not ordinary. This painting is a very rare collectible item. Even the situation is very special because it is the last piece of painting ever made (just like the painting of Monalisa; one of a kind). For the contract of goods (painting), you sign an agreement with the seller.  

Now, if the contract was for a normal transaction of goods (ordinary painting available everywhere), then under such circumstances, you will receive the money back as a form of compensation. However, the contract included a  specific performance clause for this rare collectible painting. So in such cases of breach, the clause of the specific performance is enforced by the court.

Now, in case the seller from whom you want to purchase this painting backs out of the deal or refuses to sell you the painting, under such circumstances, the court can award you with the right of replevin. The Court can make the seller deliver that rare painting to you, instead of just paying you with the money. This is because the painting is unique and also, the situation is such that there is no other piece made or available in the marketplace in the entire world. 

Now, if the court is satisfied that the right of replevin is the right remedy in this scenario, then the court will decide the terms and conditions of the remedy. In this scenario, in addition to the agreed price, the court can make the seller pay compensation for the inconvenience caused to you because of the breach. This is done to ensure that justice is fair in its outcome. 

Now, if you are unable to find the same piece of the rare collectible painting, despite your best effort, or you are reasonably affirmative that you will not be able to find another rare collectible painting like this, no matter how much effort you put, or you have already paid a security interest against the rare painting to be delivered at your doorstep, then under such circumstances, the court will make sure that you will receive the rare collectible painting.

Scholl v. Hartzell (No right to replevin for unexecuted contracts for goods)

Significance of the case

• The case of  Scholl v. Hartzell (1981) was decided by the Court of Common Pleas of Pennsylvania. The case established the importance of when the right to replevin as a remedy should be provided to the party in the disputed case.
• The remedy of the right to replevin for the contract of goods can only be awarded by the courts when the goods in question qualify the characteristics of uniqueness and when there exists no other remedy in the law to provide justice to the non-breaching party.
• The case established that the right to replevin cannot be granted to enforce the unexecuted contract (parties never fulfilled their duties) for the sale of goods.

Facts of the case

• On April 3, 1981, Hartzell, the defendant in the case (seller), placed an advertisement in the daily newspaper for the sale of his car. This was an offer to sell made by Hartzell in the newspaper. This car was a 1962 Chevrolet Corvette automobile. Even the miscellaneous parts of the car were advertised for sale. The value of the sale was $4000.
• On the same day, Scholl, the plaintiff in the case (buyer), contacted Hartzell to inspect the details of the said automobile and its parts. After the inspection, both parties signed the agreement for the sale of the car (goods) for a value of $4000.
• The security deposit of $100 was made by Hartzel and paid by Scholl. The receipt of the security deposit also consisted of a note stating that $3900 would be due and payable at the time of the pickup of the automobile by Scholl.
• Later, on the same day, Hartzell informed Scholl that he had obtained a bank money order for the balance, payable to Hartzell. Hartzell also informed that this payable amount will be hand-delivered when Scholl picks up the automobile.
• Two days later, Hartzell informed Scholl that he no longer wanted to sell the automobile and therefore would not accept the payment that was tendered. Hartzell even returned the security deposit to Scholl. 
• However, Scholl was persistent enough to purchase the automobile and kept contacting Hartzell to take the full amount of the automobile and fulfill the contract for sale of goods. However, to no avail, Hartzell did not agree.
• A suit was filed by Scholl (buyer) for Replevin, i.e., the Buyer’s Right to Specific Performance as earlier discussed. 
• Scholl asked for the judgment of specific performance, i.e., to receive the said automobile and its parts in alignment to payment of sale price or to receive the damages of $4655 in value, i.e., the difference between the sale price and replevin value of the automobile.
• Hartzell argued that the right to replevin was not an appropriate course of legal action by Scholl. 

The issue involved in the case

• Whether the plaintiff has the right to replevin or not?

Judgment of the Court

• The Court of Common Pleas of Pennsylvania stated that the right to replevin can only be granted when one person has exclusive and immediate possession of the personal goods that the other party claimed from the other party in the agreement. 
• The Court stated that the security deposit of $100 was paid by Scholl; however, the due amount and transfer of title of ownership of the automobile and its parts remained pending. Therefore, tendering of security deposit does not provide Scholl with the right to replevin.
• The Court stated that if the remedy of replevin is granted to the buyer, then it would cause injustice to the seller as the right of specific performance would force the seller to fulfill the contract of sale. Here, the money was neither paid nor the automobile delivered. Therefore, the contract remained unexecuted.
• The Court stated that the equitable remedy of specific performance can only be granted when other remedies to the breach of contracts for goods prove to be ineffective for serving justice to the non-breaching party.
• The Court stated that even though the 1962 Chevrolet Corvette automobile is considered a collectible item, the automobile lacks the capacity to be considered a unique (rare) good.

Sedmak v. Charlie’s Chevrolet Inc (Specific performance of contracts in special circumstances)

Significance of the case

• The case of Sedmak v. Charlie Chevrolet Inc (1981) was decided by the Missouri Court of Appeals, Eastern District, Division Four.
• The case established that if a certain amount of payment is made towards the fulfillment of an oral contract, then it is considered a valid contract in the UCC- Section 400.2-201 (3) (c).
• The case established that the court has the power to force someone to do something as they promised to do in an agreement, even if it is not about special terms of the contract, unless it is not fair and does not make sense. This means the goods need not be unique, they can be for any situation that is deemed right by the court as aligned with UCC-Section 400.2-716 (1).

Facts of the case

• Dr. and Mrs. Sedmak (Sedmaks) were the plaintiffs (buyers) in the case, and both of them were automobile enthusiasts. They owned six Corvettes during the trial period alone.
• Charlie’s Chevrolet Inc., on the other hand, was the defendant (seller) in the case.
• The Chevrolet automobile was a limited edition car (6000 pieces), as it was manufactured to commemorate the selection of the best Corvette at the Pace Car for the Indianapolis 500. 
• In July 1977, the same information (a limited edition car was being manufactured) was published in the magazine Vette Vues, which the Sedmaks referred to. 
• The Sedmaks wanted to purchase the car after reading the information in the magazine. The Sedmaks were regular subscribers of the magazine. 
• In November 1977, Sedmaks enquired about the limited edition automobile by contacting the sales manager of Charlie’s Chevrolet Inc. The sales manager informed Sedmarks that the car was unavailable at the time in their showroom.
• In January 1978, Sedmaks again contacted the sales manager for an inquiry about the automobile, and the presence of the car in the showroom was affirmed by the sales manager. 
• Sedmaks then went to the showroom of the seller and made a security deposit of $500 regarding the purchase. The receipt bore the names of the sales manager and Charlie’s Chevrolet Inc. 
• The Chevrolet automobile booked by the Sedmaks had certain modifications within the car as it was requested by the Sedmaks. The exact value of such modifications at the time remained unknown to the sales manager, and the same was communicated to the Sedmaks. 
• The value of such modifications could only be known to the sales manager after the job of modification was done. No retail dealer order form (contract) was sent and mailed by the sales manager to the Sedmaks in this reference.
• Both parties then signed the contract for a value of $15,000 (manufactured retailed price) as Sedmaks wanted to purchase a Corvette automobile from the seller.
• On January 25, 1978, both parties agreed to the arrangement that the limited edition Chevrolet would be kept at the showroom for promotional purposes until the end of the Indianapolis 500.
• After the car was delivered to the showroom, one of the agents informed Sedmaks that they could not purchase the car for $15,000. The agent informed the Sedmaks that they would have to bid on the purchase of the automobile as the price increased beyond what was suggested earlier.
• Sedmaks alleged that the seller breached the contract terms.
• A suit was filed by Sedmaks against Charlie’s Chevrolet Inc. for the specific performance in the Court of Common Pleas of Pennsylvania. 

Issues involved in the case

• Whether there was a valid oral contract for the sale of the Pace Car at the suggested price of the manufacturer or not.
• Whether the oral contract is enforceable under the Statute of Frauds or not.
• Whether the remedy of specific performance is appropriate for the Sedmaks or not.

Judgment of the Court

• The Trial Court awarded the Sedmaks the specific performance remedy and stated that there is no other remedy at law for Sedmaks. This is because the circumstances were special. 
• The Trial Court stated that “Sedmaks cannot purchase a similar automobile with mileage, condition, ownership, and appearance that too without considerable expense, trouble, loss, great delay, and inconvenience.” Even though the car was not unique, the circumstances revolving around it were special. The car was also a limited edition.
• The Missouri Court of Appeals, Eastern District, Division Four, however, stated that the parties entered into an oral contract for the sale and purchase of the automobile at the suggested price of the manufacturer. This is proved by the evidence and facts of the case. Therefore, the contract was enforceable under the Statute of Frauds.
• The Court affirmed the decision of the trial court for the remedy of specific performance to Sedmaks and stated that Sedmaks was entitled to the remedy because the contract was fair and just. 
• The Court stated that all the equitable principles were met by the Sedmaks. Therefore, this called for the special circumstances of the case. Hence, for the breach of contract of sale of the automobile, the remedy of specific performance is awarded concerning the principle of UCC 2-716.

Contracts for personal services 

Earlier, we discussed and understood what contracts for land and what contracts for goods are. In this section, let us understand what contracts for personal services are regarded as. 

A contract of personal service is similar to an agreement that is made between two parties who desire to fulfill something in exchange for something. In a contract for personal service, when one party or person agrees to do a job or provide service to the other party, such agreements are referred to as contracts of personal services. This form of agreement, or contract, is very popular in California. People or businesses use such contracts for work agreements, performer agreements, or freelancer agreements. The contract for personal services is tailored according to the needs and relationships of the parties involved in the contract. The most essential elements of a contract of services include the nature of the service, compensation in the event of breach, duration, termination, and other legal necessities as the parties are required to contract upon.

Let us understand the contract for personal services through landmark judgments. 

In Re. Mary Clark, A Woman of Color (Illegality of personal services contracts)

Significance of the case

• The case of Re. Mary Clark (1981) was decided by the Indiana Supreme Court. The case was initially filed before the Knox Circuit Court. The case conveys the story of a struggle for independence from slavery and personal services.
• The case was enforced to end the slavery and indentured service of contracts. The case made certain aspects of contracts for personal services illegal in Indiana.

Facts of the case

• Mary Clark, a woman of color, was born into slavery in Kentucky. In 1814, Mary Clark was purchased by Benjamin L. Harrison as a ‘slave for life’ in Kentucky.
• In 1815, by bringing Mary Clark from Kentucky to Vincennes, Indiana, Harrison freed Mary Clark from the born slavery in Kentucky. 
• After that, Mary contracted with Harrison to be his indentured servant for 30 years. An indentured servant is a form of labor. The individual works without a salary to repay the servitude or loan and is bound by a contractual agreement. It is also known as indentured servitude.
• On June 29, 1816, Indiana adopted its State Constitution for the very first time. 
• Article 11  Section 7 of the Constitution stated that any agreement made by a negro or mulatto outside the bounds of Indiana (outside the state of Indiana) is considered to be an invalid indenture contract of service. This type of contract is not considered valid within Indiana. 
• The Indiana state constitution also banned slavery and involuntary servitude (forced work), except as a punishment for a crime if found guilty. Freely indenturing service was, however, considered to be valid. 
• On October 24, 1916, the contract of indentured servitude for Mary was nullified by Harrison. However, on the same day, Mary Clark signed a contractual agreement with General W. Johnston, who was his heir, executor, and administrator.
• Mary Clark was assigned as an indentured servant and housemaid for 20 years for General W. Johnston. The contract of personal service was involuntarily agreed upon by Mary Clark. The signature of Mary Clark was also present within the agreement as ‘X.’
• However, Mary Clark filed a Writ of Habeas Corpus in the Knox Circuit Court alleging that Mary Clark was illegally detained to be the servant of General W. Johnston. A writ of Habeas Corpus allows lawful determination of the question of whether the person detained or kept as a servant is legally valid or not.
• General W. Johnston argued that he purchased Mary Clark from Harrison for $350. He also argued that Mary Clark indentured herself to him for 20 years.
• The Knox Circuit Court, however, held in favor of General W. Johnston.
• Later, the case was filed in the Indiana Supreme Court. 

Issues involved in the case

• Whether the involuntary service by Mary Clark is considered to be voluntary because it is performed under the contract of indenture service or not.
• Whether the Indiana state constitution clause of contract of servitude or personal services is contrary to the constitution of the U.S. or not.

Judgment of the Court

• The Knox Circuit Court stated that, by virtue of Article 11- section 7 of the Indiana state constitution, the agreement between Mary Clark and General W. Johnston was legally valid within the Indiana constitution. This is because Mary Clark freely indentured the service contract with General W. Johnston. The agreement was signed by Mary Clark of her own free will. 
• The Knox Circuit Court also stated that if any agreement was made by a negro and was outside of Indiana, then the agreement would be considered illegal, and no remedy of specific performance or damages could be bought before the court of law. 
• The Knox Circuit Court, however, stated that such individuals have equal rights and opportunities to make and enter into contracts of their own free will. Under such circumstances, those contracts are considered to be valid, despite being made by a person of color. 
• The Knox Circuit Court held in favor of General W. Johnston and ordered Mary Clark to be returned to him to serve for the rest of the years according to the agreement. The Court also ordered General W. Johnston to cover all the charges and legal costs of Mary Clark.
• The Indiana Supreme Court, on the other hand, reversed the decision of the Knox Circuit Court. 
• The Indiana Supreme Court stated that the Indiana state constitution allows people of color to enter into indentured service as long as it is their choice. However, Mary Clark filed a case to make her free from serving her master. This showed Mary Clark did not want to work any longer. Therefore, by virtue of U.S. Constitution, Mary Clark is under an involuntary personal service contract.
• The Indiana Supreme Court ordered Mary Clark to be set free from the clutches of her master and ordered damages to be paid to General W. Johnston to cover the costs of Mary Clark.

Lumley v. Wagner (Right to terminate a specific performance of a contract)

Significance of the case

• The case of Lumley v. Wagner (1852) was decided by the Chancery Division, England.
• The case emphasized the court’s ability to use an injunction to prevent someone from doing something that they promised not to do in a contract.
• The case also emphasized that the court cannot make someone do a specific thing that someone agreed to do in a contract.

Facts of the case

• Benjamin Lumley was the lessee of ‘Her Majesty’s Theatre in London and was the plaintiff in this case. A lessee is an individual who has temporary possession of something (even a contract of personal service) through a lease. This something belongs to the lessor.
• Johanna Wagner, on the other hand, was another lessee of ‘Covent Garden Theatre’. He was the defendant in the case. 
• Albert Wagner (father of Johanna Wagner), Mademoiselle Johana Wagner, and Frederick Gye were also the defendants in this case.
• On 9th November 1851, a guy named Joseph Bacher, who was the agent of Johanna Wagner and Albert Wagner, made an agreement with the plaintiff in Berlin. 
• The plaintiff signed an agreement to hire Mademoiselle Johana Wagner as a singer to sing at the plaintiff’s ‘Her Majesty’s Theatre’ in London for 3 months (twice a week). This agreement was reduced to writing in the French language. 
• The agreement also consisted of a date for the show. The agreement contained various terms and conditions for Mademoiselle Johana Wagner. 
• In simple terms, the plaintiff signed an agreement with the defendant to hire a third party to perform as a singer in the plaintiff’s theatre. 
• The agreement stated the salary was $400 for a month with $100 being paid each week, no other cantatrice was allowed to sing for those 3 months; and during illness, the singer would be paid only for the parts she sang along with a commitment to perform later for the missed period. If the singer wishes to perform extra, then $50 would be paid extra for each show.  If the singer failed to appear eight days before the show, the plaintiff would consider such action a breach of contract. Plaintiff had a right to transfer this contract to his successor in the event of ceasing the enterprise. A similar condition applied to the singer; Mademoiselle Johana Wagner.
• In November 1851, the plaintiff met the agent of the defendants in Paris. The plaintiff had an objection regarding the missing clause of the agreement. The plaintiff wanted to add this clause to the agreement. The clause prevented the defendant from exercising her professional abilities in England without the consent of the plaintiff.
• However, the defendant signed another agreement with Frederick Gye (another defendant in this case), whereby it was mentioned that if the singer is paid a larger sum of money than offered by the plaintiff, the singer should perform for Frederick Gye and Johanna Wagner for their theatre at the Royal Italian Opera and Covent Garden. The agreement stated that the singer should abandon the agreement made with the plaintiff.
• In simpler terms, Mademoiselle Johana Wagner (defendant) agreed to explicitly work for the plaintiff. However, Frederick Gye, a competitor (another defendant), compelled Mademoiselle Johana Wagner to break her contract with the plaintiff. 
• On 22nd April 1852, the plaintiff filed a suit against Johana Wagner, Albert Wagner, and Frederick Gye for the breach of the contract terms that restrained the singer from performing anywhere else.

The issue involved in the case

• Whether the court has the right to order an injunction and terminate the specific performance of a contract made by Mademoiselle Johana Wagner with Frederick Gye or not. 

(In simpler terms, whether the court has a right to make Mademoiselle Johana Wagner sing for the plaintiff and not anywhere else or not).

Judgment of the Court

• The Chancery Court stated that the agreement made by the two parties, i.e., the plaintiff and the defendant (Johana Wagner), was for an offer and acceptance of a personal service contract by a third party.
• The Chancery Court stated that:

“the suit filed by the plaintiff was not for specific performance of a contract and instead the suit filed was for an injunction to prevent the violation of the negative stipulation in the defendant agreement.”

It means that the suit filed by the plaintiff was not to compel Mademoiselle Johana Wagner to fulfill specific terms of the contract. Instead, the suit filed by the plaintiff was for injunction, i.e., to stop Mademoiselle Johana Wagner from singing at Covent Garden or Royal Italian Theatre (to stop her from breaking a promise made to the plaintiff, i.e., not to perform anywhere else) without the plaintiff’s permission.

• The Chancery Court stated that the court of equity does not have a right to grant an injunction that prevents Mademoiselle Johana Wagner from performing at any other theatre other than the plaintiff’s theatre. This is because an injunction order like this would mean that the court ordered Mademoiselle Johana Wagner to perform at any other theatre, including the plaintiff’s, for a duration of 3 months, for which the singer was hired.
• The Chancery Court stated that the court does not have a right to terminate the specific performance of a contract made by Mademoiselle Johana Wagner with the plaintiff because such a contract is a personal service contract. Therefore, the court cannot compel Mademoiselle Johana Wagner to sing for any other theatre.
• The Chancery Court awarded an injunction to stop Mademoiselle Johana Wagner from performing at any other theatre.

Dallas Cowboy v. Harris (temporary injunction of specific performance)

Significance of the case

• The case of Dallas Cowboys Football Inc. v. Harris (1961) was first decided by the Trial Court of Texas, Dallas, and then by the Court of Civil Appeals of Texas, Dallas.
• The case highlighted the dispute in a professional football sports game involving contracts, injunctions, and the impact on the case when special abilities are possessed by the player (employee).
• The case clarified the validity of the temporary injunction granted by the trial court in cases where the judgment on the merits of the case has already been decided. 
• The case also clarified that a full trial is an important factor when the matter is related to an injunction.

Facts of the case

• James B. Harris, a footballer with exceptional footfall skills and knowledge, is the defendant in this case.
• On the other hand, The Dallas Cowboys Football Club (the Cowboys) organization is a plaintiff in this case.
• In June 1958, Harris signed a contract with the Los Angeles Rams Football Club (Rams Club), a member of the National Football League organization.
• The agreement was signed for a consideration of $8000 to play football and engage in activities related to football only for the Rams Club. 
• The contract also restrained Harris from playing football for any other club, and in terms of breaching such a clause of the contract, the Rams Club would have a right to bring an injunction against Harris.
• This is because Harris had “special, exceptional, and unique knowledge, skill, and ability as a football player. If Harris decides not to play for the Rams Club, then in such a situation, the Rams Club will suffer irreparable harm that cannot be compensated by damages.”
• The contract was extended till 1st May 1959 (1 year). The agreement provided that after the end of a one-year, Harris has the option to renew the contract for an additional year. The contract also stated that if Harris decided not to play football and rejoined again for play, then the lapsed period would be considered a continuous period of the contract.
• The agreement was completed in one year. Both the parties fulfilled their duties and obligations towards each other. However, after that both the parties disagreed with the option of renewal of the contract. 
• Harris, therefore, took a sabbatical from playing professional football after 1959. Harris continued his education as a student at The University of Oklahoma and also became the football coach of the University. 
• The Los Angeles Rams Football Club then assigned the contract to the Dallas Cowboys Football Club Inc. (the Cowboys), a new member of the National Football League organization.
• In April 1960, Harris signed a contract to play football with the Dallas Texans Football Club (the Texans), a member of the American Football League organization.
• In April 1960, The Dallas Cowboys Football Club, Inc. filed a suit for an injunction against Harris.
• The suit was filed in trial court against Harris to restrain him from playing football for the Dallas Texans Football Club. This is because according to the 1958 contract between the two parties, i.e., Harris and the Rams Club, the defendant was still bound by the agreement. 
• Various arguments related to contract validity, antitrust laws, and reasonableness of the contract terms were raised by both parties to this dispute. 
• In the trial court, the case went in favor of the Dallas Cowboys Football Club Inc. and the court granted a preliminary injunction.
• Harris then filed an interlocutory appeal against this injunction before the Court of Civil Appeals of Texas, Dallas. However, before the proceeding could take place before the Court of Civil Appeals of Texas, the trial court decided the judgment on the merits of the case.
• The Cowboys argued that the definition of the term unique according to the New Century Dictionary  refers to “there is only one, with abilities that are unparalleled.”
• Harris, on the other hand, argued that he did not meet the requirement of the term unique according to the New Century Dictionary. However, he possessed some of the skills and abilities of a football player. The same statement by Harris was affirmed by the Dallas Texans Football Club’s manager.
• Harris also argued that the contract was invalid and that the Rams Club did not properly exercise its option clause (renewal) of the contract. Harris argued that during the renewal of the contracts, the Rams club presented Harris with a new contract. This also contained the option of renewal. However, in the original contract, the Rams club said that the new contract should not have an option for renewal. 
• From the pieces of evidence, the jury decided in favor of Harris and the trial court decided against the Cowboys.
• The Cowboys then again filed a motion in the trial court against the decision of the jury and argued that the jury’s decision went against the evidence presented in the case.
• The trial court then again denied the motion brought by the Cowboys.
• Later, the Cowboys filed an appeal against the jury decision in the Court of Civil Appeals of Texas.

Issues involved in the case

• Whether Harriss possessed special, exceptional, and unique knowledge, skill, and ability as a football player as required by the contract or not.
• Whether Harris was legally bound by the terms of the 1958 contract with the Rams Club or not.
• Whether the temporary injunction awarded by the trial court remained valid after the judgment on the merits or not.

Judgment of the Court

Based on the club’s appeal from judgment on merits

• The Court of Civil Appeals of Texas, Dallas, stated that an injunction to restrain an employee from doing something in a personal service contract can be granted only when that employee is an extraordinary individual. It means when an employee possesses special and unique skills, knowledge, and ability to provide extraordinary service through a contract. 
• The Court also stated that during the trial period, Harris did not possess such extraordinary skills as a football player. This is because mere expressions of opinion about being extraordinary do not count. Concrete evidence of extraordinary skills depends on the material facts of the case.
• The Court of Civil Appeals of Texas, Dallas stated that during cross-examination, Harris testified that he merely thought he had a certain amount of skills and abilities. This means that Harris did not believe himself to be an extraordinary employee. Harris was only presumed to be the one.
• The Court of Civil Appeals of Texas, Dallas, therefore, rejected the notion that Harriss possessed special, exceptional, and unique knowledge, skill, and ability as a football player as required by the contract.
• The Court of Civil Appeals of Texas, Dallas stated that the new motion filed by the Cowboys against the decision of the jury was denied by the trial court because there existed a difference between the no evidence rule and the insufficient evidence rule. The Court stated that if the jury’s decision of insufficient evidence is not strong enough, then the court is duty bound to offer a new trial otherwise not. 

“As the Cowboys presumed that the trial court made an error despite them having strong evidence that suggested that Harris indeed possessed extraordinary skills and abilities.”

• The Court of Civil Appeals of Texas, Dallas stated Harris was legally bound by the terms of the 1958 contract with the Rams Club. This is because the contract was valid because the new contract was not part of an original deal. 
• The Court of Civil Appeals of Texas, Dallas stated that also when Harris decided not to play the option clause of renewal the deal was paused effectively and correctly according to the terms of the agreement. The argument made by Harris of the contract being invalid was rejected by the jury.

Based on Harri’s Appeal for Temporary Injunction

• The Court of Civil Appeals of Texas, Dallas stated that the temporary injunction awarded by the trial court remained valid after the judgment on the merits. This is because even if the judgment went in favor of Harris, the footballer would still be able to play for any other team. However, the Rams club will then be responsible for the damages if they wrongly prevent Harris from playing football.
• The Court of Civil Appeals of Texas, Dallas, affirmed the judgment of merits that awarded a temporary injunction to the Cowboys against Harris. 

Lochner v. New York (right to freedom of contract)

Significance of the case

• The case of Lochner v. New York (1905) was decided by the U.S. Supreme Court on April 17, 1905. 
• The case struck down the New York state law that allowed 10 hours of maximum labor in a day for the baking industries and trade. 
• The case struck down this statute as it violated the baker’s right to freedom of contract under the 14th Amendment to the U.S. Constitution. 
• The case of Lochner is one of the most controversial cases in U.S. history and is famously recognized as the Lochner era.
• However, the Lochner era finally ended in the year 1937 when the U.S. Supreme Court upheld the constitutional validity of the Minimum Wage Labor of Washington State.
• The case of Lochner became a burning symbol of judicial interference with democracy and the dissent of Justice Holmes was widely accepted.

Facts of the case

• Joseph Lochner was a German immigrant who owned a bakery in Utica, New York. He was the defendant in this case.
• Lochner workers used to sleep and work in the bakery itself. Locher even paid the workers accordingly. 
• In 1899, Lochner was arrested by the New York authorities based on the complaints. The authorities charged Lochner with violating the New York Bakeshop Act of 1895. This is because Lochner employees used to work more than 60 hours per week. 
• In the New York Bakeshop Act of 1895, employing bakers for their service for more than 10 hours a day or 60 hours per week was considered a crime. The New York Bakeshop Act of 1895 was based on the British Bakehouse Regulation Act of 1863.
• The counsel of Lochner argued that the right to freedom of contract was one of the rights guaranteed by the U.S. Constitution. Therefore, Lochner followed substantive due process. The counsel argued that the New York Bakeshop Act of 1895, prohibited class legislation. It means the act applied to only some laborers and not all laborers (did not apply to bakers in hotels, restaurants, and clubs).
• The counsel also argued that New York state statute working hours provisions did not fall within the legitimate purview of the state’s police power because baking does not require special regulations.
• However, the trial court found Locher to be guilty of the crimes and fined Lochner $50.
• The decision of the trial court was appealed by Lochner to the New York Supreme Court, Appellate Division, and New York Court of Appeals. However, the decision of the trial court was affirmed by both the courts, i.e.,  the New York Supreme Court, Appellate Division, and New York Court of Appeals. 
• Later, Lochner filed an appeal to the U.S. Supreme Court.

Issues involved in the case

• Whether the New York Bakeshop Act of 1895 clause for working hours violated the right to freedom of contract guaranteed by the 14th Amendment of the U.S. Constitution or not.
• Whether the New York State statute fell within the legitimate purview of the police power or not.

Judgment of the Court

• The U.S. Supreme Court decided in favor of Lochner. The Court struck down the New York state statute that allowed bakers to work only for 60 hours per week and 10 hours per day. The dissent of Justice Oliver Wendell Holmes Jr. was accepted by the U.S. Supreme Court.
• The U.S. Supreme Court held that the New York Bakeshop Act of 1895 was unconstitutional as the court recognized the right to freedom of contract, i.e., freedom of employees to sell their labor to employers. The same verdict was delivered in the case of Allgeyer v. Louisiana (1897). The case of Allgeyer was decided by the U.S. Supreme Court.
• The U.S. Supreme Court held that working hours depend on the free will of the laborers. According to the due process of the 14th Amendment of the U.S. Constitution, no individual can be deprived of their personal life, liberty, or property.
• The U.S. Supreme Court, in the dissent of Justice Rufus Peckham, held that the law can limit someone’s contractual freedom only when the worker’s health and public health are affected by such contracts and not when it is protected by the law. However, the intended purpose of the New York Bakeshop Act of 1895 was not such. Justice Rufus Peckham held that bakery product qualities remained unaffected by how long the workers worked in a bakery.
• The U.S. Supreme Court, from the dissent of Justice John Marshall Harlan, held that the legitimate purview of police power supersedes the right to freedom of contract. The safety of the public depends on the government and not on the police.
• The U.S. Supreme Court, in the dissent of Justice Oliver Wendell Holmes Jr., held that the state statute has the right to intervene in the right to freedom of contract liberty. He held that the majority of the dissenters’ opinions were based on the economic theory of justice, which is not universally accepted. Justice Oliver Wendell Holmes Jr. rejected the notion that personal freedom should block sensible rules and support the law’s limitation on working hours, seeing them as connected to public health. 

What are the limitations of a remedy 

Every remedy in action is always attached to certain limitations or restrictions. Even though remedies are there to protect and secure the injured party (non-breaching party) because of the breach of the contract, conditions follow a remedy like a shadow. It is an extra layer of a shield of law to make sure that the breaching party does not suffer unfair consequences of justice provided to the non-breaching party.

In the United States, UCC Section 2-719 enables the provisions for the limitation of a remedy. The limitations are also referred to as contractual modification of a remedy. The UCC 2-719 has the following limitations for enforcing the remedies. This includes

• In concurrence with the provisions of UCC 2-718 Liquidation or Limitation of Damages; Deposits. [This provision of UCC deals with the contractual modifications of damages (legal remedies) in contract law. The conditions for reasonable liquidated damages, the buyer’s entitlement to restitution, and its calculation when sellers withhold the goods, payment, and profits received are outlined in UCC 2-718].
• The agreement can provide alternative remedies against what is already established in UCC 2-718 and UCC 2-719 if the contract law allows it. The parties to the agreement can make addition or substitution of the remedies provided in UCC 2-718 and UCC 2-719. The parties to the agreement have the right to set limits or modify how much the non-breaching party can receive compensation in the event of a breach.

For example, consider a scenario where you are a seller and you sold a mixer grinder to one of your customers. You agreed with the buyer that, in case of any defect in the goods, the buyer could return them.

Now, if the mixer grinder is defective such as the seal of the packaging is broken or certain parts are missing from the mixer grinder, the customer will complain regarding the same. In that case, as a buyer, the customer can either return the mixer grinder for a refund, get a replacement, or get the goods repaired from you. This is because you agreed to such conditions while forming a contract with the buyer. These are considered alternative forms of remedies for the customer.

• The parties to the agreement do not necessarily have to use the remedy that is agreed upon by them if there are other options of remedy available in the contract. If the contract specifically states that no other remedies are to be used by the parties in the event of breach than the one that is agreed upon, then in such circumstances, the party does not have the right to options for remedy.

• When the parties to the agreement agree to use the remedy curtailed by them in the agreement. If the agreed-upon remedy somehow fails to live up to its expectations due to certain circumstances, then under such situations the parties can resort to using the remedy as provided by UCC 2-719.
• The parties to the contract can set limits on the additional damages, such as consequential damages, until and unless it is considered to be extremely unfair and unjust in the event of a breach by either of the parties involved in the agreement. 

When the goods involved in the agreement are consumer goods then limiting the damages for personal harm is considered to be unfair and unjust. However, limiting the damages for commercial harm is considered to be acceptable.

California Business and Professions Code,1937 

The California Business and Professions Code (BPC) of 1937 is a law of California that governs the actions or activities of professionals as they do their businesses. It addresses the issues that arise in the ever-changing business world and provides solutions for those issues. 

The general business activities and the activities of individuals in a particular business field are governed by the BPC. When the rules and regulations of the BPC are applied in cases of business disputes, the California Court can deny, suspend, and revoke an individual’s business license.

If any individuals of a specific business or general business violate the laws of the BPC, then those individuals and businesses can face criminal charges. The criminal charges include jail or prison time, high fines, or a period of probation.

Division 7- General Business Regulations (16600-18001) offers Chapter 1, Contracts in Restraint of Trade (16600- 16607)  in Part 2 Preservation and Regulation of Competition (16600-17365).

In Chapter 1, Section 16600 of Contracts in Restraint of Trade states that any contract or agreement that stops any business or party from entering into any legal profession, trade, or business of any kind is not valid according to the BPC, unless, there are specific rules that state otherwise or the rules that take precedence.

In concordance with the UCC 2-716 right to specific performance or right to recover goods emphasizes that any party to a contractual agreement has a right to recover the goods in the event of the breach if, those goods are unique or have special value. 

When the rules of UCC 2-716 are applied to BPC Section 16600, if a contract stops someone from engaging in a particular business, trade, or profession, the injured party can reclaim or recover their right to specific performance of engaging in any business, trade, or profession. 

Other different forms of remedies besides specific performance remedies in contract law

There are different forms of remedies available when there is a breach of the terms of the agreement of contract law apart from specific performance remedies. The remedies are categorized as damages and declaratory judgments. Let us discuss some aspects of these remedies in a few detail to better understand the available relief to the disputed parties in the contract settings.

Damages

The remedy of damages is the default remedy awarded by the court when there is a breach of contract. Its value is in monetary compensation, also known as monetary (money) damages. It is awarded by the court against the loss, injury, or pain suffered by the aggrieved party so that the aggrieved party can restore his/her status of what it was before the violation of his/her legal rights. There are no punitive damages awarded by the court when there is a breach of contract by the party, unlike in civil cases or a case of Tort. This is because the court allows for the breach of a contract under special circumstances.

For example, imagine a scenario where Party A offers Party B to paint the walls of the house of Party A for $50,000. Party B accepts the offer made by Party A. Party B fulfills the legal obligation towards Party A. However, once the walls of the house were painted and when Party B demanded Party A to fulfill his/her obligation to pay money, Party A only paid $10,000 against the work done. In this situation, the court will order or award Party B $40,000 in damages. If the damages were punitive damages then under such circumstances, the court would be hesitant to award the damages to Party B because of the efficient breach theory of contract law.

Other alternative remedies to damages awarded by the courts to the non-breaching parties under the contract law include expectancy damages, restitution, liquidated damages, and reliance damages.

• Expectancy damages: The expectancy damages is a form of remedy available with the non-breaching party. In this form of remedy, the non-breaching party can recover the damages, resulting from a breach of the contract. It places the non-breaching party in a position as if the breaching party has fulfilled all of its obligations arising from the terms of the agreement signed by the parties. This form of remedy is what the non-breaching party expects to receive from the breaching party under the contract.
• Restitution: A restitution remedy refers to rectifying the mistake of the breaching party or giving the profits back to the non-breaching party. The restitution remedy tries to compensate for the loss or harm suffered by the non-breaching due to the breach of the contract. A restitution remedy is also a form of an equitable remedy. It means that such a remedy is developed by the courts based on the changing societal norms rather than based on the precedent of common law. The restitution remedy is based on what is considered to be right, fair, equal, and just for society and by society. This form of remedy does not follow the strict rules of the common law. 
• Liquidated damages: Before parties sign the agreement, there are clearly stated sections or clauses in the agreement curtailed by the parties. This section or clauses in the contract specify the details of what would happen in case of a breach of the agreement by either of the parties involved. When one party breaches the agreement the other party will receive a specific amount of money or a set of formulas to calculate the amount of money in respect of that breach. This is already agreed upon by the parties contracting with each other. This way the breaching party tries to compensate for the loss or harm suffered by the non-breaching party. This is called a remedy for liquidated damages. 

When the real or actual damages, resulting from the breach of the contract are difficult to assess then under such circumstances, the remedy of liquidated damages is used by the parties. This is because the clarity of the amount to be compensated for the losses is mentioned specifically in the agreement. This saves time and resources for the parties involved in the contract. The remedy of liquidated damages is not awarded in cases where the court is satisfied that enforcing the remedy of liquidated damages will seem like a punishment, or is unfair, illegal, or against social norms and rules. 

• Reliance damages: The reliance damages are received by the aggrieved party for the losses suffered because of the breach of the contract. It means that when Party A relies on the reasonable promise of the party B, and party B breaks the promise. Also, based on that promise the party A takes action or spends money to fulfill the obligations as agreed in the contract, then under such circumstances party A can receive reliance damages.

In simple terms, the court will order the breaching party to compensate for the losses suffered by a non-breaching party because the non-breaching party reasonably trusted and acted on the promise made by the breaching party. In certain specific situations, the non-breaching party can also recover more money than what was initially contracted under the agreement by the parties. This form of situation is more common during the breach of contract or promissory estoppel.

Declaratory judgments

Another form of alternative remedy awarded by the court to the non-breaching party in the contract law is called Declaratory Judgment. A declaratory judgment is also a form of equitable remedy. A declaratory judgment is like a decision or a court order, defining the rights and responsibilities of each party to the agreement that is presented before the court of law. This order or judgment from the court helps to clear up the confusion or resolve the uncertainty regarding what are the rights and responsibilities of each party so that the parties can fulfill their obligations concerning the agreement. 

In simple terms, declaratory judgments are more about the authoritative opinions of the court regarding the disputed matter presented before the court of law. If the court believes that parties have a right to receive relief without doing anything, then only the party will receive the remedy of declaratory judgments. 

Do you know that declaratory judgment, however, is sometimes not awarded by the court to the parties of a disputed case that easily? This is because the parties of the disputed case sort this remedy before the full development of the case. The Judges of the court prefer to see more development in the disputed case presented before the court. Therefore, the judges are more likely to avoid giving the declaratory judgment at the initial stage of the case. 

A declaratory judgment is nothing like other remedies such as expectancy, reliance, liquidated remedies, or coercive remedies of specific performance. This is because a declaratory judgment does not enforce or order the party to take any actions, and nor does it demand the party to pay any damages. It simply lays out the rights and responsibilities of each party that they need to fulfill to resolve the confusion and uncertainty that arose in the agreement between them.  

Conclusion 

Whenever any individual or business enters into a contract or agreement such as for land, goods, or personal services with another individual or business, there is always a relationship of give and take. Even if one reduces everything in writing to fulfill the obligations and duties that each party owes to the other party, everything does not go according to the plan. Consequences to contracts are always attached to the agreement. This is because not all circumstances or situations are always favorable for any of the parties that are involved in a contract. Nor do any individual or business think alike even after they have signed the agreement. 

Therefore, to protect oneself from an unjust, unfair, and unreasonable harm or loss, the remedy of specific performance of a contract is made available by the U.S. government through the courts of law. 

The remedy of specific performance is always equitable, meaning it is just and proper to provide equal justice to the parties that are involved in a dispute. Whether the party is a breaching party or a non-breaching party, the equitable remedy of specific performance does not differentiate between the parties involved. The award of specific performance is always based on considering all the necessary reasonable facts and circumstances of the parties that are involved in a dispute.

To protect oneself and businesses from harm and losses at the expense of the profits earned by other individuals or businesses, it is quite informative to keep in mind that nobody possesses the right to gain illegal profit from another at the expense of suffering and harm. Coercive remedies like specific performance can always be resorted to when any individual or business fails to hold their part of the bargain, i.e., obligations and duties.

Frequently Asked Questions (FAQs)

What is specific performance in contract law?

When two or more parties sign the agreement to fulfill obligations and duties that the parties have towards each other, then it forms the basis of a contract. When either of the parties breaches the terms of the contract, then the non-breaching party has a remedy at law to seek compensation from the breaching party. This remedy at law is called specific performance which falls under the ambit of equitable remedy. The equitable remedy at law is different from the legal remedy. 

Can parties include specific performance contract clauses in their agreement?

Yes, the parties to the agreement can include a specific performance clause when reducing the terms of the contract in writing. This makes it easier for the parties when there is an event of breach by either of the parties to the contract. The equitable remedy of specific performance is explicitly mentioned as an available remedy during the breach of the contract. However, the courts still review such clauses to make sure that the contract is fair, just, and reasonable for consideration.

How is specific performance awarded in the United States?

When the compensation of monetary damages is inadequate to cover the harm or the loss suffered by the non-breaching party because of the breach of the terms of the contract or is not appropriate to serve justice to the non-breaching party, then under such circumstances the equitable remedy of specific performance is awarded by the court in the United States. For the contract of sale of land and goods, the property in question should be of unique qualities and the circumstances also need to be special.

How does the Uniform Commercial Code (UCC) relate to the specific performance?

The Uniform Commercial Code (UCC) governs commercial transactions in the United States, including the sale of goods. The UCC provides guidelines for the court as to when the equitable remedy of specific performance should be awarded to the parties involved in the dispute because of the breach of the agreement terms.

Which types of contracts in the United States are eligible for the equitable remedy of specific performance?

Generally, equitable remedy at law is awarded by the court under special circumstances and when the property in question marks a unique quality. Equitable remedy at law in the United States is mostly awarded for real estate. Therefore, the equitable remedy is eligible under contracts for goods, land contracts, and contracts for personal services.

Can specific performance be awarded for any type of breach of contract?

No, specific performance cannot be awarded for any type of breach of contract. The Courts award the equitable remedy of specific performance to the parties in dispute only when the court is satisfied with the fact that damages such as monetary, expectancy, or liquidated damages will be inadequate to serve the desirable justice to the non-breaching party to the case.

How is the equitable remedy of specific performance limited by the Uniform Commercial Code?

When during the breach of the contract, courts award an equitable remedy of specific performance the UCC can limit the remedy of specific performance. This is because when the courts are satisfied that the goods in question are not of unique quality and can be easily replaceable with other goods in the marketplace, then under such circumstances the equitable remedy of specific performance is limited by the UCC for the parties in dispute.

What are the situations when a court can deny the equitable remedy of specific performance to the non-breaching party?

When the court is satisfied that enforcing the equitable remedy of specific performance to the non-breaching party would create unnecessary hardships on the breaching party or when the court deems fit that enforcing such remedy is impractical, inequitable or the agreement is too vague and unclear, then under such circumstances the court denies the remedy of specific performance.

How do the courts in the United States determine the feasibility of a specific performance remedy?

To determine the feasibility of a specific performance remedy to be awarded by the courts to the parties in dispute, the courts consider factors like the complexity of the specific performance remedy and the availability of the substitutes. 

What are the limitations of seeking a specific performance remedy?

When granting an equitable remedy of specific performance to the non-breaching party, the court considers the time (duration) of when the equitable remedy was sought by the non-breaching party. If there is a delay in seeking the equitable remedy of a specific performance, the court can reject the application for a specific performance remedy.

References

• https://www.google.co.in/books/edition/Contracts/6NoXEAAAQBAJ?hl=en&gbpv=1&pg=PR32&printsec=frontcover 
• https://repository.law.umich.edu/cgi/viewcontent.cgi?article=7625&context=mlr 
• https://www.jstor.org/stabl mb e/1097241 
• https://www.jstor.org/stable/26918422 
• https://www.jstor.org/stable/43829113 
• https://www.jstor.org/stable/25660233 
• https://www.diva-portal.org/smash/record.jsf?pid=diva2:1781458 
• https://archive.org/search.php?query=external-identifier%3A%22urn%3Alcp%3Acontractscasesdo0000barn%3Alcpdf%3A9277042b-44ea-41b5-9fa4-b391caaab233%22 
• https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3358925
• https://scholarship.law.nd.edu/ndlr/vol98/iss3/6/ 
• https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4335951 
• https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4380580 
• https://www.jstor.org/stable/26920023 
• https://archive.org/details/contractscasesdo0000barn/page/176/mode/2up 

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