Remedies - Specific performance and injunction

Learning Outcomes

This article examines the equitable remedies of specific performance and injunctions. It details the prerequisites for obtaining these remedies, including the inadequacy of legal damages, the definiteness of contract terms, and the feasibility of enforcement. Defenses such as laches, unclean hands, and hardship are also covered. After completing this module, you will be equipped to identify scenarios where equitable relief may be granted or denied, analyze the requirements for different types of injunctions, and apply these concepts to MBE questions involving contract breaches and tortious conduct.

MBE Syllabus

For the MBE, you are required to understand the principles governing equitable remedies, specifically specific performance and injunctions, as alternatives or supplements to legal damages. This involves analysing when such remedies are appropriate and the defenses available against them. You should be prepared to:

• Distinguish between legal and equitable remedies.
• Identify the prerequisites for specific performance, including inadequacy of legal remedy, definite and certain terms, feasibility of enforcement, mutuality of remedy (modern view), and conditions precedent.
• Analyze the applicability of specific performance to contracts involving land, unique goods, and personal services (including covenants not to compete).
• Recognize and apply equitable defenses: laches, unclean hands, hardship, mistake, misrepresentation, and sale to a bona fide purchaser.
• Understand the requirements for injunctive relief (TRO, preliminary injunction, permanent injunction), including irreparable harm, likelihood of success on the merits, balancing of hardships, and public interest.
• Differentiate between mandatory and prohibitory injunctions.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Specific performance is most likely to be granted as a remedy for breach of a contract involving: a) Sale of a widely available consumer electronic device. b) Provision of standard accounting services. ) Sale of a unique parcel of real estate. d) A contract to lend money.

2. Which of the following is NOT a requirement for obtaining a preliminary injunction?
   1. Likelihood of success on the merits of the primary claim.
   2. Proof of completed harm already suffered by the plaintiff.
   3. Plaintiff is likely to suffer irreparable harm if the injunction is not granted.
   4. The balance of hardships favors the plaintiff.
3. The equitable defense that bars a plaintiff from relief due to unreasonable delay in bringing the claim, which prejudices the defendant, is known as:
   1. Unclean hands.
   2. Estoppel.
   3. Laches.
   4. Waiver.

Introduction

Equitable remedies are judicial remedies developed by courts of equity to provide more flexible responses to harms than monetary damages. On the MBE, the primary equitable remedies tested are specific performance (an order compelling a breaching party to perform their contractual obligation) and injunctions (court orders requiring a party to do or refrain from doing a specific act). These remedies are extraordinary and are granted only when the legal remedy (typically monetary damages) is inadequate.

The availability of equitable relief rests within the sound discretion of the court. This discretion is guided by established principles, prerequisites, and defenses. Unlike legal damages, which a plaintiff is entitled to upon proof of breach and loss, equitable remedies are granted only if specific requirements are met and equitable defenses do not bar relief.

Specific Performance

Specific performance is an equitable remedy that compels the breaching party to perform the very act promised in the contract. It is available only when the legal remedy (monetary damages) is inadequate.

Key Term: Specific Performance A court order requiring a party to perform a specific act, usually that which is stated in a contract. It is used when monetary damages are an inadequate remedy.

Prerequisites for Specific Performance

For a court to grant specific performance, several conditions must typically be met:

1. Inadequacy of Legal Remedy: The plaintiff must demonstrate that monetary damages are insufficient to compensate for the breach. This is the most critical requirement.
   • Land Contracts: Damages are always considered inadequate for breach of a land sale contract because land is unique. Specific performance is presumptively available for both buyer and seller.
   • Unique Goods: Damages are inadequate if the goods are rare or unique (e.g., antiques, heirlooms, items of special sentimental value, goods custom-made for the buyer). Specific performance may be granted under UCC § 2-716(1) where goods are unique or in "other proper circumstances" (e.g., inability to cover).
   • Personal Services: Specific performance is never granted for personal service contracts due to enforcement difficulties and concerns about involuntary servitude (13th Amendment). However, a court may grant an injunction prohibiting the breaching employee from working for a competitor (a negative covenant).

Key Term: Inadequacy of Legal Remedy The principle that equitable relief, such as specific performance or injunction, will not be granted if monetary damages provide a sufficient means of redress for the plaintiff.

1. Definite and Certain Terms: The essential terms of the contract must be sufficiently definite and certain for the court to determine what performance is due and to fashion an appropriate order. Vague or ambiguous terms may preclude specific performance.

2. Feasibility of Enforcement: The court must be able to supervise the performance without undue burden. Complex or long-term performance requirements (like overseeing construction) may render specific performance infeasible. Personal service contracts are deemed infeasible to enforce.

3. Mutuality of Remedy (Modern View): Traditionally, courts required mutuality – meaning the plaintiff could only get specific performance if the defendant could also have gotten it had the plaintiff breached. The modern view (and the Restatement view) rejects strict mutuality. Courts now ensure the defendant will receive the plaintiff’s promised counter-performance (e.g., by conditioning the specific performance order on the plaintiff tendering payment).

4. Conditions Satisfied: The plaintiff must demonstrate that any conditions precedent to the defendant's performance have been satisfied or excused.

Worked Example 1.1

Collector contracted to buy a rare, authenticated manuscript signed by a historical figure from Seller for $50,000. Seller subsequently received a higher offer from Museum and refused to deliver the manuscript to Collector, offering instead to pay damages. Collector sued for specific performance. Is Collector likely to prevail?

Answer: Yes. The manuscript is unique; monetary damages would be inadequate because Collector cannot simply purchase an identical replacement on the open market. Assuming the contract terms are definite and enforcement is feasible, specific performance is the appropriate remedy for unique goods.

Injunctions

An injunction is a court order compelling a party to do (mandatory injunction) or refrain from doing (prohibitory injunction) a specific act. Injunctions are granted when the legal remedy is inadequate and certain requirements are met.

Key Term: Injunction A court order requiring a person to do or cease doing a specific action.

Types of Injunctions

1. Temporary Restraining Order (TRO): Issued to preserve the status quo until a hearing for a preliminary injunction can be held. It is of short duration (e.g., 10-14 days under FRCP 65). A TRO may sometimes be granted ex parte (without notice to the opposing party) if immediate and irreparable injury will result before the adverse party can be heard and the movant certifies efforts made to give notice or reasons why notice should not be required. Security is typically required.

Key Term: Temporary Restraining Order (TRO) A short-term, pre-trial temporary injunction issued to prevent irreparable injury before a preliminary injunction hearing can be held.

1. Preliminary Injunction: Granted before or during trial to preserve the status quo until a final judgment on the merits can be reached. It requires notice to the adverse party and a hearing. The party seeking a preliminary injunction must typically show:
   • Likelihood of success on the merits of the primary claim.
   • Likelihood of suffering irreparable harm if the injunction is not granted (damages inadequate).
   • The balance of hardships tips in their favor.
   • The injunction is in the public interest. Security is usually required.

Key Term: Preliminary Injunction An injunction issued during litigation to preserve the status quo until the case can be decided on its merits.

1. Permanent Injunction: Issued after a final judgment on the merits. It is not temporary. The requirements are similar to a preliminary injunction (irreparable harm/inadequate legal remedy, balancing hardships, public interest), but the plaintiff must actually have succeeded on the merits of the primary claim.

Worked Example 1.2

Factory operates next to residential homes and emits noxious fumes late at night, violating local environmental ordinances and significantly interfering with residents' ability to sleep and enjoy their property. Resident sues Factory, seeking a preliminary injunction to stop the nighttime emissions pending trial. Resident presents evidence of lost sleep, respiratory irritation, and inability to use their backyard, along with proof of the ordinance violation. Factory argues an injunction would force costly operational changes. Is Resident likely to obtain a preliminary injunction?

Answer: Likely yes. Resident can argue (1) likelihood of success (based on nuisance law and ordinance violation), (2) irreparable harm (ongoing health effects and loss of enjoyment of property are not adequately compensable by damages), (3) balance of hardships favors Resident (harm to health/property likely outweighs Factory's compliance costs), and (4) public interest favors enforcing environmental laws and preventing nuisance.

Equitable Defenses

Even if the prerequisites for specific performance or an injunction are met, relief may be denied if certain equitable defenses apply. These defenses focus on fairness and the conduct of the parties.

1. Laches: This defense bars relief if the plaintiff has unreasonably delayed in bringing the action, and the delay prejudices the defendant (e.g., loss of evidence, changed circumstances). Mere delay is not enough; prejudice is required.

Key Term: Laches An unreasonable delay by the plaintiff in bringing an equitable claim that causes prejudice to the defendant, potentially barring the claim.

1. Unclean Hands: Relief is barred if the plaintiff seeking equitable relief is guilty of improper conduct related to the lawsuit itself (e.g., fraud, misrepresentation in the transaction). The improper conduct must be related to the subject matter of the current litigation.

Key Term: Unclean Hands An equitable defense barring relief to a plaintiff who has acted improperly or unethically in relation to the subject matter of the lawsuit.

1. Hardship: Relief may be denied if enforcing the contract or issuing the injunction would cause undue hardship to the defendant or the public that grossly outweighs the benefit to the plaintiff. Courts are reluctant to deny relief solely on hardship if the hardship was foreseeable or self-inflicted. Inadequacy of consideration is relevant here.

2. Mistake/Misrepresentation: These contract defenses may also bar equitable relief, particularly if granting specific performance would be unfair under the circumstances.

3. Sale to a Bona Fide Purchaser (BFP): Specific performance is unavailable against a BFP – a subsequent purchaser who buys the property for value and without notice (actual, record, or inquiry) of the plaintiff’s prior claim. The plaintiff’s remedy is limited to damages against the original breaching party.

Exam Warning

Do not confuse laches with the statute of limitations. Laches is an equitable defense based on unreasonable delay causing prejudice, regardless of the statutory period. The statute of limitations is a legal bar based on a fixed time period, irrespective of prejudice. An equitable claim might be barred by laches even if the statute of limitations has not yet run.

Summary

Specific performance and injunctions are equitable remedies granted at the court's discretion when legal remedies (damages) are inadequate. Specific performance compels performance of a contract, typically available for land or unique goods but not personal services. Injunctions (TROs, preliminary, permanent) compel a party to act or refrain from acting, requiring showings like irreparable harm and likelihood of success (for preliminary relief). Equitable defenses, including laches, unclean hands, and hardship, can bar these remedies even if prerequisites are met.

Key Point Checklist

This article has covered the following key knowledge points:

• Equitable remedies (SP, injunction) are discretionary and require inadequate legal remedy.
• Specific Performance: Requires valid contract, certain terms, feasibility, inadequate damages (unique goods, land). Never for personal services.
• Injunctions: Preserve status quo (TRO, preliminary) or provide final relief (permanent). Require showing irreparable harm, likelihood of success, balance of hardships, public interest (for preliminary/permanent). TROs can be ex parte in emergencies.
• Equitable Defenses: Laches (unreasonable delay + prejudice), Unclean Hands (plaintiff's misconduct related to suit), Hardship (grossly disproportionate burden), Mistake/Misrepresentation, Sale to BFP (bars SP against BFP).

Key Terms and Concepts

• Specific Performance
• Injunction
• Inadequacy of Legal Remedy
• Temporary Restraining Order (TRO)
• Preliminary Injunction
• Laches
• Unclean Hands