What to do when a party isn’t holding up their side of an agreement
Entering into a contract or agreement with another party generally means that both parties have certain obligations and responsibilities in accordance with that agreement. If you are a party to an agreement that is complying and carrying out all your obligations, but the other party is not holding up their side of the agreement, it can be frustrating as you question what can I do?
For the purpose of this article, the party complying and carrying out their obligations pursuant with the agreement have been referred to as the ‘compliant party’, while the party not carrying out their obligations have been referred to as the ‘non-compliant party’.
Where an agreement exists and one party, the non-compliant party, is failing or refusing to perform their obligations in accordance with the agreement, the compliant party can apply to the court for an order of ‘specific performance’.
What is specific performance?
Specific performance refers to an order made by the court which will compel the non-compliant party to carry out their obligations under the agreement. This is an equitable remedy, meaning that it is an action prescribed by the court. They are typically granted when legal remedies or monetary compensation, such as damages, cannot adequately resolve the wrongdoing. It is often a requirement that legal remedies be unavailable before a court will decide to issue an equitable remedy.
Specific performance requires the existence of a binding agreement and either an:
- ‘Actual breach’ – where one party refuses to perform their obligations under the agreement; or,
- ‘Anticipatory breach’ – where one party threatens to refuse to perform their obligations under the agreement.
Before making such an application, the compliant party should consider whether the agreement adequately identifies the obligations of each party. The court is unlikely to make an order for specific performance where they are required to correct the language of the agreement and/or the threshold requirements to prove specific performance cannot be met.
The NSW Supreme Court’s power to grant specific performance is in accordance with section 68 of the Supreme Court Act 1970 (NSW). It is a discretionary remedy which means that whether or not the order is made will depend on the judge’s decision and is considered on a case by case basis.
In general, a judge will not make an order for specific performance in the following circumstances:
- Where the party making the application is not willing or able to perform their obligations under the agreement;
- Where the parties obligations pursuant to the agreement are unclear or ambiguous as this would set the non-compliant party up for failure;
- Where damages are considered to be sufficient compensation to the party making the application;
- If it will cause unconscionable hardship on the non-compliant party; and/or,
- If the agreement requires the parties to continue a personal relationship, such as an employment relationship.
It should also be noted that where a party refuses or fails to comply with an order for specific performance they can be found in contempt of the court, resulting in a fine or in more serious cases imprisonment
If you wish to discuss any aspect of this article, please do not hesitate to contact a member of Coleman Greig’s Litigation & Dispute Resolution team, who would be more than happy to assist you.