Archive for the ‘specific performance’ Category

Effect of a liquidated damages clause in a sale contract (Roman-Dutch law)

May 3, 2012

Abdul Cader Abdeen v Abdul Careem Mohamed Thaheer ([1958] 2 W.L.R. 350, PC) was an appeal to the Privy Council from the Supreme Court of Ceylon (Sri Lanka). It concerned an agreement to sell land. The agreement was governed by Sri Lanka’s Roman-Dutch law. Under this system of law there is a legal right to demand specific performance (that is, specific performance is the legal default and not the result of an equitable discretion). The contract provided for the sale of land and for the payment of liquidated damages in default. The sellers refused to proceed and the buyer sought specific performance. This was refused. On its proper interpretation, the contract gave the sellers two equally valid ways of performing the contract; they could either execute the conveyance or pay the liquidated damages. There was no room for specific performance of the former mode of performance; the latter was equally available to the sellers.

Refusal to order damages rather than specific performance

March 22, 2012

In Tan Kim Guan v Tan Tee Theng ([2012] SGHC 53) the parties had entered into an option to purchase. The option was exercised but the sellers would not complete. The buyers sought specific performance. The sellers asked that damages be awarded instead. The court ordered specific performance.  Both parties are in principle entitled to this remedy (the fact that the property was an HDB flat made no difference to this entitlement).

Pallant v Morgan

December 9, 2011

In Pallant v Morgan ([1953] Ch 43) P and M were neighbours. Each of them wanted to bid for nearby amenity land. M suggested that they would each benefit if only one of them were to bid. If successful, they would divide the property between them. They had reached substantial, but not complete, agreement as to how the land was to be divided and on the valuation formula. On the basis of M’s assurance that they had an agreement, P did not bid. M’s bid was sucessful. He indicated that he intended to keep all of the land. P sought an order for specific performance or, alternatively argued that M held the land on trust for P and M. The court refused to order specific performance because of the lack of certainty as to the area and price. It found for P on the basis that there had been an agreement that the property was to be divided between them and, in reliance on this, P had refrained from bidding. The court ordered that the parties should seek to reach agreement on how the property was to be divided. If agreement could not be reached then the property was to be sold and any profit from the sale was to be divided equally between the parties.

Willmott v Barber

November 21, 2011

In Willmott v Barber ((1880) L.R. 15 Ch. D. 96) B was tenant of three acres of land. He granted W a lease of one acre and W spent money on that land and certain neighbouring land of his. B also granted W an option to purchase B’s lease of the three acres. W sought to exercise the option. B’s lease provided that the lease could not be assigned without the landlord’s prior written consent. The landlord refused to give consent and B refused to assign the lease to W. W sought specific performance as against Barber and an order compelling the landlord to give his consent to the assignment. As against the landlord he relied on estoppel on the basis that the landlord had allowed B to spend money on the land in the mistaken belief that he would be able to exercise the option.

The action failed as against B since there would be no order for specific performance to compel B to act in breach of his prior agreement with his landlord. The action failed as against the landlord since the landlord had no way of knowing about W’s mistake concerning his legal rights. Was it a ‘fraud’ for L to insist that there could be no assignment without his written consent (as provided for in the lease to Barber)? Fry J. said:

‘It requires very strong evidence to induce the Court to deprive a man of his legal right when he has expressly stipulated that he shall be bound only by a written document. It has been said that the acquiesence which will deprive a man of his legal rights must amount to fraud, and in my view that is an abbreviated statement of a very true proposition. A man is not to be deprived of his legal rights unless he has acted in such a way as would make it fraudulent for him to set up those rights.’ (at 105)

Fry J. then proceeds to list five factors which he thought would have to be present:

‘In the first place the plaintiff must have made a mistake as to his legal rights. Secondly, the plaintiff must have expended some money or must have done some act (not necessarily upon the defendant’s land) on the faith of his mistaken belief. Thirdly, the defendant, the possessor of the legal right, must know of the existence of his own right which is inconsistent with the right claimed by the plaintiff. If he does not know of it he is in the same position as the plaintiff, and the doctrine of acquiescence is founded upon conduct with a knowledge of your legal rights. Fourthly, the defendant, the possessor of the legal right, must know of the plaintiff’s mistaken belief of his rights. If he does not, there is nothing which calls upon him to assert his own rights. Lastly, the defendant, the possessor of the legal right, must have encouraged the plaintiff in his expenditure of money or in the other acts which he has done, either directly or by abstaining from asserting his legal right. Where all these elements exist, there is fraud of such a nature as will entitle the Court to restrain the possessor of the legal right from exercising it, but, in my judgment, nothing short of this will do.’ (105 – 106)

The landlord did not (at the relevant time) know of his own rights nor of W’s mistaken belief. Nor had W’s expenditure necessarily arisen from a belief that he could exercise the option. He could insist on the lease term providing that his written consent to an assignment was needed.

Equitable remedies are available to compel a licensor to honour a contractual licence

February 1, 2011

The equitable remedies of specific performance and injunction are available to compel a contractual licensor to honour his bargain, whether or not the licensee is yet in possession.

Verrall v Great Yarmouth Borough Council ([1981] QB 202, CA (Eng)) concerned a licence that the council had granted to the National Front to allow the latter to hold its annual conference in council-owned premises. Before the conference began, the council revoked the licence. The National Front sought specific performance of the licence. This was awarded. The important message from this case is that in appropriate circumstances equity will award specific performance or injunction to compel a contractual licensor to honour its bargain.

Damages would not be an adequate remedy. The National Front would not be able to find an alternative venue for its conference anywhere in England or Wales. Freedom of speech was at stake. The National Front was entitled to the freedoms of speech and of assembly provided they were exercised peaceably. In general, specific performance would be appropriate if a licensor sought to revoke a license in circumstances where many people would be affected and the revocation would have important consequences.