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When is specific performance not a good contract solution?

| May 10, 2021 | Business Litigation

You need to be able to depend on the people or organizations that you do business with. A business contract creates shared obligations between you and another party, allowing you to hold one another accountable.

Unfortunately, not everyone makes good on their contractual obligations. Some people violate or breach a contract through a simple mistake or issues outside their control, like supply-chain complications. Other people breach their contracts with no concern for the impact to the other business involved or any desire to make things right.

Given that a breach of contract could mean major financial losses for your company, you may want to take action against a person or business that fails to fulfill contractual obligations to your company. Specific performance ordered by a judge can compel someone to complete their contractual obligations to your company after a serious breach of contract. When might such a court ruling not be the best outcome?

When the breach has led to trust or relationship issues

If the other party has become aggressive, negative, unprofessional or otherwise inappropriate during your negotiations related to the breach of contract, you may no longer feel comfortable doing business with them.

You may worry that they will do a subpar job, or you may prefer to receive invested capital on your end back so that you can hire a more professional, responsible or dependable party. If a breach of contract is serious enough to undermine your willingness to do business with the same company in the future, seeking a ruling that requires them to fulfill the contract may not be the best approach.

When specific performance will not address your losses

Perhaps the other party failed to deliver certain goods or perform a service, so you had no choice but to turn to another supplier or service provider for your needs.

When you have already addressed the immediate business implications of the breach but not the financial losses it caused, you may not need the other company to fulfill their contractual obligations but would instead prefer that they reimburse you for the financial impact of the breach.

During an effort to address a breach of contract, directly with the other party and through the courts, it’s important to have specific goals to help protect your business from unfavorable outcomes.