Like any other legal contract, real estate contracts are enforceable in court if one party or the other defaults on the contract or fails to perform one or more terms of the contract. One major issue in contract disputes often is the remedy that will cure the breach of contract. Depending on the circumstances, specific performance or requiring the breaching party to perform the contract as agreed can be a potential remedy in a real estate contract dispute. In the case of specific performance, the party to the contract would have to abide by all the original terms of the real estate contract, at least to the extent possible.
Enforcing the Terms of Contract in Court
Assuming that a contract to purchase real estate meets all the requirements under the law to be legally valid and enforceable, the party seeking to enforce the contract must prove that the other party breached the contract terms. They also must prove that they suffered some sort of damages due to the other party’s breach of contract.
If the aggrieved party can successfully establish a breach of contract, the question then concerns the appropriate remedy. In the absence of an agreement of the parties, the court must decide the remedy for the contract breach that is most likely to make the innocent party whole or put the party back in the same position that they were in before they entered the contract.
Specific Performance as a Remedy
Specific performance is often considered an exceptional remedy and is not always realistically available in a contract dispute for various reasons. Simply put, specific performance requires the parties to move forward and complete the contract as they previously agreed, as if there had never been a breach by one party. However, since real estate is often a unique asset with no adequate replacement, specific performance may be a preferable remedy for many parties.
A court typically may order specific performance as a remedy under the following conditions:
- The parties had a legally valid and binding real estate purchase agreement in writing
- The contract contained specific and definite terms governing the real estate purchase
- The contract provided for both parties to have obligations under the contract and remedies in the event of a breach
- The non-breaching party was ready and able to fulfill its obligations under the contract
In some real estate contracts, money damages for the breach of the contract may be insufficient. For instance, if a purchaser has sought to buy a specific parcel of land with a particular location for a certain purpose, there may be no comparable real estate available for purchase. In that case, money damages may be inadequate to compensate the purchaser for losing out on the real estate, so specific performance of the contract may be necessary.
Specific performance is likely an available remedy when a seller can sell the property as agreed but simply has changed their mind about the transaction. In this case, the purchaser likely would have the right to sue the seller and insist upon specific performance. Even if the seller went ahead and sold the property to a third party, that third party might still be required to turn over the property to the original purchaser and seek damages from the seller.
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