Specific Performance

When should specific performance be available for breach of contract? Civil law systems make it the primary remedy for breach, while the common law treats it as a humble exception with limited application. The same sharp split exists in legal theory, with philosophers tending to endorse the civil law tradition and economists praising the common law. The net result: the law and theory of specific performance oscillates between incompatible reforms and values.

There is a better approach. Autonomy, rightly understood, makes sense of the current law of specific performance and offers well-grounded reforms that can bring the doctrine closer to its animating principles. By anchoring this contract remedy in a conceptually coherent and normatively attractive framework, our recent article breaks the decades-long logjam in one of the field’s foundational debates.

Our work here builds on The Choice Theory of Contracts and on our responses to the law-and-economics, philosophical, and contract theory critiques it attracted (see also our previous OBLB post engaging with Prof. Oren Bar-Gill’s critique). We showed how contract is an empowering practice that is, and should be, guided by an autonomy-enhancing mission. Contract’s operative doctrines—including the choice of remedy—allow people legitimately to recruit others to their future plans by committing their own future selves in return. This commitment necessarily curtails the self-determination of the promisor’s future self—and it’s the key to understanding specific performance.

1. The Compensation Baseline. Contract-keeping is justified because and only to the extent that the claimed dominion of the present self over the future self can itself be justified. This seemingly simple proposition encapsulates both the moral premise of the common law and its challenges. The common law baseline of compensation—and not specific performance—serves as a stronghold for the autonomy of the promisor’s future self. Covering a promisee’s expectation interest is qualitatively less imposing on the future self’s self-determination. Therefore, other things being equal, contract’s autonomy-enhancing mission requires that disappointed promisees should be entitled to damages, rather than specific performance. 
   
   The requirement that ‘other things being equal’ must be unpacked. Most contracts can achieve their mission of facilitating promisees’ plans by liquidating breach into money. Where this is true, imposing on the promisor the obligation specifically to perform the promise, rather than to cover its value, cannot be justified by reference to the promisee’s self-determination. This means, at least for liberal contract law, that it cannot be justified, period.
    
2. Three Challenges. Other things, however, are not always equal. The first challenge therefore is to identify categories of cases in which liquidating the promisor’s performance does significantly frustrate contract’s function as a planning tool. Those categories, at least a priori, do justify specific performance. For the most part, the common law correctly identifies these categories. A second, related challenge is to help parties signal cases in which they consider the contract’s actual performance significant for their own particular plans, even though their contract does not fall within the usual categories. Here, the common law falls substantially short. Parties have a hard time ensuring they will get specific performance when that is what they want from their contracts. The third challenge pushes in the opposite direction. Here, contract law faces categories of cases, notably involving employment, where specific performance is bound to threaten the self-determination of the future self to such a degree that it cannot be justified—even if excluding such a remedy diminishes contract’s empowering potential.
    
3. Three Doctrinal Takeaways. These challenges in turn yield three practical takeaways. First, the so-called ‘uniqueness’ exception—covering cases in which specific performance is regularly provided—should be refined so it tracks its normative foundation. As a practical matter, this means, distinguishing in real estate transactions between sales of residential and commercial property, and between breaches by sellers and buyers. Second, the common law should not categorically reject parties’ attempts to opt into specific performance (and to penalty clauses) to remedy breach. In particular, specific performance should be more readily available when an employer breaches a promise to continue to employ an employee. Finally, the doctrine should be even more skeptical in enforcing non-compete agreements that overly facilitate the current self’s pursuit of its welfarist interests at the expense of the future self’s autonomy.
    
4. Our Bottom Line. Let us state our bottom line plainly. From the standpoint of autonomy, (1) specific performance must not be the default remedy. (2) Specific performance should nonetheless be available where monetary recovery cannot substantially avoid the disruption breach causes to a promisee’s plan. (3) Translating (2) into a workable rule implies that specific performance should be the default if the promisee is a buyer of a unique good for personal use, paradigmatically, a personal residence. (4) Because (3) is only a proxy for (2), parties should be able to opt into specific performance, so long as they do not violate (5). (5) Specific performance should not be awarded against providers of personal services.
    
5. Autonomy Versus Law and Economics. The dominant economic analysis of specific performance also arrives at these five principles, raising the question whether our account is just economic analysis in disguise. It is not. Our five principles derive from contract’s autonomy-based telos and lead to a distinct reform agenda. In our account, (2) and (3) are normative defaults. Contra the economists, they do not arise from or depend upon the current majoritarian preferences of contracting parties. On (4), relational justice constrains party opt-in, an autonomy-regarding floor missing from the economic account. Finally, (5) yields a mandatory rule. Contra the economists, it is not contingent on people’s imperfect foresight, which technology may ameliorate.

In sum, we offer an understanding of specific performance firmly grounded in the most fundamental normative commitments of contract law in a liberal polity. The common law baseline deserves moral praise—contra the economists’ pragmatic apology and the philosophers’ moral condemnation.

Hanoch Dagan is Stewart and Judy Colton Professor of Legal Theory and Innovation & Director of the Edmond J Safra Center for Ethics, Tel-Aviv University. 

Michael Heller is Lawrence A Wien Professor of Real Estate Law, Columbia Law School.