Winner of 2019 Real Property Law Student Essay Competition

  • May 28, 2019

Damages vs Specific Performance: Land Contracts

Kaitlin Brennan

Kaitlin Brennan is a third-year law student at the University of Ottawa and has completed two undergraduate degrees at the University of Ottawa – a Bachelor of Arts in Theatre and a Specialization in English Literature. Kaitlin has worked at Tierney Stauffer LLP for two summer terms and will return for articling in the summer of 2019. She has been exposed to various legal areas during her employment, including personal injury, general civil litigation, family law, real estate and corporate law.

1.0 Introduction

In Canadian common law, the two most common remedies for breach of contract are damages and specific performance. The Compensation Principle, a fundamental principle in Canadian contract law, dictates that in the face of a breach, the innocent party should be placed in the position they would have been, had the contract been performed.[1] Specific performance is awarded only in cases where money damages would be inadequate.[2] Historically, the reliable exception has been for contracts involving land sales. Land was considered unique, as no two pieces of land were alike, and the typical remedy for breach of a land contract was an order forcing the breaching party to complete the transaction.[3] Today, the common law has progressively moved away from awarding specific performance for breach of land contracts, holding that damages are often sufficient to place the injured party in the position they would have been, had the contract been performed. However, in the context of real estate transactions, given the challenges with valuing property and the highly speculative and subjective nature of the “uniqueness” analysis, damages are not always effective in making a party whole.

This paper will analyze the traditional view on specific performance as a remedy for breach of land contracts, tracking the court’s shift towards a preference for money damages. An analysis of the pitfalls of damages as a remedy, as well as the civil law presumption of specific performance will demonstrate that the common law would better serve justice with a presumption of specific performance in breach of real estate transactions cases.  

2.0 History of Specific Performance

2.1 Overview of Specific Performance

Under the common law, the remedy of specific performance dictates that the breaching party must perform the obligations set out in the contract between the parties.[4] In Canada, specific performance is available as a remedy only when damages are considered inadequate.[5] In order to receive an award for specific performance, the plaintiff must prove that “common law damages for breach of contract will not suffice to do justice.”[6] An award of specific performance has always been discretionary to the court; however, it was traditionally awarded in breach of land contract cases “as a matter of course.”[7] A brief overview of the history of specific performance in Canada will demonstrate a paradigm shift in the court’s interpretation and application of specific performance on real estate transactions.

2.2 Traditional View on Specific Performance for Land Contracts

Traditionally, land was considered unique, as no two pieces of land are alike, regardless of its market value.[8] In other words, two equally valued pieces of land may still be markedly different in their appearance and quality. In A Treatise on the Specific Performance of Contracts, Sir Edward Fry best articulated this traditional view:

…though one sovereign or one shilling is to all intents and purposes as good as any other sovereign or shilling, yet one landed estate, though of precisely the same market value as another, may be vastly different in every other circumstance that makes it an object of desire; so that it evidently follows that there would be a failure of justice, unless some other jurisdiction supplemented that of Common Law, by compelling the defaulting party to do that which in conscience he is bound to do, namely actually and specifically to perform his contract.[9]

Fry emphasizes that land has significance beyond simple market value. As such, damages were considered inadequate to compensate an innocent party in breach of land contract cases.

In premodern England, land was both an “economic asset and a primary indicator of a person’s status.”[10] Beyond rents, real estate transactions were connected to, in whole or in part, political identity, political authority, a number of legal privileges, and social status.[11] As such, land carried far more value than cash – it was a measure of status and authority. In order to address the offset in value at the time, Courts of Equity would award specific performance for breach of land contracts as a matter of course.

Nearly a century after Sir Edward Fry’s treatise, the presumption of specific performance persisted in the common law. In 1952, the Supreme Court of Canada (“SCC”) applied the traditional view on remedies for breach of land contracts in Roy v Kloepfer Wholesale Hardware & Automotive Co.[12] In Roy, the appellant attempted to repudiate a contract for purchase and sale of lands and premises, prior to the closing date for sale. The appellant argued that damages would be adequate as the land was intended to be used as an investment. The Court held that, in general, specific performance applies to land contracts:

Finally, as to the suggestion that damages would be sufficient because it is contended that the plaintiff desired to use the property as an investment, it is sufficient to say that generally speaking, specific performance applies to agreements for the sale of lands as a matter of course.[13]

Kirwin J.’s holding demonstrated that, regardless of the intended use of the land, specific performance was the preferred remedy. The Court did not provide reasons for awarding specific performance beyond holding that the remedy was available “as a matter of course” in land contract cases.

Thirty years after Roy, courts were still applying the traditional remedy of specific performance, despite the shift towards a preference for damages in emerging case law. In Bashir v Koper, the Court awarded specific performance on an Agreement for Purchase and Sale (“APS”) of a river lot.[14] The appellate judge reversed the decision of the trial judge, holding that, when considering damages, a trial court need only refer to Snell’s Principles of Equity, 27th ed. (1973). Quoting directly, the court stated, “where the necessary conditions are satisfied, the court will therefore almost invariably decree specific performance of a contract regarding land…”, emulating the reasoning in Roy.[15]

2.3 Shift Away from Specific Performance for Investment Properties

Between the time of the Roy and Bashir cases, some courts began to deny specific performance for breach of APS’s for investment properties. The rationale was that it was difficult to see why damages were insufficient when the buyer had no personal attachment to the parcel of land he was purchasing,  particularly when the purchaser was speculating the property for resale.[16] While investors will seek land that is unique to their particular tastes, it is often the case that an equally suitable property will be available in the relevant market.[17] In Heron Bay Investments Ltd v Peel-Elder Developments Ltd, the court held that the “uniqueness and peculiarity” of land reasoning did not apply to investment properties:

The remedy of specific performance is one that is peculiar to real estate transactions and is based on the fact that real estate is regarded as unique and of particular importance to the purchaser…That reasoning does not apply when land is purchased merely as an investment. In the case at bar, the land was purchased as an investment. True it may be a uniquely good investment, but it was not being purchased by the plaintiffs for their own use but only to develop and resell at a profit. Obviously, any loss of profits can be compensated for in damages.[18]

Gushue J employed a similar logic in Chaulk v Fairview Construction.[19] In Chaulk, the respondent sued the appellant general contractor for refusing to convey three remaining properties that were contracted for. The trial judge held that specific performance was available to the plaintiff as a remedy. On appeal, the court held that there “was nothing whatever unique or irreplaceable” about the subdivision bargained for.[20] As such, damages were an adequate remedy for the breach of contract.  Similarly, in McNabb v Smith, the British Columbia Superior Court held that money damages are adequate in cases where the plaintiff purchases property with interest of “flipping” it, or making a quick resale.[21] Under those circumstances, the purchase of property is purely economic; the land does not have any particular uniqueness.[22]  

In 1993, the Ontario Court of Justice solidified the gradual shift away from a presumption of specific performance for investment land contracts. In Domowicz v Orsa Investments Ltd, the plaintiffs purchased an apartment building for investment purposes. [23] The sale failed to close, and the plaintiffs took the position that the land contract merited specific performance. In its reasons for rejecting specific performance, the court held that land was no longer tied to status; land ownership conferred neither privileges nor the right to vote.[24] Traditionally, these qualities of land had contributed to the “automatic availability of specific performance in relation to a land contract.”[25] The court noted that the defendant was able to demonstrate that “other buildings with similar characteristics were on the market during the period in question”, demonstrating that the building was not “physically and commercially unique.”[26] Thus, damages were sufficient.

2.4 Semelhago and the Modern Approach

In 1996, the SCC expanded the presumption of damages for investment land contracts to land contracts, generally. In Semelhago v Paramadevan, the plaintiff contracted to purchase property in the Toronto area. The defendant reneged on the contract before closing and the plaintiff sued for specific performance or damages in lieu thereof.[27] The Court held that the progress of modern real estate development has led to several frequent, if not always, readily available properties when deals fall through.[28] As such, the Court held that it is no longer appropriate to “assum[e] that damages for breach of contract for the purchase and sale of real estate will be an inadequate remedy in all cases.”[29] The Court held, in obiter dicta, that specific performance for real property is only available where 1) damages are inadequate, 2) the property is unique to the extent that a substitute would not be readily available; and 3) there is a fair, real, substantial, and legitimate justification for an award of specific performance.[30] Justice Sopinka adopted the “fair, real, substantial, and legitimate test from Asamera Oil Corp v Sea Oil  General Corp – a case that dealt with contracts involving chattels. Justice Sopinka held that the guideline proposed by Justice Estey in Asamera for chattels should be equally applicable to contracts for real property. Consequently, Justice Sopinka extended the courts preference for money damages for breach of investment land contracts, to contracts for real property in general.

3.0 Post-Semelhago Critique

3.1 Undue Importance Placed in the “Uniqueness” Analysis of Real Property

Following the decision in Semelhago, courts have had to refine Sopinka J’s standard of “uniqueness” in Semelhago.[31] The trial court in John E Dodge Holdings Ltd v 805062 Ontario Ltd held that uniqueness is a standard beyond “incomparability”; plaintiffs must show that the property has distinctive features that make an award of damages inadequate.[32] On appeal, Weiler J identified the principles on which to conduct the “uniqueness” analysis as: 1) the property in question has a quality that cannot be readily duplicated elsewhere; and 2) the quality of the property makes it particularly suitable for the intended use by the purchaser.[33] Despite the necessary refinement of uniqueness after the Semelhago decision, courts have placed undue weight on uniqueness as the single-most important feature of an analysis on the appropriateness of specific performance.[34] While uniqueness is an important element, the potential difficulty in assessing the value of property, the alternate objectives of equitable remedies, and the potential inability for a defendant to pay a damages award ought to play an equally important role in assessing the appropriateness of a specific performance remedy.

3.1.1 The value of real property may be difficult to obtain

The challenges associated with assessing the value of real property could make money damages inadequate in an otherwise fungible piece of property. In Cantini Developments Ltd v Hi-Rise Group (Toronto) Inc, the plaintiff vendor sued the defendant purchaser for breach of an APS for lands that were to be used to develop an Ontario Provincial Police (“OPP”) detachment.[35] The sale was conditional on the plaintiff retaining a severance of five acres. The plaintiff had reduced the purchase price of a 22.5-acre piece of land by $200,000 to compensate for the five-acre carve out he requested. The defendant purchaser paid the reduced price for the piece of land, but did not obtain a severance. In this case, while $200,000 in money damages would appear to be adequate, the court held that “damages for a severance that may or may not have been granted is too speculative or uncertain to be a satisfactory remedy.”[36] If the plaintiff had failed to acquire a severance, there would be no $200,000 piece of land, thus making the damages award too speculative to value. Given the challenges in valuing the property, the court held that “uniqueness is only one factor” in assessing the adequacy of specific performance, or the inadequacy of money damages.[37]

The volatility of the real estate market in some jurisdictions could also affect the adequacy of money damages for breach of land contracts. In Amar v Matthew, the plaintiff purchaser agreed to buy a home in Vancouver from the defendant vendor.[38] The purchase was conditional on the defendant ensuring the release of any potential claims under the Wills Variation Act that may have resulted from the passing of the defendant’s wife.[39] After the closing date, the defendant did not execute the conveyancing documents as stipulated under the contract. While assessing the adequacy of damages over specific performance, the court held that it is “common ground that the real estate market in the Greater Vancouver area is at present very volatile and there is no assurance that any award of damages…in this case would provide an adequate remedy.”[40] Sewell J held that any amount of damages that he might see fit could put the plaintiff at risk of not finding alternative accommodation in Vancouver’s volatile real estate market. In this case, the “special and peculiar” value of the property was limited to the fact that the real estate market was too unpredictable to find an alternate location, making it difficult to determine an appropriate quantum of damages.[41]

3.1.2 Alternate objectives of equitable remedies

The conduct of both parties can also be an important factor in determining the adequacy of an equitable remedy.[42] A defendant’s inappropriate conduct (beyond a simple breach of contract), may sway a court in favour of an order of specific performance against that party.[43] In Mondino v Mondino, the plaintiff and defendants owned a property in common.[44] The parties had a strained relationship and the defendant sought to either purchase the plaintiff’s 1/3 interest, or sell their 2/3 interest to her. The plaintiff spoke little English, so her son replied to the letter accepting the offer to purchase the remaining 2/3 interest, constituting a valid and binding agreement.[45] The defendants later refused to sell their interest and the court noted that the initial offer was made in bad faith; the defendants believed that the plaintiff could not finance the purchase and the offer was tendered with hostility. In discussing the relevance of “uniqueness” in a specific performance analysis, the court paraphrased from the decision in John E Dodge Holdings Ltd v 805062 Ontario Ltd:

…it is possible to put too much stress on uniqueness rather than on the more fundamental and embracing question of whether the plaintiff has shown that the land rather than its monetary equivalent better serves justice between the parties, with the burden of establishing that being or the party seeking specific performance.[46]

The court held that specific performance would better serve justice as damages would be inadequate, considering the hostile conduct between the parties. The defendants relied on their belief that the plaintiff would not be able to finance the purchase. As a result, the court held that damages would likely exacerbate existing hostilities, as it would leave the parties as co-owners.[47] In this case, the conduct of the parties became the determining factor for an order for specific performance.

3.1.3 The defendant’s inability to pay damages

In some cases, a defendant’s insolvency, or otherwise inability to pay a damages award, may tip the scales of justice towards an order for specific performance. In Sihota v Soo, the court held that one of the defendants did not have any assets or income in the province to satisfy a judgment for damages.[48] The court held that equal weight would be placed on the defendant’s precarious financial position and the volatility of the real estate market in assessing that damages would be an inadequate remedy in the circumstances.

3.1.4 Uniqueness analysis unduly restricting the availability of specific performance

Specific performance has become the “same kind of extraordinary remedy as an injunction”; damages are the preferred remedy in almost every case.[49] This may be, in part, a result of the importance placed on the “uniqueness” analysis in case law post-Semelhago. In many of the cases cited above, if the court placed uniqueness as the most important factor in the specific performance analysis, the decision on an appropriate remedy may have been different. While the cases cited in this section placed greater weight in other factors, most judgments will assess the uniqueness of the property in connection to the intent of the buyer before continuing to the next step of the analysis.[50] This was demonstrated in Canamed (Stamford) Ltd v Masterwood Doors, where the court held that the plaintiff must first satisfy the Court that the property is unique to the extent that a substitute is not readily available.[51] While the special and peculiar nature of a piece of property is an important feature of the analysis, there are several important factors that ought to sway a court to order specific performance, in lieu of a particularly unique value to the property in question.

3.2 Modern Approach to Specific Performance Can Negatively Impact Investment Purchases

To determine whether or not a piece of land is “unique”, the court must undergo a subjective and objective analysis. In doing so, courts will consider two main questions: 1) what features of the property mattered to the purchaser, making it particularly suitable for the purpose for which it was purchased; and 2) can those features be found elsewhere?[52] In general, investment properties have not been considered objectively unique simply because they are a uniquely good investment. If the purchase was made for purely economic purposes, then damages should be adequate. However, this proposition does not account for the complexity of negotiations, plans, and the selection process that goes into an APS. While damages can compensate for tangible losses, such as legal fees and title searching, there are a number of intangible losses associated with real estate transactions that cannot be compensated for. This concept will be explored more in-depth in the following section. 

4.0 Specific Performance in the Civil Law

In both the French and German legal systems, specific performance is the preferred remedy for breach of contract cases. Like other civil law jurisdictions, specific performance is more commonly referred to as enforced performance or specific enforcement.[53] The following section will analyze the theory and rationale behind the civil law’s preference for specific performance, in contrast to the common law’s focus on damages. In addition, this section will analyze the benefits of the civil law presumption of specific performance in the context of real estate transactions, while highlighting the drawbacks of the common law presumption of damages.

4.1 French Civil Law

In a stark contrast to the common law, French civil courts will more often order specific performance to remedy breaches of almost any contract.[54] A French court will only award damages in circumstances where the breaching party is unable to fulfil its obligations as stipulated in the contract.[55] At the heart of this distinction is the French civil law concern with the “moral stance” that individuals should be obligated to perform their promises.[56] French law treats a breach of contract as a form of “moral wrongdoing”, whereas the common law treats a breach as a matter of business. A common law remedy in damages is in the interest of “security of transactions and economic efficiency”.[57]

The enforcement of specific performance in French civil law and common law jurisdictions deeply reflects the theories that underpin the remedy in each legal system. In French civil law, a court order for specific performance is meant to confirm the primary right flowing from the contract (the promise), as opposed to creating a new right or replicate an old one.[58]  In other words, the primary right is realized, as opposed to creating a secondary right, caused by a wrong.[59] This highlights the civil law’s emphasis on keeping promises and holding promisors to contracts they create. In contrast, the remedy of damages reflects the common law’s emphasis on commercial expediency, as well as the theory that many parties enter into contracts for financial reasons.[60] Under the common law, breach of a contract to realize a profit should be adequately compensated with money equal to the expected windfall.

In order to ensure that a breaching party will abide by a specific performance order, French civil law created the astreintes – an order against the debtor to pay an accumulating sum of money for each day that he/she remains in default.[61] The astreintes is a means of financial pressure on defendants to perform their obligations.[62] In this way, French civil courts further emphasize the importance placed in upholding promises by ordering a form of “punitive damages” as punishment for disobeying an order for specific performance.[63] In effect, the innocent party is more than made whole.

4.2 German Civil Law

Like French law, enforced performance is a primary remedy for breach of contract in German Law. Section 241 of the German Civil Code stipulates that an obligee is “entitled to claim performance from the obliger” where an obligation has been formed.[64] The right to claim performance is referred to as a Prim√Éranspruch (primary right) as opposed to Sekund√Éranspruch (secondary right), which involves substitutes for performance such as damages.[65] Similar to French civil law, German civil law is “hostile towards allowing a promisor to avoid the promise to perform and pay damages instead.”[66] Both French and German legal systems are repugnant to “efficient breach” theory found in the common law – the concept that there can be aggregate economic benefits to breach of a contract, insofar as the breach does not harm the innocent party.[67]

Similar to French civil law, German law will reinforce an order for specific performance with financial pressure. Once an order for specific performance is made, German law grants the breaching party a grace period, or Nachfrist, before allowing the innocent party to rely on his/her secondary rights (damages).[68] After the grace period has elapsed, the innocent party can opt to continue to enforce the promise or recover damages.[69] The innocent party can only seek to recover damages once the Nachfrist has passed, forcing parties to attempt to keep the contract alive before resorting to a monetary remedy.[70]

4.3 Civil Law Presumption of Specific Performance applied to Common Law Land Contracts

4.3.1 Historical overview of the common law presumption of damages

Before the administrative fusion of courts of law and equity, both courts operated independently of each other.[71] In the court of equity, equitable remedies, such as specific performance, were the principle remedy; the same was for courts of law. The “damages first” rule is rooted in the manner in which courts of equity were derived – a “remedial supplement to the perceived shortcomings of the law.”[72] Even with the two independent courts, equity was available when common law courts could not afford adequate and complete relief.[73] Since the fusion of the law and equity, courts have created primacy of one remedy over another in the interest of maintaining predictability, certainty, and continuity in the law.[74] To maintain predictability and protect economic and commercial interests, the common law presumes that damages are the appropriate remedy, unless otherwise proven inadequate.

4.3.2 Damages are not always a cost-effective or efficient remedy

In the context of non-fungible commodities, such as real estate, the civil law presumption of specific performance may provide a more cost-effective remedy. In the context of real estate transactions, an appropriate assessment of damages requires a thorough consideration of several variables. As a starting point, courts need to determine the fair market value of the property in question. Depending on the piece of real estate, these assessments can be time consuming and costly to acquire.[75] In some cases, courts may also need to consider future developments on the land and factor in fluctuations in the real estate market. In cases where the market is particularly volatile, an accurate number may be impossible to determine. In addition, courts must determine whether an innocent party acted reasonably in mitigating damages, which may affect the final dollar amount in damages. On all of these assessments, expert and other evidence may be tendered, which can be costly to procure.[76] Courts can avoid accounting for all of these variables with an order for specific performance.

In some cases, courts have held that insolvency is not a valid basis to determine whether damages are inadequate; leaving innocent parties under-compensated.[77] In 410675 Alberta Ltd v Trail South Developments[78], the plaintiff argued that the land in question was the defendant’s only asset, thus an award of damages would be inadequate.[79] The Alberta Court of Appeal (“ABCA”) held that the authorities cited by the plaintiff “did not support the proposition that a plaintiff’s potential inability to collect damages from a defendant is an adequate basis for specific performance.”[80] The Court held that the plaintiff’s argument confused the remedy of specific performance with interlocutory injunctive relief, or pre-judgment execution.[81] In contrast to Trail South Developments, in Mylonas Enterprises Ltd v Foundation Place Inc, the Alberta Queen’s Bench held that damages would be an inappropriate remedy because the defendant was insolvent.[82] In cases where insolvency is not considered a valid basis for an equitable remedy, innocent parties may have no means to recover damages. In these cases, specific performance would be the most cost-effective, efficient, and adequate way to compensate parties from insolvent defendants.

In cases where an innocent party mitigates their losses, courts may not factor in all of the innocent party’s losses when determining an appropriate quantum of damages. In investment property contracts, these purchases are often part of ongoing commercial ventures. When a real estate deal falls through, parties cannot simply sue for performance, they must now devote time and energy into finding suitable alternatives.[83] Courts will generally factor in reasonable, tangible costs, such as legal fees and property searches, but they will not compensate for lost opportunities. Parties can spend an extraordinary amount of time searching for a substitute location, negotiating a deal, and obtaining financing for the purchase. In these circumstances, time does not equate to money. In addition, parties who elect to mitigate their losses may end up undermining their claim for performance. A prudent purchaser would opt to reasonably mitigate their losses in order to ensure damages are assessed appropriately; however, if the party ultimately seeks performance, finding a “suitable alternative” could defeat their equitable claim.[84]

Once an order for damages is made, the parties may incur additional costs through judgment debtor examinations (“JDE”). A court may have to conduct a JDE in order to determine what assets the debtor has in order to satisfy the order.[85] In some cases, the court may need to issue a writ of enforcement or judicial sale – both of which are costly and difficult processes.[86] Once the JDE is completed, it may be determined that the debtor does not have sufficient assets to satisfy the award against him/her. An innocent party will not incur these additional examination costs in cases where a court forces the conveyance of real estate via an order for specific performance. 

4.3.3 A presumption of performance in real estate contracts can achieve better results

In the context of real estate transactions, parties to a contract may benefit more from a presumption of specific performance, similar to civil law jurisdictions. If a court awards specific performance, an innocent purchaser will not have to incur additional losses through mitigation, lost opportunities, or property appraisals. In addition, a presumption of specific performance in real estate transactions would likely warrant less judicial discretion in breach of land contract cases. If performance in-kind were the legal presumption, judges would not have to objectively and subjectively evaluate the “unique” quality of a piece of land. As mentioned above, the uniqueness evaluation is highly fact driven and the results are unpredictable. In many cases, there are strong arguments for or against specific performance in a breach of land contract, depending on the facts. For example, an order for specific performance could hinge on whether a judge determines that a unique quality of a piece of property was in keeping with the purchaser’s reason for buying it. Assessing the intent of a buyer is inherently speculative. A presumption in favour of specific performance could clear up this confusion as to whether land will be considered unique, among other qualities, to qualify for specific performance. The underlying principle of any remedy is to place the party in the position they would have been, had the contract been performed – the Compensation Principle. Given the challenges with quantifying the number of variables associated with real estate transactions, specific performance is the most effective way to make a party whole again in breach of land contract cases. 

5.0 Where Specific Performance in Real Estate Transactions May Fall Short

5.1 Efficient Breach

A presumption of specific performance in real estate transactions would eliminate the concept of the “efficient breach”. In economic terms, the efficient breach is described as a “Pareto improvement” or “Pareto superior” – a change (or breach) that puts “one member of society in a better position without making somebody else worse off.”[87] The theory makes logical sense in cases where a party has been offered a higher price by a third party. In that case, it would be more cost-productive for the vendor to sell to the new purchaser, assuming damages to the initial purchaser are less than the difference between the two offers.  For example, if vendor A agrees to sell widgets (worth $10,000 at fair market value) to purchaser B for $9000, and then receives an offer from purchaser C for $12,000, vendor A would owe purchaser B $1000 in damages, while still receiving $2000 in profit from vendor C. This scenario is only efficient if purchaser C’s offer exceeds the fair market value of the widget, otherwise the sale is efficiency neutral. [88]

Eliminating the efficient breach would force vendors to abide by their contracts, however imprudent the sale may have been. In the context of real estate transactions, given the volatility of many real estate markets, there may be many situations where a vendor may be able to receive an exceptionally better offer prior to closing. In cases where the new offer drastically exceeds the fair market value, efficient breach values the commercial freedom of the vendor over the purchaser. For example, the first purchaser may have purchased the property as an investment with the intention of flipping the property for a quick resale. In this case, damages may not account for the resale value that the initial purchaser would have received. Instead, efficient breach allows the vendor to benefit from potential market fluctuations. If the common law adopted a presumption of specific performance, parties would likely create more prudent agreements, if they knew they would be more likely to have to abide by them.

5.3 Enforcement Costs

While damages can carry additional enforcement costs through judgment debtor examinations and writs of execution, orders for specific performance can also carry enforcement costs. In some cases, an award for specific performance may cost more to enforce, if it requires the court to keep the case on its docket until the defendant has abided by the order.[89] In cases where a vendor arranged a resale in good faith, or where a purchaser had already arranged a resale by the time a vendor breached, the damages assessment costs should be lower; the property valuations would be almost complete.[90] However, in cases where a conveyance would be seamless and a property assessment would be detailed and costly, the enforcement costs of specific performance would be relatively low.

6.0 Conclusion

In the context of real estate transactions, a presumption of specific performance would better serve justice in the face of a breach of contract. In the case where a plaintiff is seeking an order for specific performance, they need only prove that 1) there is a valid contract; and 2) the plaintiff is ready, willing and able to complete the transaction. In order to resist an order for specific performance, a defendant would need to prove that 1) the order would give rise to undue hardship on that party or to a third party; or 2) the plaintiff has not come to the court with clean hands; or 3) there are other considerations that would motivate the court to deny the equitable remedy.[91] While the presumption of damages is meant to compensate an injured party in the face of a breach, real property, in particular, can carry intangible value that may not be compensated for in damages.  Given the difficulty of valuing property, the potential for uncompensated losses, and the enforcement costs associated with a damages remedy, a presumption of specific performance in the context of real estate transactions would better serve justice.

BIBLIOGRAPHY

LEGISLATION

Wills Variation Act, RCBC 1996, c 490.

German Civil Code, 2002 s 241.

JURISPRUDENCE

Amar v Matthew, 2010 BCSC 508, [2010] BCWLD 6436, 188 ACWS (3d) 585.

Bashir v Koper, [1989] 18 ACWS (2d) 292, 27 RPR 297, 40 OR (2d) 758.

Canamed (Stamford) Ltd v Masterwood Doors Ltd, [2006] OJ No 802, 41 RPR (4th) 90.

Cantini Developments Ltd v Hi-Rise Group (Toronto), 2013 ONSC 186, 225 ACWS (3d) 259, 28 RPR (5th) 279.

Chaulk v Fairview Construction Ltd, [1977] NJ No 35, 14 Nfld & PEIR 13, 33 APR 13.

Domowicz v Orsa Investments Ltd, [1993] OJ No 2214, 15 OR (3d) 661, 42 ACWS (3d) 934.

Heron Bay Investments Ltd v Peel-Elder Development Ltd, [1976] OJ No 1403, 2 CPC 338.

John E Dodge Holdings Ltd v 805062 Ontario Ltd, [2001] OJ No 4397, 109 ACWS (3d) 528, 46 RPR (3d) 239.

John E Dodge Holdings Ltd v 805062 Ontario Ltd, [2003] OJ No 350, 10 RPR (4th) 98, 120 ACWS (3d) 392.

McNabb v Smith, [1981] BCJ No 1833, 124 DLR (3d) 547, 20 RPR 146.

Mondino v Mondino, [2004] OJ No 1132, 129 ACWS (3d) 1232, 18 RPR (4th) 200.

Mylonas Enterprises Ltd v Foundation Place Inc, 2013 ABQB 385, [2013] AWLD 3009 229 ACWS (3d) 631.

Roy v Kloepfer Wholesale Hardware & Automotive Co, [1952] 2 SCR 465, [1952] 3 DLR 705.

Semelhago v Paramadevan, [1996] 2 SCR 415, [1996] SCJ No 71, 136 DLR (4th) 1.

Sihota v Soo, 2010 BCSC 886, at para 63, [2010] BCWLD 8366, 190 ACWS (3d) 953.

410675 Alberta Ltd v Trail South Developments, 2001 ABCA 274, [2001] AJ No 1341, 109 ACWS (3d) 499.

SECONDARY MATERIALS: ARTICLES

Bruce Ziff, “Death to Semelhago!” (2016) 39:1 Dal LJ.

George Triantis, “The Evolution of Contract Remedies (and Why Do Contracts Professors Teach Remedies First?)” (2010) 60 U Toronto LJ 643.

Helge Dedek “From Norms to Facts: The Realization of Rights in Common and Civil Private Law” (2010) 56:77 McGill LJ.

J Berryman, “The Specific Performance Damages Continuum: An Historical Perspective” (1985) 17:2 OLR at 300.

Jason Kirwin, “Appraising a Presumption: A Modern Look at the Doctrine of Specific Performance in Real Estate Contracts” (2005) 47:2.

Lawrence Berkovich, “To Pay or to Convey?: A Theory of Remedies for Breach of Real Estate Contracts” (1995) 2:1 Ann Surv Am L.

Louis J Romero, “Specific Performance of Contracts in Comparative Law: Some Preliminary Observations” (1986) 27:4 Le Cahiers de Droit.

Marguerite Moore, “Damages and Specific Performance: A Tale of Two Remedies” (2011) 2 RPR 175.

SECONDARY MATERIALS: BOOKS

Barry Nicholas, French Law of Contract (London: Butterworths, 1982).

Johnston et al, The German Law of Contract: A Comparative Treatise (Oxford: Hart Publishing, 2006).

Klaus Mathis, Efficiency Instead of Justice (New York: Springer Science + Business Media LLC, 2009).

Richard A Posner, Economic Analysis of Law (New York: Wolters Kluwer Law & Business, 2014).

Sir Edward Fry, A Treatise on the Specific Performance of Contracts, 2nd ed (Albany, NY: Weare & Little & Co, Law Booksellers, 1884).

Vaughan Black et al, Remedies: Cases and Materials 7th ed (Toronto: Emond Montgomery Publications, 2016).

Endnotes

[1] George Triantis, “The Evolution of Contract Remedies (and Why Do Contracts Professors Teach Remedies First?)” (2010) 60 UTLJ 643 at 650.

[2] Bruce Ziff, “Death to Semelhago!” (2016) 39:1 Dal LJ at 3.

[3] Ibid.

[4] J Berryman, “The Specific Performance Damages Continuum: An Historical Perspective” (1985) 17:2 OLR at 300.

[5] Ziff, supra note 2 at 3.

[6] Ibid.

[7] Roy v Kloepfer Wholesale Hardware & Automotive Co, [1952] 2 SCR 465, at para 7, [1952] 3 DLR 705.

[8] Marguerite Moore, “Damages and Specific Performance: A Tale of Two Remedies” (2011) 2 RPR 175 at 1.

[9] Sir Edward Fry, A Treatise on the Specific Performance of Contracts, 2nd ed (Albany, New York: Weare & Little & Co, Law Booksellers, 1884) at 22.

[10] Jason Kirwin, “Appraising a Presumption: A Modern Look at the Doctrine of Specific Performance in Real Estate Contracts” (2005) 47:2 at 703.

[11] Ibid.

[12] Roy, supra 7.

[13] Roy, supra 7 at 472.  

[14] [1989] 18 ACWS (2d) 292, 27 RPR 297, 40 OR (2d) 758.

[15] Ibid, at para 4.

[16] Vaughan Black et al, Remedies: Cases and Materials 7th ed (Toronto: Emond Montgomery Publications, 2016) at 982.

[17] This viewpoint is still the current rationale for specific performance relating to APS’s for investment properties. See: Vaughan Black et al, supra note 16.

[18] Heron Bay Investments Ltd v Peel-Elder Development Ltd, [1976] OJ No 1403, at para 4, 2 CPC 338 [Heron Bay].

[19] Chaulk v Fairview Construction Ltd, [1977] NJ No 35, 14 Nfld & PEIR 13, 33 APR 13 [Chaulk].

[20] Ibid at para 21.

[21] McNabb v Smith, [1981] BCJ No 1833, 124 DLR (3d) 547, 20 RPR 146 aff’d 132 DLR (3d) 523, 44 BCLR 295 (BC CA).

[22] Ibid at para 24.

[23] [1993] OJ No 2214, 15 OR (3d) 661, 42 ACWS (3d) 934 [Domowicz].

[24] Ibid at para 60.

[25] Ibid.

[26] Ibid at para 68.

[27][1996] 2 SCR 415, [1996] SCJ No 71, 136 DLR (4th) 1 [Semelhago].

[28] Semelhago, supra note 27 at para 20.

[29] Ibid, at para 21.

[30] Ibid, at para 22. Given that the appropriateness of specific performances was not put to issue in Semelhago, Justice Sopinka’s comments on the remedy were obiter dictum. See: Ziff, supra note 5 at 9.

[31] While Sopinka J held that uniqueness was one of the standards by which the appropriateness of specific performance must be assessed, he did not identify the principles on which to conduct the uniqueness analysis. See: Moore, supra note 8 at 3.

[32] John E Dodge Holdings Ltd v 805062 Ontario Ltd, [2001] OJ No 4397, at para 60, 109 ACWS (3d) 528, 46 RPR (3d) 239 [Dodge Holdings].

[33] John E Dodge Holdings Ltd v 805062 Ontario Ltd, [2003] OJ No 350, at para 39, 10 RPR (4th) 98, 120 ACWS (3d) 392 [Dodge Holdings ONCA].

[34] Ziff, supra note 2 at 10. The Semelhago decision was vague on what factors should be considered when determining whether or not a piece of property could be considered unique enough to warrant specific performance.

[35] 2013 ONSC 186, 225 ACWS (3d) 259, 28 RPR (5th) 279 [Cantini].

[36] Cantini, supra note 35 at para 73.

[37] Ibid.

[38] 2010 BCSC 508, [2010] BCWLD 6436, 188 ACWS (3d) 585 [Amar].

[39] Wills Variation Act, [RSBC 1996] Ch 490.  

[40] Amar, supra note 36 at para 25.

[41] Ibid, at para 28.

[42] Ziff, supra note 2 at 11.

[43] Ibid.

[44] Mondino v Mondino, [2004] OJ No 1132, 129 ACWS (3d) 1232, 18 RPR (4th) 200 [Mondino].

[45] Ibid, at para 31.

[46] Mondino, supra note 42 at para 46.

[47] Ibid, at para 51.

[48] Sihota v Soo, 2010 BCSC 886, at para 63, [2010] BCWLD 8366, 190 ACWS (3d) 953 [Sihota].

[49] Moore, supra note 8 at 3.

[50] Canamed (Stamford) Ltd v Masterwood Doors Ltd, [2006] OJ No 802, at para 102, 41 RPR (4th) 90 [Canamed].

[51] Canamed, supra note 50 at para 102.

[52] Ziff, supra note 2 at 13.

[53] Barry Nicholas, French Law of Contract (London: Butterworths, 1982) at 211 [Nicholas].

[54] Ibid.  Note that this is not the case for personal service contracts. See: Nicholas, supra note 53 at 211.

[55] Ibid.

[56] Ibid.

[57] Ibid.

[58] Helge Dedek “From Norms to Facts: The Realization of Rights in Common and Civil Private Law” (2010) 56:77 McGill LJ at 110.

[59] Ibid.

[60] Ibid, at 109.

[61] Nicholas, supra note 51 at 221.

[62] Louis J Romero, “Specific Performance of Contracts in Comparative Law: Some Preliminary Observations” (1986) 27:4 Le Cahiers de droit at 808.

[63] Ibid.

[64] German Civil Code, 2002 s 241.

[65] Johnston et al, The German Law of Contract: A Comparative Treatise (Oxford: Hart Publishing, 2006) at 398.

[66] Johnston, supra note 63 at 399.

[67] Ibid.

[68] Ibid at 400.

[69] Ibid.

[70] The primary remedy of performance is only available when performance is possible. If performance is deemed impossible under the circumstances, the innocent party can resort to money damages as a remedy. See: Johnston, supra note 63 at 401.

[71] Ziff, supra note 2 at 20.

[72] Ziff, supra note 2 at 20.

[73] Ibid.

[74] Ibid.

[75] Ibid, at 23.

[76] Ziff, supra note 2 at 25.

[77] Ibid, at 11.  

[78] 410675 Alberta Ltd v Trail South Developments, 2001 ABCA 274, [2001] AJ No 1341, 109 ACWS (3d) 499 [Trail South Developments].

[79] Ibid, at para 19.

[80] Ibid, at para 20.

[81] Ibid.

[82] 2013 ABQB 385, [2013] AWLD 3009 229 ACWS (3d) 631 (AB QB) [Mylonas].

[83] Ziff, supra note 2 at 24. While parties are not required to mitigate their losses, in most cases it is in their best interest to do so.

[84] In finding a “suitable alternative”, parties may only be seeking a property with a similar dollar value. The unique aspects of a particular piece of property are not considered.

[85] Ibid, at 25.

[86] Ibid.

[87] Klaus Mathis, Efficiency Instead of Justice (New York: Springer Science + Business Media LLC, 2009) at 32.

[88] Ziff, supra note 2 at 30.

[89] Richard A Posner, Economic Analysis of Law (New York: Wolters Kluwer Law & Business, 2014) at 132.

[90] Lawrence Berkovich, “To Pay or to Convey?: A Theory of Remedies for Breach of Real Estate Contracts” (1995) 2:1 Ann Surv Am L at 355.

[91] Ziff, supra note 2 at 33.