2

Mindy Chen-Wishart. Contract Law (2018 6 edn). p 557.

Counterpoint

  1. The current level of damages awarded is the outcome of balancing the various policies identified in Chapter 13. If we accept the validity of policies such as the avoidance of waste and undue harshness to defendants, and the desirability of mitigation of loss by the claimant, then under-compensation to that extent is inevitable. Such policies should not be evaded by simply choosing specific performance.

  2. On one view, automatic specific enforcement may amount to ‘over-compensation’, because [2.1] it allows the claimant to sell the right to specific performance for [2.2] more than the true value of the performance to him or her (Lord Hoffmann in Cooperative Insurance v Argyll Stores).

  1. How's 2.1 true? I'm assuming that contracts ordinarily don't allow either party to sell the right to specific performance, if the contract doesn't stipulate such selling.

  2. How's 2.2 true?

3

Nate nailed it. It's all about the difference between the loss to the defendant from having to perform, and the loss to the plaintiff from the breach.

I am only writing to add quotations from Lord Hoffman's decision in Cooperative Insurance showing that he meant exactly what Nate conjectured he meant.

In his opinion, Lord Hoffman points out that ordering specific performance

may cause injustice by allowing the plaintiff to enrich himself at the defendant's expense. The loss which the plaintiff may suffer through having to comply with the order (for example, by running a business at a loss for an indefinite period) may be far greater than the plaintiff would suffer from the contract being broken.

Hoffman then quotes Professor RJ Sharpe, Specific Remedies in Contract Breach:

In such circumstances, a specific decree in favour of the plaintiff will put him in a bargaining position vis a vis the defendant whereby the measure of what he will receive will be the value to the defendant of being released from performance. If the plaintiff bargains effectively, the amount he will set will exceed the value to him of performance and will approach the cost to the defendant to complete.

Finally, Lord Hoffman quotes Lord Westerbury, who said,

[I refuse] to deliver over the defendants to the plaintiff bound hand and foot, in order to be made subject to any extortionate demand that he may by possibility make...

2

This is a guess, but perhaps they have in mind a situation like the following.

Suppose Alice and Bob have a contract in which Alice has promised to do some thing, call it X. It will cost Alice £5000 to do X, and she doesn't want to do it. If she doesn't do it, Bob will incur losses of £1000.

Now if specific performance were always ordered, Bob could go to Alice and say: "Instead of doing X, you can simply pay me £4900." Alice knows if she refuses Bob's offer, Bob can go to court and get an order for specific performance, which will cost her £5000. So it is cheaper for her to pay the £4900 to Bob. Thus Bob is in some sense "selling" the right to specific performance, by offering to waive his right in exchange for money. But this results in Bob being "over-compensated" by £3900, since his losses are only £1000 and he's receiving £4900.

If specific performance is not ordered, Alice can simply decide not to do X. She will be liable to Bob for only £1000, and he'll be exactly compensated for his losses, not over-compensated.

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