Ontario Specific Performance: When Courts Order Contract Performance

The Foundational Principle: Inadequacy of Damages

Specific performance is not a matter of right — it is a discretionary equitable remedy. The fundamental prerequisite is that damages would be an inadequate remedy for the breach. Where monetary compensation would fully compensate the innocent party for the loss suffered from breach, courts will leave the parties to their remedy in damages and will not compel performance.

The classic statement is from Beswick v Beswick [1968] AC 58 (HL): equity will give specific performance where the common law remedy of damages is inadequate to do justice between the parties. Inadequacy of damages arises most clearly where the subject matter of the contract is unique — something that cannot be readily obtained on the open market with the damages award.

Real Property: The Traditional Domain of Specific Performance

Land has historically been treated as unique, and specific performance of contracts for the purchase and sale of land has traditionally been available almost as of right in Ontario. The traditional presumption is that every parcel of land is unique — no two parcels are in the same location with the same characteristics — so damages cannot adequately compensate a purchaser for the loss of the specific parcel contracted for.

The traditional approach was significantly modified by the Supreme Court of Canada inSemelhago v Paramadevan [1996] 2 SCR 415. Justice Sopinka, writing for the majority, held that the presumption that all land is unique is no longer sustainable in the modern context. Residential real estate is frequently available as a commodity — there are often many comparable properties available for purchase on the market, and monetary compensation may adequately compensate a purchaser.

After Semelhago, a purchaser seeking specific performance of a real estate contract must establish that the property has a particular and special value that cannot be compensated in damages. This may be established where:

• The property has unique physical characteristics (location, views, access to water, heritage buildings)
• The property is adjacent to the purchaser's existing land and has strategic value for combination or development that cannot be replicated by a substitute property
• The purchaser contracted for a specific property for personal reasons that a substitute cannot fulfil
• The market was extremely tight and no comparable property was available

Commercial real estate — development land, properties with specific zoning or density entitlements, or properties with critical locational advantages — more readily attracts specific performance because the commercial value of the specific location or entitlements cannot be replicated by a substitute.

Ontario courts post-Semelhago have ordered specific performance where the property has unique characteristics or the purchaser has demonstrated a specific purpose, while declining it for standard residential properties where the purchaser has not established specific uniqueness.

Specific Performance for Vendors

The principle of mutuality of remedies holds that specific performance should be available to both parties where it is available to one. A vendor of real property can seek specific performance against a purchaser who refuses to close, compelling the purchaser to complete the transaction and pay the purchase price.

The vendor's claim for specific performance is important in markets where property values have declined: if the vendor must resell the property, a claim for damages (the difference between the original contract price and the resale price) may be straightforward. But where the vendor has a tax reason to sell in a particular year, or where the property is subject to other complications, specific performance may be the preferred remedy.

Specific Performance Beyond Real Estate

Unique Goods

The Ontario Sale of Goods Act RSO 1990 c S.1 s.51 authorizes a court to make an order for specific delivery of specific or ascertained goods — but only at the court's discretion and not as a matter of right. Goods are candidates for specific performance where they are genuinely unique — antiques, original works of art, historically significant items, one-of-a-kind equipment, or goods of particular personal significance.

Standard commercial goods available on the open market do not attract specific performance — damages for the cost of obtaining substitute goods from another supplier will adequately compensate the buyer.

Contracts for Personal Services

Courts will not order specific performance of a contract for personal services — requiring a person to personally perform services for another. This flows from the refusal to compel personal service relationships and the recognition that courts cannot adequately supervise the performance of such contracts.

Negative covenants in personal service contracts — restraints of trade and non-compete clauses — may be enforced by injunction restraining the party from breaching their promise not to compete, even though specific performance compelling them to work would not be granted.

Share Purchase Agreements

Specific performance of share purchase agreements is increasingly recognized in Ontario. Where a party has agreed to sell shares in a private corporation and refuses to complete, the purchaser may seek specific performance on the basis that the shares — representing a specific ownership interest in a specific enterprise — are unique and cannot be substituted by any other shares.

The argument for uniqueness is particularly strong for controlling or majority share interests, and for shares in companies with unique assets, proprietary technology, or specific business relationships that cannot be replicated.

Defences to Specific Performance

Hardship

Courts will refuse specific performance where it would result in hardship to the defendant out of proportion to the benefit conferred on the plaintiff — particularly where the hardship arises from circumstances beyond the defendant's control. The hardship must be significant and must relate to the specific enforcement being ordered.

A vendor who agreed to sell and is subsequently required to find alternative housing at significantly higher cost does not normally establish hardship sufficient to defeat specific performance — changed market conditions are within the expected risks of a real estate transaction. But supervening events that make performance genuinely impossible or oppressive may engage the hardship defence.

Laches and Delay

Specific performance is an equitable remedy, and equity refuses to assist those who sleep on their rights. Unreasonable delay in bringing a claim for specific performance — especially delay that has caused prejudice to the defendant — may bar the remedy.

The Ontario Limitations Act 2002 applies a two-year limitation period to claims for specific performance, subject to discoverability. Equitable delay (laches) may operate independently of the statutory limitation period to bar specific performance where the plaintiff's delay has been inequitable.

Plaintiff's Default (Clean Hands)

Equity requires the plaintiff seeking specific performance to have themselves performed their obligations under the contract or to have tendered performance. A purchaser who was not ready, willing, and able to complete the transaction on the closing date cannot seek specific performance against a non-performing vendor.

The clean hands doctrine — "he who comes to equity must come with clean hands" — may also bar specific performance where the plaintiff has engaged in misleading or unconscionable conduct in connection with the contract.

Mutuality

Specific performance must generally be available to both parties to a contract for the court to order it against one. Where the nature of the contract is such that the remedy would only be available to one party (for example, a contract for personal services that only the plaintiff could perform), the court may decline to grant it against the defendant.

Partial Performance

Ontario courts may order specific performance of part of a contract where only part of the contract is enforceable or where the plaintiff can take what is available on the terms of the contract. In real estate, partial performance may arise where only part of the land contracted for is available for conveyance due to a survey discrepancy or encumbrance.

In the law of contract, part performance operates in equity to make otherwise unenforceable oral contracts for land specifically enforceable where acts of part performance have occurred — the classic example being the payment of purchase money plus taking possession of land under an oral agreement for sale.

Damages in Lieu of Specific Performance

Under the Courts of Justice Act RSO 1990 c C.43 s.99, the court may award damages in lieu of or in addition to an injunction or specific performance. This provision (formerly the Lord Cairns Act jurisdiction) permits the court to award equitable damages where legal damages would be inadequate and where specific performance is not an appropriate remedy on the specific facts.

Equitable damages in lieu of specific performance can be measured differently from common law damages — they may compensate the plaintiff for the specific value of the performance rather than simply the expectation measure. In real estate, this permits the court to compensate the purchaser for the specific value of the property (including development value or personal value) rather than just the market value difference.

Practical Considerations for Ontario Real Property Lawyers

Real estate lawyers in Ontario should advise clients who face a non-performing counterparty on:

• Whether the property has unique characteristics that would support a claim for specific performance post-Semelhago
• The time-sensitive nature of the election between pursuing specific performance and repudiating the contract and claiming damages — taking inconsistent steps can waive the right to specific performance
• The obligation to remain ready, willing, and able to perform in order to maintain the claim for specific performance
• The desirability of registering a certificate of pending litigation (CPL) on the title to the property to prevent a third party purchase that would make specific performance impossible
• The limitation period for commencing an action for specific performance after a vendor refuses to close

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