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Developers can often utilize specific performance clauses

On Behalf of | Jun 10, 2024 | Real Estate and Construction Litigation

Real estate developers often use specific performance clauses. These clauses are essential in the real estate industry because each piece of property is unique, and monetary compensation alone might not always be an adequate remedy for a breach of contract.

Specific performance clauses ensure that if one party fails to fulfill its contractual obligations, the other party can ask a court to enforce the contract’s terms rather than just seek monetary damages. For example, if a seller refuses to transfer property as agreed, the buyer can seek a court order for the transfer of the property rather than just compensation for the breach.

This clause is also valuable to developers who rely on certainty in transactions involving land acquisition, construction contracts, and agreements with architects, contractors, and suppliers. Ensuring that each party fulfills their contractual duties as specified helps maintain timelines, budgeting, and the overall success of development projects.

Leverage for getting it done

Specific performance can be a critical remedy in construction litigation. Unlike other types of contracts, where monetary damages might be sufficient compensation for breach of contract, the result of the work is often the priority in construction. For instance, if a contractor agrees to build a custom-designed home, simply paying back money isn’t enough if the contractor fails to complete the project. The developer wants the house as planned and specified, not just compensation.

How to handle specific performance clauses

It’s essential to utilize specific performance clauses with care. Here are a three tips:

  1. Clear terms: Ensure all contract terms are unambiguous. The more specific your contract, the easier it is to enforce specific performance.
  2. Understand the risks: Specific performance can be a double-edged sword. It ensures that the work is done as agreed, but it also means you must meet your obligations to the letter.
  3. Legal advice: Always consult with a legal professional when drafting or signing a contract that includes a specific performance clause. Doing so can prevent misunderstandings and litigation down the road.

A tool for ensuring accountability

Understanding specific performance clauses is non-negotiable for developers and anyone else in the construction industry. Understanding their agreed-upon responsibilities helps maintain the integrity and quality of a construction project from start to finish. It can also minimize the risk of disputes and ensure that projects meet your expectations.