Specific performance of contracts is a commonly applied remedy when there is a breach of contract. The failure to perform, improper performance, or incomplete fulfilment of commitments in a contract, such as failure to deliver goods, or not ensuring the quantity and quality of the goods, serves as the basis for applying the commercial remedy: Specific performance of contracts. In this article, we will present the legal provisions related to this remedy.

1. Definition of “Specific performance of contracts”

Specific performance of a contract means a remedy whereby the aggrieved party requests the breaching party to properly perform the contract or apply other measures to cause the contract to be performed and the breaching party shall have to bear any costs incurred. The essence of this remedy is that the party in breach of the contract must continue to perform the contract as requested by the aggrieved party.

2. Content of “Specific performance of contracts”

i) Where the breaching party fails to deliver goods in full or provide services in accordance with the contract, it shall have to deliver goods in full or provide services in accordance with the contract. Where the breaching party delivers goods or provides services of inferior quality, it shall have to rectify defects of the goods or shortcomings of the services or to deliver other goods as substitutes or provide services in accordance with the contract. The breaching party must not use money or goods or services of other types as substitutes unless so consented by the aggrieved party.

ii) Where the breaching party fails to comply with the provisions mentioned in (i) above, the aggrieved party may purchase goods or receive services of the correct type as stated in the contract from another seller or provider for substitution and the breaching party must bear the price difference and relevant expenses, if any; or may rectify defects of the goods or shortcomings of the services by itself, and the breaching party must pay actual and reasonable expenses for the rectification.

The aggrieved party shall have to receive goods or services and make payments if the breaching party has fulfilled all obligations according to (i) above.

iii) Where the breaching party is the purchaser, the seller may request the purchaser to pay for and receive goods or fulfil other obligations stipulated in the contract and provided for in the 2005 Commercial Law.

3. Extension of time limit for performance of obligations

In case of specific performance of a contract, the aggrieved party may extend the time limit for a reasonable period for the breaching party to perform its contractual obligations.

4. Relationship between the remedy of specific performance of contracts and other remedies

• Unless otherwise agreed, during the period of application of the specific performance of a contract, the aggrieved party may claim for damages and fines to be paid but must not apply other remedies. Other remedies include Suspension of performance of contracts, Stoppage of performance of contracts, and Cancellation of contracts.

However, according to Article 51(3) of the 2005 Commercial Law, in cases where the seller has delivered goods that do not conform to the contract, the buyer has the right to temporarily suspend payment until the seller rectifies the non-conformity. The temporary suspension of payment by the buyer is considered a suspension of contract performance. Therefore, during the period in which the buyer enforces contractual performance obligations, the buyer still has the right to temporarily suspend contract performance if this suspension is carried out in accordance with the legal provisions or as stipulated by the parties in the contract.

• If the breaching party fails to carry out the remedy of the specific performance of a contract within the time limit set by the aggrieved party, the aggrieved party may apply other remedies to protect its legitimate rights.

5. Notes

Parties involved should note that when applying this remedy, the breaching party is not required to prove that actual damages have occurred; they only need to demonstrate the legitimate benefits they expected to gain from the contract that the obligated party failed to provide.

On the other hand, this remedy is not applicable in all cases, as the obligated party may not be able to fulfil the contract in reality or the law may prohibit it. For example, if the goods are no longer available for a sale and purchase contract, if the goods have been seized by the competent state authorities, etc.

The above is the article “Commercial remedy: Specific performance of contracts” that TNTP has sent to its readers. If you have any issues that require discussion, please contact TNTP for timely assistance.