There has been a significant increase in the number of specific performance cases before the Courts. Vendors are seeking this remedy to pursue purchasers who fail to complete property contracts executed in much healthier economic times. Most specific performance applications are accompanied by an application for damages in lieu of specific performance. The amount of damages awarded by the Courts in these actions is in the spotlight due to the huge drop in property values.

The Courts have emphasised the general principle that damages will be awarded so as to put vendors back into the position they would have been in if the contract had been performed. The inability of a purchaser to procure funding to complete a contract or pay damages is not taken into account by the Courts. A judgment delivered in July this year illustrates that the Courts consider the downturn in property values to be a purchaser’s bad fortune. In May 2007, a purchaser agreed to purchase land in Carlow for approximately €10.7m. The purchaser failed to complete and the vendors ultimately took an action for damages in lieu of specific performance. In assessing the amount of damages to award, the Courts measure the initial contract price against the value of the land following the breach of contract. The Courts have discretion to choose the most appropriate date at which to value the land for the purposes of calculating damages. In this case, the Court did not value the land on the date of the intended completion of the sale but at the date on which the purchaser failed to comply with a prior order for specific performance. That value was €639,200 so taking into account the deposit already paid, the amount of damages awarded against the purchaser was €10,095,000. The purchaser did not appear in this case and the Court accepted the valuations produced by the vendors.

Good advice needs to be sought by both parties to these actions on the submissions they make relating to the level of damages, valuations of property and the appropriate date on which to assess land values. Vendors seeking to enforce contracts need to ensure that there is no doubt as to the validity of the original contract and that they are ready, willing and able to complete the sale.  Unfortunately no amount of preparation will make a bankrupt or insolvent purchaser able to pay an amount of damages awarded against it so the merits of taking an action and the likelihood of achieving a financial result need to be carefully assessed before proceeding.