The Conveyancing Transaction: Remedies for Breach of Contract for Sale or Transfer of an Interest in Land

Introduction:

This note will discuss the remedies available to the vendor and the purchaser following a breach of contract by either party.

Remedies Available to Parties for Breaches, Non-Disclosures, Misdescriptions, and Non-Descriptions

1. Specific performance.
2. Damages.
3. Rescission.
4. Rectification.

These remedies are now discussed.

1. Specific Performance as a Remedy:

A. Meaning:

Specific performance may be defined as an order or a decree of a court, in the exercise of its equitable jurisdiction, compelling a party to a contract to perform his obligations under the contract as per its terms.

In Black’s Law Dictionary, 9^th ed., specific performance is defined as

The rendering, as nearly as practicable, of a promised performance through a judgment or decree; specif., a court-ordered remedy that requires precise fulfillment of a legal or contractual obligation when monetary damages are inappropriate or inadequate, as when the sale of real estate or a rare article is involved.• Specific performance is an equitable remedy that lies within the court's discretion to award whenever the common-law remedy is insufficient, either because damages would be inadequate or because the damages could not possibly be established.

In the context of contracts for the sale of land or the transfer of interest in land, the court will either order the vendor to complete the transfer or the purchaser to complete the purchase. For instance, the court may order a vendor to grant a formal lease to the purchaser or order the purchaser to take a formal lease from the vendor.

B. When it will be Granted:

Before the courts will order specific performance, the following conditions must be fulfilled:

1. There must be a valid contract, per the cases of Short v. Morris, 3 WALR 339–342, Fofie v. Zanyo [1992] 2GLR 475 SC, and Deegbe v. Nsiah and Another [1984-86] 1 GLR 545. This contract may be written or oral, as seen in the cases of Tahiru v. Mireku & Another [1989–90] 2 GLR 615, Djan v. Owoo and Another [1976] 2 GLR, and Samarasinghe v Sbaiti 1977 2 GLR 442.
2. Damages must be inadequate as a remedy. Before a court will grant an order for specific performance, it must be satisfied that the plaintiff cannot be compensated by an award of damages, or it must be shown that damages will be inadequate. In contracts for the sale of land, damages are usually considered inadequate. In the case of Kwaku Bonsu v. Ama Agyemang [2012] SCGLR, the Supreme Court of Ghana, speaking through Date-Bah JSC, acknowledged that “more generally in relation to the remedy of specific performance, there is a requirement that damages must be inadequate before an order for it is granted.” The court added that “The settled conventional position of the law is that, upon breach of a contract for the sale of land, the primary remedy available to the innocent party is specific performance, although this is a discretionary equitable remedy.”
3. The plaintiff must have performed his part. Before the courts will grant specific performance in favour of a plaintiff, he must have performed his obligations under the contract. See the cases of Lartey v. Bannerman [1976] 2 GLR 461 and Fofie v. Zanyo (supra), where Justice Aikins advanced that “It is a well-known principle of law that if the plaintiff has wholly or in part executed his part of the agreement believing that the defendant would also do the same, the court may order specific performance of the agreement for the reason that it would be a fraud on the defendant’s part should he not carry out his part of the bargain. In other words the basis of equity’s intervention is that the plaintiff has prejudiced his position by his conduct, and for that matter has acquired an equity to be protected against the destruction of the agreement upon which he acted .”

C. When it will not be Granted:

Specific performance may be refused by the court if

1. The contract is illegal: For instance, if the contract is for the transfer of a leasehold interest to a foreigner for a term above 50 years, the court will not order specific performance because the contract is contrary to Article 266(4) of the Constitution, 1992.
2. There is no mutuality: Under the doctrine of mutuality, each party to a contract must be able to institute an action for an order of specific performance against the other party, and that order must be capable of being granted. In the case of Flight v. Bolland (1828), 38 ER 817, the plaintiff was an infant who entered into a contract with the defendant. The defendant failed to perform his contractual obligations, and the infant plaintiff instituted the present action. The defendant argued that since the defendant would not be able to obtain the remedy of specific performance against the infant plaintiff if the plaintiff was to be found to have failed to perform his obligations, the plaintiff should equally not be granted the remedy. The court upheld this argument and dismissed the plaintiff’s action, emphasising that “it is not doubtful that it is a general principle of courts of equity to interpose only where the remedy is mutual.”
3. The contract is vitiated by fraud, misrepresentation or mistake: In the case of Elluah v. Ankumah [1968] GLR 795 HC, the defendant obtained a leasehold interest from the Government of Ghana. There was a covenant on the part of the defendant not to assign the land without the prior consent of the government. The defendant, contrary to the covenant, contracted to lease the land to the plaintiff but later refused to complete the transaction. The plaintiff brought an action for specific performance. It was held that “Under the second schedule, paragraph (2)(h) of the original lease, exhibit A, the lessee, i.e. the defendant herein, covenants not without the previous consent in writing of the Government of the Republic of Ghana to assign, underlet, mortgage at law or in equity, pledge, charge or part with the possession of the said demised premises or any part thereof or any building or buildings or grant any interest therein. No such consent has even now been obtained. This consent in writing is a condition precedent, and the failure to obtain it vitiates the whole contract between the plaintiff and the defendant. Suppose the court allows the claim for the specific performance and the Government refuses to exercise its discretion under the lease to give the consent in writing, what would be the effect of the order of the court? No court would make an order which is incapable of being enforced otherwise it would make a mockery of justice.”

2. Damages as a Remedy:

A. Meaning:

This is a sum of money claimed as compensation or awarded by a court as compensation to the plaintiff/claimant for harm, loss or injury suffered by the plaintiff/claimant as a result of a tortuous act or breach of contract committed by the defendant or his agent.

In the context of a contract for the sale or transfer of an interest in land, a purchaser may be entitled to damages if there is misdescription in the contract, misrepresentation by the vendor, non-disclosure by the vendor, or failure of the vendor to complete the sale or transfer.

A. Types of Damages:

Under the general law of contract, damages are classified as

1. General damages
2. Special damages.

In the case of Delmas Agency Ghana Ltd. v. Food Distributors International (2007-2008) 2 SCGLR 748, the Supreme Court of Ghana characterised general damages as follows:

General damages is such as the law will presume to be the natural or probable consequence of the defendant’s act. It arises by inference of the law and therefore need not be proved by evidence. The law implies general damage in every infringement of an absolute right. The catch is that only nominal damages are awarded

On the other hand, special damages are damages awarded for specific losses suffered by an injured party following a breach of contract. They are quantifiable and can easily be ascertained.

3. Rescission as a Remedy:

A. Meaning of Rescission:

This is the cancellation of a contract, usually by the court. After a contract is rescinded, the parties are discharged from their contractual obligations. In Black’s Law Dictionary, rescission is defined as

A party's unilateral unmaking of a contract for a legally sufficient reason, such as the other party's material breach, or a judgment rescinding the contract.

Once a contract is rescinded, the parties are restored to their original position and money which was paid under the contract is returned.

B. When a Contract Can Be Rescinded:

A contract can be rescinded on any of the following grounds:

1. Breach of contract by the other party.
2. Misrepresentation, mistake, fraud, or any other grounds on which the court is prepared to set the contract aside.
3. Agreement between the parties.
4. A contractual provision that allows one party to rescind the contract.

4. Rectification as a Remedy:

A. Meaning:

Sometimes, the written contract may not accurately reflect the intentions of the parties. Where that is the case, the court may grant the equitable remedy of rectification to alter the contract to conform to the intention of the parties. See the case of P.Y. Attah & Sons v. Kingsman Enterprises Ltd. [2007-2008] SCGLR, where the parties intended to contract for a sub-lease but ended up with an assignment. Also see the case of Joscelyne v. Nissen [1970] 2 QB 86, where a written contract was rectified to require a daughter to pay for household expenses.

B. When Rectification is Available:

1. If the parties have made the same mistake and agree to rectifying the written instrument.
2. Where there is only one party to the instrument, such as a deed poll (which is an instrument that binds one or more persons to an intention or obligation).
3. Where the party who is not mistaken is guilty of fraud.
4. Where the non-mistaken party is aware of the mistake, he will be estopped from resisting the non-mistaken party’s claim to rectification.