11.6 Fifth sub-question: Specific performance and related legal institutions

In determining the boundaries of the law on specific performance, the boundaries of comparable legal institutions need to be examined and determined. This is the topic of the last sub-question, which has been dealt with in Chapter 9: How can the law on specific performance be positioned as regards other similor legal institutions?

By comparing these legal institutions to the right to specific performance, similarities and differences are observed. This comparative analysis furthermore provides insight into the arguments that lay at the foundation of all these legal institutions namely the phenomenon that an obligor, who is confronted with an obligee who does not (completely) perform his or her contractual obligation, can enforce a right in natura with regard to the obligee or a third person instead of claiming monetary damages.

In par. 9.2, the relationship of the right to specific performance to the right to damages in natura has been examined. Mora debitoris is in principle a requirement for damages, but not for specific performance. The impossibility to perform on the other hand is only a defence against specific performance, but not against a claim for damages.

It is this author's opinion that the judge is not granted a discretionary competence to reject damages in natura if he or she believes another remedy to be more suitable. The judge is, however, able to take into account the obligor's infringement of the obligation to mitigate his or her damages (Article 6:101). An infringement of the obligation to mitigate the damages occurs if the obligor has refused to accept an obligee's offer to compensate the damages in natura, even though the offer was adequate in the judge's opinion. It has been argued that the obligor in the scope of his or her claim for specific performance can in principle claim replacement, if the obligee cannot deliver or repair the agreed specific goods. By means of interpretation of the contract, it needs to be determined whether the performance of a specified obligation is replaceable by an alternative. Hereby, the judge should determine whether the replacement performance of an obligation is of an equal sort and value as the obligation upon which the parties agreed. If this is this the case, then the obligor can claim replacement of the specific goods and the obligee can free him or herself of the obligation by offering an alternative act. The obligor is confined in his or her choice of monetary damages or damages in natura by the limitations of good faith, just as with respect to his or her choice for specific performance.

Par. 9.3 deals with the question how the law on specific performance relates to the different situations in which the obligor uses a third party to ensure that the contractual obligation is performed, at the cost of the obligee. Four different subjects are dealt with in this paragraph.

Firstly, judicial approval. This legal institution provides the obligor with the possibility to appoint a third party to carry out the act upon which the parties agreed at the cost of the obligee, after judicial authorisation has been obtained. The judicial approval is a functional, but in practice, presumably seldom used legal institution. The judicial approval is a hybrid legal institution with both enforcement and substantive law characteristics. The character of this legal institution is probably best described as a sui generis legal institution. Otherwise than generally accepted, it is this author's belief that a judge, who must assess the relative merits of a claim for judicial approval, does not have discretionary competence. The obligor does, however, need to send the obligee a letter of notice that allows him an additional, reasonable period of time for performance in order to obtain the judicial approval, this in order to provide the obligee the chance to perform properly. If specific performance has become impossible, a judicial approval on the basis of Article 6:79 is usually equally impossible, due to the fact that third parties will also not be in a position to perform. As a defence to a claim for judicial approval, the obligee could refer to the disproportionately high compensation costs (130% guideline), just as in the case of specific performance.

Secondly, the statutory provisions have been dealt with that provide the obligor with the ability to instruct a third party to repair a faulty performance at the cost of the obligee (Article 7:21(6) and 7:203(3)). The (original) obligee can, in this author's opinion, as a defence to these claims appeal to the disproportionately high compensation costs (130% guideline). Without any real reason, the legislature has neglected to create a statutory basis for the client party's ability to hire a third party at the cost of the constructor to correct the faults in the delivered structure. A statutory provision that would grant the client in construction contracts this right is to be recommended.

Thirdly, the question was raised whether an obligor has a right to claim damages for the cost of involving a third party, if he or she has failed to place the opposing party in a state of mora debitoris. It has been argued that the obligor, who deprives the opposing party of his or her right to cure the fault, should lose his or her right to damages, even for those costs that the obligee has saved as a result of not having repaired the fault him or herself.

Finally, reference has been made to the obligation of the creditor to mitigate his or her damage and his or her right to specific performance. A classic legal-economic argument against specific performance as a primary remedy is that specific performance leaves no room for the obligation to limit one's damages. Otherwise than by a claim for damages, an obligor claiming specific performance need not take any action to limit his or her damage flowing as a result of the non-performance. It has been argued that the obligation to limit ones damages should apply with respect to a buyer claiming specific performance in commercial (sales) contracts. In accordance with the PECL and the UNIDROIT principles, it has further been argued that professional buyers should be under an obligation to execute cover transactions if certain conditions are satisfied. Before the establishment of an obligation on the buyer to limit his or her damages, the buyer must have placed the seller in a state of mora debitoris, and he or she must be able to easily obtain a cover transaction on the market Infringement of the obligation to execute a cover transaction, does not infringe the right to specific performance of the professional buyer. The failure of covering with higher damages as a result should in this author's opinion lead to an obligation for the buyer to compensate the seller for the damages suffered.