Specific Performance. Teachers Insurance and Annuity Association of America (T.I.A.A.) agreed to lend City Centre One Associates $14.5 million for the construction of an office building in Salt Lake City. City Centre, however, refused to go through with

Question

the closing on the loan, and T.I.A.A. sued for specific performance of the contract. Courts have in the past granted specific performance of lending agreements when requested by the borrower if failure to go through with the loan would result in irreparable injury to the borrower, who may be unable to secure alternate financing. Should T.I.A.A., as a lender, succeed in its request for specific performance? Explain.

Answer 1

Specific performance
T.I.A.A. should not succeed in its request for specific performance. Specific performance is an extraordinary remedy that a court will grant only when ordinary monetary damages are insufficient to put the plaintiff in as good a position as he or she would have been in had the contract been performed. For instance, courts will not normally grant specific performance for a contract for the sale of goods because money damages would allow the plaintiff to go into the marketplace and buy replacement goods. Courts will only grant specific performance when the subject matter of the contract is unique, such as land or a rare art object. If a borrower's business would be irreparably disrupted because of a lender's breach, then courts will allow specific performance of the lending agreement. Lenders, however, are not in the same position as their customers. A breach by a prospective borrower does not deprive the lender of anything more than ordinary damages. T.I.A.A. has only to find another borrower from whom it can exact the same rate of return. If it cannot find such a borrower, the only harm it suffers is pecuniary and fully compensable in damages. T.I.A.A. may collect only ordinary monetary damages from City Centre.