I bought machine equipment under a hire purchase agreement. It was verbally agreed between us that the selling company would give 3 years of free maintenance and service of the equipment. After 2 years of free service the company refused to carry out this term of the contract. My friend told me that the court may give an order of specific performance. What does this mean?
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Answer by Neha Sharma, Hillsdale 2036 NSW
- In this case you had a verbal agreement with the company regarding 3 years of free maintenance.
- The company’s action for 2 years towards upholding the verbal agreement helps to establish the credibility of that agreement.
- The law tells us that if one party to the agreement refuses to comply with the contract the other party may apply to a court for specific performance. Specific performance simply means the court will require the company to carry out the term of the contract that is being disputed. In this case the term is to provide free maintenance and service of the equipment for 1 more year.
- There are some situations when the court is unlikely to order specific performance. For example:
- if you have done something unconscionable;
- if another remedy is easily available for example the company is no longer able to do the service but is willing to pay an agreed amount for service by another company; or
- if the court will be required to supervise the specific performance because the company is unlikely to cooperate.
- Generally in these circumstances it is a better idea to enter into negotiations to come to an agreement outside of court. This is because litigation can be costly and timely. This may have serious consequences for the functioning of your business. You should consider speaking to a lawyer regarding the negotiation process between you and the company.