Michaels leased space on the eastern exterior wall of a building to P for 3 years with an option for another seven years.
P erected an illuminated sign there and leased it to Asch Advertising for a 3 year period.
Michaels sold the building to D. D sent letter to P cancelling the lease pursuant to a section that said that the lessor (or its successor) could terminate and cancel the lease on not less than 60 days notice in the event of a bona fide sale of the building to a third party.
P abandoned the space and sued for specific performance and damages.
Procedural History:
Trial court found for P, lease could not be terminated, declined to order specific performance, awarded P lost profits up until the trial.
Appellate court affirmed.
NY COA affirmed, declined to order specific performance, but modified award to give P lost profits through the entire term of the lease.
Issues:
Under what circumstances should a court award specific performance?
Holding/Rule:
A court should award specific performance in breaches of real estate contracts (sales, not leases) and in other breaches where the uniqueness of the property in question raises uncertainty in valuing it.
Reasoning:
The current trend among commentators appears to favor the remedy of specific performance.
Uniqueness alone does not warrant specific performance; it must be matched with an inability to adequately value the cost of the breach.
When the relevant information is thin and unreliable about the valuation of a good, there is a substantial risk that an award of money damages will either exceed or fall short of the promisee's actual loss.
Restatement 360 says that the difficulty of proving damages with reasonable certainty is the first factor affecting adequacy of damages.
In this case, it is not hard to place a value on the breach of contract; there were lease contracts with values attached.
It is not novel for damages to be projected into the future.
Equitable relief would be inequitable in that its effect would be disproportionate in its hard to D and its assistance to P.
