Disputed Sales of Real Estate: Specific Performance

A question that frequently arises is “Can I enforce my purchase agreement?”  This occurs when the buyer or the seller wants to back out of a deal, and the other side wants to enforce the deal.  The answer, generally, is “Yes”—you can enforce a valid written contract for the sale of real estate in Michigan.  We’ll first discuss the concept of “specific performance” and then address the two general issues that arise when a buyer or seller wants to force the sale to go through.

When you are trying to force someone to perform something precisely as specified in a contract, it is called “specific performance.”  You might be surprised to know that this type of enforcement is rare in Michigan (and most states).  Usually if a party breaches a contract by not performing, the law only requires them to pay general damages to make the other party whole.  (Example: if we contract for me to make widgets for you at a certain price, and I breach the contract by not making the widgets, you usually can’t force me to make them.  What you can do is force me to pay you damages, perhaps the money you would have lost on selling the widgets or the extra money you had to spend to buy the widgets elsewhere).  However, where money damages are inadequate, a Court may order specific performance.  In Michigan, a contract for the sale of realty is subject to specific performance, in part because land has traditionally been presumed to be a unique commodity having a peculiar value—the buyer, particularly, may be damaged in ways that money cannot compensate if the buyer does not get the exact parcel she agreed to buy.

Now that we know a contract to purchase real estate can be enforced in this manner, there are two general issues when we examine whether a purchase agreement can be enforced by specific performance.    The first is whether the agreement is in writing.  To be valid in Michigan, an agreement to sell real estate must be in writing.  (See MCL 566.106-109).  The writing must identify and be signed by the seller and buyer, must describe the consideration (usually the purchase amount), and adequately describe the property being transferred.  If there is not writing, there is no valid agreement to sell the property, and thus no contract to be enforced.

The second general issue is how, and whether, the contract has been breached.  Most real estate contracts, including the forms used by realtors, contain numerous conditions or contingencies.  Common conditions include a due diligence or inspection period, an escrow amount, survey or title insurance, and proof of financing.  A party seeking specific performance must be able to demonstrate to the Court that she has met all her obligations under the contract, and the other party has breached.  Obviously each case differs, and evaluating whether specific performance is available requires examining all provisions of the purchase agreement.