Johnson v Agnew [1980] AC 367

The sellers agreed to sell mortgaged properties, but the buyers failed to complete. The sellers obtained an order for specific performance requiring completion. The buyers did not comply, and the mortgagees later sold the properties in enforcement of their security. Those sales did not fully clear the sellers' liabilities. The sellers then sought financial relief against the buyers. The dispute concerned the consequences of the unperformed order, whether damages remained available and the appropriate basis and date for assessing the loss after the attempt to obtain the agreed sale had failed.

Could the sellers obtain damages after an unperformed order for specific performance, and what principles governed termination and the date for assessing their loss?

The House of Lords confirmed that obtaining an order for specific performance did not prevent the sellers from later seeking discharge of that order and damages when the buyers failed to comply. The contract was not retrospectively erased merely because the court brought the outstanding performance obligations to an end. Damages remained compensatory and were assessed by ordinary contractual principles. Although the date of breach is a usual starting point, it is not an inflexible valuation rule. Where specific performance was reasonably pursued but subsequently became unavailable, another assessment date could be needed to reflect the loss properly. The court therefore distinguished termination for breach from rescission that unwinds a transaction for a vitiating factor.

A party who obtains specific performance may, following non-compliance, seek termination and contractual damages instead. The compensatory principle governs assessment; the breach date is a usual starting point, but another date may be appropriate when rigid application would mismeasure the loss.

Johnson prevents election of specific performance from becoming an irreversible trap after the defendant refuses to obey. It also clarifies terminology: ending future performance for breach differs from unwinding a contract for misrepresentation. The assessment-date discussion is valuable when market movements occur during litigation, but it is not a licence to select the most profitable date. The court seeks fair compensation in light of the remedy reasonably pursued and the circumstances in which performance ceased to be available.