The Specific Performance, Equitable Relief, or Injunctive Relief clause requires a defaulting party to perform the contractual obligations in accordance with the terms of the bargain.
The clause typically contains four elements: (a) statement that any breach of the agreement may result in irreparable damages or injury, (b) acknowledgement that there is no adequate remedy at law, (c) right of the non-breaching party to injunctive and other equitable relief, and (d) without requirement to post bond.
1. Specific Performance. Each party acknowledges and agrees that a non-breaching party may, upon any breach or threatened breach of this Agreement, immediately seek enforcement of this Agreement by means of specific performance or injunction, without any requirement to post a bond or other security.
1. Specific Performance. Each party acknowledges and agrees that a non-breaching party may, upon any breach of this Agreement, immediately seek enforcement of this Agreement by means of specific performance or injunction, without any requirement to post a bond or other security.
A stand-alone equitable relief clause appears in 70% of 214 sampled agreements from EDGAR and Google.
A small number of clause examples extend the right to specific performance in the event of a threatened breach of the agreement. Clauses attempting to make the provision less onerous may use language such as: "[i]n the event of [Party 1]'s actual breach of any provisions of this Non-Competition Agreement." However, it is unlikely that the word "actual" adds anything to the interpretation whether an agreement has been breached.
Specific Performance. The Executive acknowledges that in the event of breach or threatened breach by the Executive of the terms of Section 1 hereof, the Company could suffer significant and irreparable harm that could not be satisfactorily compensated in monetary terms, and that the remedies at law available to the Company may otherwise be inadequate and the Company shall be entitled, in addition to any other remedies to which it may be entitled to under law or in equity, to specific performance of this Agreement by the Executive including the immediate ex parte issuance, without bond, of a temporary restraining order enjoining the Executive from any such violation or threatened violation of Section 1 hereof and to exercise such remedies cumulatively or in conjunction with all other rights and remedies provided by law and not otherwise limited by this Agreement. The Executive hereby acknowledges and agrees that the Company shall not be required to post bond as a condition to obtaining or exercising any such remedies, and the Executive hereby waives any such requirement or condition.
Alternative 2—Acknowledgement — No Adequate Remedy
Some drafters incorporate acknowledgement of reasonableness in the remedies clause.
Acknowledgement. [Party 1] acknowledges that (i) the restrictions contained in this Agreement are reasonable in scope and are necessary to protect the [Party 2]'s legitimate interests in protecting its business, and (ii) any violation of the restrictions contained in this Agreement will cause significant and irreparable harm to the [Party 2] for which the [Party 2] has no adequate remedy at law.
Alternative 3—Equitable Remedies
Many clause examples stipulate that specific performance may include preliminary and permanent injunctions.
Equitable Remedies. [Party 2] shall also be entitled to obtain injunctive relief, including but not limited to a temporary restraining order, a temporary or preliminary injunction or a permanent injunction, to enforce the provisions of this Agreement, as well as an equitable accounting of and constructive trust for all profits or other benefits arising out of or related to any such violation, all of which shall constitute rights and remedies to which the [Party 2] may be entitled.
Alternative 4—Without Bond or Proof of Damages
Equitable Remedies. [Party 2] shall be entitled to such relief without the necessity of proving actual damages or posting a bond, in addition to, and not in lieu of, any other rights and remedies available to [Party 2] under law or in equity have the right and remedy to have the provisions of this agreement enforced by injunctive relief in any court of competent jurisdiction, it being agreed that any breach or threatened breach of this agreement would cause irreparable injury to [Party 2] and that damages would not provide an adequate remedy to [Party 2].
Right to Specific Performance
Specific performance is an equitable remedy. Courts consider a number of factors when determining to enforce contractual obligations. There must a valid, binding contract with clear statement of obligations. The party seeking performance must have acted in good faith. And, damages will not adequately compensate the non-breaching party. See, Seeking Remedies In Non-Compete Cases, Courts weigh whether monetary damages preclude injunctive relief, Richard C. Robinson, Connecticut Law Tribune, January 25, 2010, Vol. 36, No. 4.
Note: courts will enforce negative performance covenants if the conditions for equitable relief are satisfied; courts will not compel performance of personal service contracts because the Thirteenth Amendment to the Constitution prohibits slavery.
"Obtaining preliminary injunctive relief is never easy, even when a non-compete violation is established." Reciprocal Litigation Undermines Claim for Injunctive Relief (Tradition Chile v. ICAP Securities USA), Kenneth J. Vanko.
See, also: Injunctive Relief and a Substantial Monetary Judgment Awarded to National CPA Firm Against Former Employees Who Breached Non-Compete Agreements, February 14, 2011, Paul Freehling, Seyfarth & Shaw.