07926

OVERVIEW

This question has two interrogatories one asking preliminary injunction and the other on specific performance.

QUESTION ANALYSIS

J6. Peter owned a sporting goods store. He learned that American Building Company (ABC) was about to construct a shopping mall in his city. Desirous of expanding his business, he approached ABC to arrange to rent a small space in the proposed mall. A lease agreement for a small store to be located in the East Wing of the mall was signed by Peter and ABC on July 1, 1991. (Contract was formed and contract remedy issues)

Although the dimensions of the space and its proposed rent are recited in the agreement no provision is made for an exact date when the space would be completed and ready for occupancy. The agreement explicitly leaves the determination of when the East Wing of the mall will be built to the judgment of ABC.

On August 1, 1991, Peter learned through a newspaper column that ABC had agreed with a toy company to lease to it the entire East Wing of the mall, including the area where Peter's store would have been located. (Breach of contract) Feeling that he had a valid contract, Peter took no immediate action; he thought that ABC would eventually accommodate him either by extending existing plans for that part of the mall or by offering him alternative space elsewhere in the mall.

In March 1992, Peter inquired of ABC when he might expect his space to be ready for occupancy. He was informed that ABC had changed its plans and was in the process of building a structure in which it would rent space in the East Wing

to four or five major lessees, not including Peter, and that there would be no space elsewhere in the mall for Peter.

In an action by Peter against ABC in state court in State X, Peter has obtained an ex parte temporary restraining order halting construction.

1. Is Peter entitled to a preliminary injunction against ABC restraining it from proceeding with construction based on the changed building plans? Discuss.

2. Can Peter eventually force ABC to build and lease to him a space as described in the lease agreement of July 1, 1991? Discuss.

ANSWER OUTLINE

I. Preliminary Injunction

Likelihood of Success on the Merits

Balancing the Hardship

Maintaining the Status Quo

II. Specific Performance

Inadequate Legal Remedy

Contract Valid

Feasibility of Enforcement

Mutuality of Performance

No Defense

MODEL ANSWER

Peter is entitled to a preliminary injunction against ABC if you can demonstrate: (1) he will likely succeed on the merits of the suit; (2) the hardships weigh in his favor; (3) injunctive relief is necessary to maintain the status quo pending trial.

Peter's likelihood of success depends on whether he will prevail on the breach of contract theory. Peter entered a written lease with ABC for the rental of space in the East Wing of the mall. Although ABC's performance of the contract was conditioned upon the completion of the East Wing, as the time for performance was contingent on ABC's judgment, once ABC began building the East Wing and indicated his intention not to honor its agreement with Peter, ABC was in immediate breach of the contract giving rise to a breach of contract legal action. Thus, Peter will succeed in his legal action against ABC, and will receive damages and specific performances, as discussed below.

The court will also balance the hardships to each party. The horses suffered by Peter clearly weighs in his favor, Since he presently owns a sports store which she seeks to relocate in the mall, and he will be required to find an alternate site, and may suffer loss of profits due to ABC's failure to provide him with a space in the mall. Although ABC may lose an existing tenant, the toy company, it leased the East Wing to that company knowing that it had already entered into a binding contract with Peter. Because any losses ABC will suffer were caused by its own actions, the court will find in favor of Peter on this issue.

The final factor, the need to maintain the status quo pending trial, also favors Peter, since the space and construction will likely depend on the particular needs of the lessee. A major lessee may require greater space than Peter's "small space", and the needs of a toy company may differ substantially from a sporting goods store. Thus, ABC's construction should be enjoined until Peter's rights are determined, and since the court may order specific performance of the contract, the status quo must be preserved until trial.

Thus, Peter is entitled to a preliminary injunction, and the court should continue the terms of its previous restraining order halting ABC's construction.