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Co-op Insurance Society v Argyll Stores [1997] 2 WLR 898 House of Lords

Co-op Insurance was landlord of Hillsborough Shopping Centre in Sheffield which consisted of 25 retail outlets. In 1979, Argyll Stores took a lease of one of the units for a period of 35 years for the purpose of operating a Safeway supermarket. The lease contained a covenant by which Argyll agreed to use the outlet as a supermarket and keep it open during the usual hours of business. However in 1995, head office of Argyll Stores took the decision to close 27 of their supermarkets including the one at Hillsborough which was trading at a loss. Co-op Insurance sought specific performance of the covenant, fearing the impact on other traders at the site if the Supermarket was to close.

Held:

Specific performance was refused.

Lord Hoffman:

“The purpose of the law of contract is not to punish wrongdoing but to satisfy the expectations of the party entitled to performance. A remedy which enables him to secure, in money terms, more than the performance due to him is unjust. From a wider perspective, it cannot be in the public interest for the courts to require someone to carry on business at a loss if there is any plausible alternative by which the other party can be given compensation. It is not only a waste of resources but yokes the parties together in a continuing hostile relationship. The order for specific performance prolongs the battle. If the defendant is ordered to run a business, its conduct becomes the subject of a flow of complaints, solicitors' letters and affidavits. This is wasteful for both parties and the legal system. An award of damages, on the other hand, brings the litigation to an end. The defendant pays damages, the forensic link between them is severed, they go their separate ways and the wounds of conflict can heal.”

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