Designing Hell or High Water Clauses for Foreign Investment Clearances
Hell or high water clauses for foreign investment clearances must bound divestiture obligations with strict asset schedules and reverse termination fees.
Specific Performance Decree
Meaning
Judicial orders that compel a party to a contract to fulfill their exact obligations rather than paying financial damages are used when the subject of the agreement is unique or irreplaceable. A specific performance decree is most common in real estate transactions or the sale of a one-of-a-kind manufacturing facility. It ensures that the non-breaching party receives exactly what was promised in the signed document.
Equitable Remedy
Courts only grant this form of relief when money is an inadequate substitute for the actual performance of the contract. The specific performance decree originates from the idea that certain assets have no market equivalent that can be purchased with cash. Judges look for evidence that the buyer would suffer a loss that cannot be calculated in currency.
Execution Barrier
Implementing such a mandate requires the court to oversee the actions of the defendant to ensure they comply with every detail of the order. A specific performance decree is rarely used for personal service contracts because it is difficult to force an individual to perform a task to a specific standard. However, it is a powerful tool in corporate law to force the closing of a merger that a seller tries to abandon.
Breach Penalty
Failing to follow the instructions of the court leads to severe sanctions, including daily fines or the arrest of the responsible officers. The specific performance decree remains active until the transfer of the asset is fully documented and confirmed. It provides a level of certainty in high-value deals where the strategic value of the asset outweighs any potential cash settlement.
This legal mechanism prevents a seller from simply walking away from a deal if a better offer arrives from a third party after the contract is signed.