Specific Performance – An outlook at Indian Laws

By | July 7, 2017

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“Specific performance will be granted where damages are an inadequate remedy or no standard for ascertaining the actual damage.”


Introduction

The laws relating to Specific Performance of Contract are contained in section 9 to 25 of the Specific Relief Act, 1963 and Section 58 of the Sales of Goods Act, 1930. It is called “specific” because under this the plaintiff gets specific relief, rather than a general relief or damages or compensation that is the thing which the other party was bound to perform or forbear from performing. Specific relief finds its roots in equitable principles.

Meaning

A contract is an agreement upon sufficient consideration to do or not to do a particular act and enforceable by law.  But the party on whom this contractual obligation rests must not fail to discharge such obligation. If he fails to discharge, the other party will have a right to sue for the specific performance of the contract. This is called ‘Specific Performance’.

The Specific performances of the contract are granted when damages are not an adequate remedy. Such orders are discretionary, as with all equitable remedies, so the availability of this remedy will depend on whether it is appropriate in the circumstances of the case.  Therefore, we can say that Specific performance is a remedy developed by the principle of equity.

For specific performance of the contract, there must be a valid agreement. It was also observed in the case of Ambica Prasad v.  Naziran Bibi AIR 1939 All 64.  But where any relief is claimed in respect of the specific performance of contract, the person against whom the relief is claimed may plead by way of defence any ground which is available to him relating to contracts. (Section 9)

Cases in which Specific Performance of Contract Enforceable (Section 10)

The enforceability of specific performance of any contract may, in the discretion of the Court and it can be granted:

  1. when there exists no standard for ascertaining the actual damage caused by the nonperformance of the act which agreed to be done; or
  2. when the act agreed to be done is such that compensation in money for its non-performance would not afford adequate relief.

Also, the court shall presume that the breach of a contract to transfer immovable property cannot be adequately relieved by compensation in money; and that the breach of a contract to transfer movable property can be so relieved except in the following cases:—

  1. where the property is not an ordinary article of commerce or is of special value or interest to the plaintiff, or consists of goods which are not easily obtainable in the market;
  2. where the property is held by the defendant as the agent or trustee of the plaintiff.

Also, when the act agreed to be done is in the performance wholly or partly of a trust, the specific performance of such contract be enforced according to the discretion of the court. But if the contract is made by a trustee in excess of his power or in breach of trust cannot be specifically enforced. (Section 11)

Case Law

The unregistered sale deed is admissible in evidence in a suit for specific performance.( S.Kaladevi v. V.R.Somasundaram, AIR 2010 SC 1654).

When can a part of Contract be Specific Performed (Section 12)

The general rule is that the court shall not direct the specific performance of a part of the contract. Except in the cases where a party to a contract shall be deemed to be unable to perform the whole of his part,   in such cases only a part of the contract is specific performed which are as follows:

  1. Where a party to a contract is unable to perform the whole of his part of it and admits of compensation in money, the court may direct the specific performance of so much of the contract as can be performed and award compensation in money for the deficiency.
  2. Where a party to a contract is unable to perform the whole of his part of it, and the part which must be left unperformed either forms a considerable part of the whole, though admitting of compensation in money; or does not admit of compensation in money he is not entitled to obtain a decree for specific performance; but the court may, at the suit of the other party, direct the party in default to perform specifically so much of his part of the contract as he can perform.
  3. When a part of a contract which, taken by itself, can and ought to be specifically performed, stands on a separate and independent footing from another part of the same contract which cannot or ought not to be specifically performed the court may direct specific performance of the former part.

Type of contracts not specifically enforceable (Section 14)

The following Contracts cannot be specifically enforced namely-

  1. If the compensation in money is an adequate relief for the non-performance of a contract.
  2. a contract which runs into such minute or numerous details or which is so dependent on the personal qualifications, or otherwise, that the court cannot enforce specific performance of its material terms;
  3. A contract which is in its nature determinable contract the performance of which involves the performance of a continuous duty which the court cannot supervise.

Apart from that, no contract should be done to refer present or future differences to arbitration shall be specifically enforced.

Who may obtain Specific Performance (Section 15)

The specific performance of a contract may be obtained by any party thereto or the representative-in-interest, or the principal, or any party thereto excepting where the learning skill, solvency or any personal quality of such party is a material ingredient in the contract.

Apart from this, there are the following circumstances in which the specific performance may be obtained:

  1. Where the contract is a settlement on marriage, or a compromise of doubtful rights between members of the same family, any person beneficially entitled thereunder;
  2. where the contract has been entered into by a tenant for life in the due exercise of a power, the remainderman ( the person who inherits property);
  3. a reversioner in possession, where the agreement is a covenant entered into with his predecessor in title and the reversioner is entitled to the benefit of such covenant;
  4. a reversioner in the remainder, where the agreement is such a covenant, and the reversioner is entitled to the benefit thereof and will sustain a material injury by reason of its breach;
  5. when a company has entered into a contract and subsequently becomes amalgamated with another company, the new company which arises out of the amalgamation;
  6. when the promoters of a company have, before its incorporation, entered into a contract for the purposes of the company, and such contract is warranted by the terms of the incorporation, the company:

Personal bars to relief (Section 16)

Specific performance of a contract cannot be enforced in favour of a person-

  1. Who would not be entitled to recover compensation for its breach; or
  1. Who has become incapable of performing  the contract, or violates any essential term of the contract or acts in fraud of the contract, or willfully acts at variance;  or
  2. Who fails to aver & prove that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him. But where a contract involves the payment of money it is not essential for the plaintiff to deposit any money except directed by the court and if the plaintiff willingness to perform the contract according to its true construction then a specific performance of a contract can be enforced in favour of a person.

It is pertinent to note that “Readiness and willingness” are enshrined in clause (c) which was not present in the old Act of 1877. However, it was later inserted with the recommendations of the 9th Law Commission’s report. This clause provides that the person seeking specific performance must prove that he has performed or has been ready and willing to perform the essential terms of the contract which are to be performed by him.

The words “ready” and “willing” imply that the person was prepared to carry out the terms of the contract. The distinction between “readiness” and “willingness” is that the former refers to financial capacity and the latter to the conduct of the plaintiff wanting performance. Generally, readiness is backed by willingness.

Also in N. P. Thirugnanam (Dead) by Lrs. v. Dr. R. Jagan Mohan Rao and Others [(1995) 5 SCC 115], the Supreme Court held that “The continuous readiness and willingness on the part of the Plaintiff is a condition precedent to grant the relief of specific performance. This circumstance is material and relevant and is required to be considered by the Court while granting or refusing to grant the relief.

If the Plaintiff fails to prove the same, he must fail. To adjudge whether the Plaintiff is ready and willing to perform his part of the contract, the Court must take into consideration the conduct of the plaintiff prior and subsequent to the filing of the suit along with other attending circumstances.”

Discretion as to Decreeing Specific Performance (Section 20)

The court has the discretionary power to decree specific performance but the discretion of the court is not arbitrary, unsound and unreasonable, it must be guided by judicial principle and capable of correction by a court of appeal. Further, the court shall not refuse to any party specific performance of a contract merely on the ground that contract is not enforceable at the instance of other parties.

Power to Award Compensation (Section 21)

It is the general rule that the Court has the power to award the compensation. In a suit for specific performance of a contract, the plaintiff may also claim compensation for its breach, either in addition to or in substitution of, such performance.

Apart from this if in any such suit, the court decides that specific performance ought not to be granted, but that there is a contract between the parties which has been broken by the defendant, and that the plaintiff is entitled to compensation for that breach, it shall award him such compensation accordingly. Also, if, in any such suit, the court decides that specific performance ought to be granted, but that it is not sufficient to satisfy the justice of the case, and that some compensation for breach of the contract should also be made to the plaintiff, it shall award him such compensation accordingly.

It is pertinent to note that, no compensation shall be awarded unless the plaintiff has claimed such compensation in his plaint. Also, if the plaintiff has failed to claim any such compensation in the plaint, the court shall, at any stage of the proceeding, allow him to amend the plaint on such terms as may be just, for including a claim for such compensation.

While determining the amount of any compensation awarded, the court shall be guided by the principles specified in section 73 of the Indian Contract Act, 1872.

Power to Grant Relief for Possession, Partition etc. (Section 22)

Any person suing for the specific performance of a contract for the transfer of immovable property may specifically be claimed in plaint possession or partition and separate possession of the property in addition to such performance or any other relief to which he may be entitled, including the refund of any money or deposit paid in case his claim for specific performance is refused. But if the plaintiff has not claimed any such relief in the plaint, the court shall, at any stage of the proceeding, allow him to amend the plaint on such terms as may be just for including a claim for such relief.

Specific Performance under Sales of Goods Act, 1930 (Section 58)

In any suit for breach of contract to deliver specific or ascertained goods, the Court may, if it thinks fit, on the application of the plaintiff, by its decree direct that the contract shall be performed specifically, without giving the defendant the option of retaining the goods on payment of damages. The decree may be unconditional, or upon such terms and conditions as to damages, payment of the price, or otherwise, as the Court may deem just, and the application of the plaintiff may be made at any time before the decree.

Conclusion 

According to me, the conduct of parties is very much important in a suit for specific performance, the party who seek for relief of specific performance must approach the Court of Law with clean hands. In other words, in a suit for specific performance of the contract, the plaintiff must establish his readiness and willingness to perform his part of the contract.

Further, while preparing plaint and written statement, parties should also take proper care and caution and the relief must be clear and specific. Apart from this, the court must exercise his discretionary power in a reasonable manner by following the principles of natural Justice, Equity, and Good Conscience.


-Deepanshu Tuteja


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