Specific Performance of Contracts

By | January 9, 2020
Specific Performance of Contracts

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Specific Performance of Contracts is one of the most prominent equitable remedies that are a gift from the fusion of the common law and equity. It depends upon the discretion of the court which would be fulfilled with the components provided under the law as provided are being met with.

Introduction

Specific Relief Act, 1963 adopts the remedy of Specific Performance of contracts from its predecessor, i.e., the 1877 Act. This equitable remedy forms the backbone of the Specific reliefs and is one of the most prominent remedies that are granted by the courts.

In the coming article, we will study the in and out of this remedy so as to be aware of the legal nuances of this wide but important concept.

Meaning

Though the word itself indicates the explicitly clear meaning it becomes important to analyse primarily what exactly is Specific Performance? Edward Fry has answered this question in an English context. He says that it is a contract’s actual execution according to its stipulations and terms, and is contrasted with damages or compensation for the non- execution of the contract.[1]

Hence, the execution or enforcement of a contract amounts to the specific performance of the contract. In the Indian scenario, it is being defined as an equitable relief that is given by the courts in case of breach of contract in the form of a judgment. The substance of the judgment would be to direct the defendant to actually perform the terms of the contract.[2]

Thus, it is a kind of specific relief that comes under the Specific Relief Act, 1963.[3]

Background

Basically this entire concept of specific performance arises from the fact that a contract exists. The statutory definition of a contract is that it is an agreement enforceable by law.[4] And, an agreement is a set of promises forming the consideration for each other.[5]

The crux is that there arises an obligation through a contract since the promise at essence is the acceptance of a proposal[6] that is the doing or abstaining from doing anything.[7] Therefore, the one who proposes has an obligation to perform what he or she had proposed to perform.

Such an obligation arises directly out of the contractual relationship and binds the defendant to perform the terms of the contract. If no details of the agreement can be proved and deduced, then no relief of specific performance can be granted.[8]

Historical Context

In ancient times when the contract law was not much advanced, there was little scope for such enforcement. Charondas and ancient Indians adopted the principle that the contracts ought only to be entered with those whose honour could be trusted.[9]

On such grounds, in the ancient legal system, the assistance that should have been offered for the specific performance of the contract was not been provided. Then, the Court of Chancery took forward the lead in terms of developing the law of equity in conflict with the rigidity of the common law.[10]

This led to the development of the principle of mutuality, whereby the vendor of the property was made compellable to perform his contract in a Court of Equity but would also be entitled to come to the Court.[11]

During the evolution of law, it was also agreed upon that the grant of this relief would be purely discretionary on part of the court. It can be rejected if it is highly unreasonable to do so and that aspect would depend upon the facts and circumstances of a particular case.[12]

Comparison with Other reliefs

Both the damages along with the specific performance are separate remedies awarded at the time of the breach of the contract. But, the relief of the latter may require the debtor to pay a specified sum of money to the plaintiff for every day he or she remains in default.[13]

When it comes to the injunction aspect, the difference is the compulsion to perform which type of obligation. In Injunction, the law demands the performance of a negative obligation (since the defendant is retrained from performing an act)[14] whereas in the case of specific performance, it is a positive obligation that has to be performed.[15]

As compared to the agreed sum, it is a matter of right as compared to a relief of specific performance that is not a matter of right and is subject to the discretion of the court.[16]

Limitation

The law provides for a period of three years as a fixed period in which this remedy can be claimed.[17] This limitation period starts applying from the date of the notice issued by the vendor refusing to perform his part of the contract.[18]

Suppose, the date fixed for performance is extended and there is no date again fixed, the suit would be filed when the plaintiff has noticed that the performance is refused.[19] Thus, the Allahabad High Court granted validity to the suit that was filed within three years from the date of last performance was in time.[20]

This time in question has to be measured and calculated cautiously. It has to be done in the context of the agreement and the obligations inherent therewith by the parties themselves. For instance, in the case of an agreement to purchase a flat, the time limit for specific performance will not begin unless the construction is completed, and the vendor fails to hand over the vacant possession to the purchaser.[21]

Let us take another example.[22] The defendants had agreed to sell two houses. In their sale deed, they had a proviso that the execution would be done only after the attachment of the houses in the execution proceedings is raised. But, no date was fixed for this event

One of the defendants sold the house by a registered sale deed to a third party. Hence, the courts have held that the commencement of the period of limitation would be from the date of the knowledge of refusal.[23]

Oral Agreement

The law is very clear that for the sale of immovable property no written agreement is required and the oral agreements are very well enforceable.[24] But the fact whether there was any such concluded oral contract would remain a question of fact.[25]

Thus a heavy burden lies on the party who claims the existence of such oral agreement for sale of immovable property, first to establish a consensus ad idem, and then to ascertain the specific terms of the agreement.[26] If such an agreement is desired to be enforced through a court of law, naturally a heavy burden will lie upon that party.[27]

In the landmark case of Wakeham v. Mackenzie,[28] the relief of specific performance was being granted for an oral agreement between a widow and the person wherein, the latter promised her the house on his death if she looked after him and paid for her board and coal. When he dies, the court awarded the relief, reason being, partial performance was establishing an oral contract.

Enforcement of the decree

Hon’ble Supreme Court in the case of Hungerford Investment Trust Ltd v. Haridas Mundhra,[29] has clarified that the decree of specific performance would be enforceable not as a money decree rather in the manner prescribed under Order 21, Rule 32 of the Code of Civil Procedure.[30]

Naturally, the most important portion of the decree is where the court directs the contract to be specifically performed.[31] There can be technical defects in the decree as well. For instance, in the case of an agreement to sell, it is not considered enough for the decree to just state handing over the possession rather it must contain a direction to the defendant so as to execute the sale deed.[32]

However, it has also been agreed upon that such defects can be cured in appeal.[33] Since the nature of the decree is that of being preliminary in nature, the decree can be enforced by the plaintiff as well by the defendant.[34] Hence, the court passing the decree retains its control over the decree even after it is been passed.[35]

It must, therefore, also be remembered that if a suit for specific performance is being dismissed, the agreement would become unenforceable. It would be no more available as a defence to a suit for specific performance filed by another purchaser under a later agreement of sale of the same property.[36]

Scheme of Chapter II[37]

Sr. No. Section Marginal Heading
1§ 9Defences respecting suits for relief based on contract.
2§ 10Specific performance in respect of contracts.
3§ 11Cases in which specific performance of contracts connected with trusts enforceable.
4§ 12Specific performance of part of contract.
5§ 13Rights of purchaser or lessee against person with no title or imperfect title.
6§ 14Contracts not specifically enforceable.
7§ 14APower of court to engage experts.
8§ 15Who may obtain specific performance.
9§ 16Personal bars to relief.
10§ 17Contract to sell or let property by one who has no title, not specifically enforceable.
11§ 18Non-enforcement except with variation.
12§ 19Relief against parties and persons claiming under them by subsequent title.
13§ 20Substituted performance of contract.
14§ 20ASpecial provisions for contract relating to an infrastructure project.
15§ 20BSpecial Courts.
16§ 20CExpeditious disposal of suits.
17§ 21Power to award compensation in certain cases.
18§ 22Power to grant relief for possession, partition, refund of earnest money, etc.
19§ 23Liquidation of damages not a bar to specific performance.
20§ 24Bar of suit for compensation for breach after dismissal of suit for specific performance.
21§ 25Application of preceding sections to certain awards[38] and testamentary directions to execute settlements.

For the sake of avoiding repetition, the marginal headings of these sections would be avoided and would be referred by their section numbers only.

Defences available for Defendant

Under § 9, a defendant may use those defences as provided in the Indian Contract Act, like incapacity of parties, uncertainty of contracts, coercion, undue influence, fraud, misrepresentation, mistake etc.[39]

Specific Performance enforceable

Under § 10, contracts can be specifically enforceable, only when, no standard for ascertaining actual damage or compensation not an adequate remedy. Example, the shares of a private company have been held to be goods of such a nature that they cannot be easily found in markets, thus this relief can be granted by the courts.[40]

Under § 11, a trustee’s duty can be specifically enforced, and the period of limitation under this situation also runs from the date the party comes to know about the other party refusing performance.[41]

Even a part of the contract can be ordered to be specifically enforced under § 12, when the unperformed part only a small proportion. It has been held that if there was no willingness in the party to accept part performance, that party later cannot elect for this remedy.[42]

  • 13 merely provides for rights to lessee and purchaser against the person with no or imperfect title, which just requires one perusal for better understanding.

Specific Performance not enforceable

  • 14 provides for four such cases, first, compensation being adequate remedy, second, contract with minute, numerous details or dependant on personal qualification, third, determinable contract, last, contract with continuous duty.

One example is an agreement ordinary in nature which is to merely to lend or borrow cannot be specifically enforced.[43] The court can also engage experts to get solicit their opinion before granting this relief, if found necessary.[44]

Persons for or against whom specific performance is enforceable

It can be a party, representative, person beneficially entitled in a settlement of marriage, remainderman in a contract of the tenant, reversioner in possession, reversioner in remainder, LLP or new company arising out of amalgamation, or the company itself if the promoters had an agreement beforehand.[45]

But a party who has obtained substituted performance or has become incapable of performing or fails to prove his will to perform would be personally barred from the relief.[46] Sections 17, 18 and 19 are about specific situations and if come to § 20, it is been substituted in 2018 amendment. Hereby, the expenses can be recovered at the will of one party by a substituted performance by a third party or his own agency.

For infrastructural projects, in order to provide a speedier remedy, § 20-A, B, and C have been added. Courts are specially empowered to grant an injunction.

Other reliefs such as Compensation

In certain cases, court can also award compensation along with the relief of specific performance.[47] This depends upon the justice of each case and further upon the discretion of the court. Similarly, the court can also award possession, partition, refund of earnest money etc under Section 22.[48]

Liquidation of damages would not become a bar in the grant of this remedy if the court becomes satisfied that the amount was stipulated only for the purpose of securing specific performance.[49]

Conclusion

This wide conception of this remedy envisages a huge discretionary pedestal for the party to satisfy for the court so as to be able to be entitled to the remedy.

This article has tried to study the basic and introductory aspects of the concept of specific performance of contracts.


[1] Edward Fry, A Treatise on the Specific Performance of Contracts 2 (Universal Law Publishing 2008).

[2] Avtar Singh, Contract and Specific Relief 829 (Eastern Book Company 2013).

[3] Specific Relief Act, 1963, §9, No. 47, Acts of Parliament, 1963 (India).

[4] Indian Contract Act, 1872, § 2 (h), No. 9, Acts of Imperial Legislature, 1872 (India).

[5] Id. at §2 (e).

[6] Id. at §2 (b).

[7] Id. at §2 (a).

[8] Kumari Anandan v. T. Balamukunda Rao, AIR 2002 Mad 472; Ameer Mohammed v. Barkat Ali, AIR 2002 Raj 406.

[9] Holland, Jurisprudence 256 (11th ed.).

[10] Sir Frederick Pollock et. al., Pollock & Mulla, The Indian Contract and Specific Relief Acts 1875 (Lexis Nexis 2013).

[11] Webb v. Direct London and Portsmouth Rly Co., (1852) 1 De GM&G 521.

[12] Om Prakash v. Amarjeet Singh, (1988) Supp SCC 780.

[13] Konrad Zweigart, Introduction to Comparative Law 470 (Clarendon Press, Oxford, 1998).

[14] Specific Relief Act, 1963, § 42, No. 47, Acts of Parliament, 1963 (India).

[15] Sir Frederick Pollock et. al., Pollock & Mulla, The Indian Contract and Specific Relief Acts 1878 (Lexis Nexis 2013).

[16] Indian Contract Act, 1872, § 73, No. 9, Acts of Imperial Legislature, 1872 (India).

[17] Limitation Act, 1963, Schedule, Article 54, No. 36, Acts of Parliament, 1963 (India).

[18] Shakuntala v. Narayan Gundoji Chavan, AIR 2000 SC 3921.

[19] S Brahmanand v. K R Muthugopal, AIR 2006 SC 40; Pancharan Dhara v. Monmatha Nath Maity, AIR 2006 SC 2281.

[20] Radha Krishna Agarwal v. Krishna Lal, AIR 2012 All 64.

[21] Saraswathamma v. H Sharad Shrikhande, AIR 2005 Kant 292.

[22] Krishna Keshav Kulkarni v. Balaji Ganesh Kulkarni, AIR 1976 Bom 342.

[23] Sugani v. Rameshwar Das, AIR 2006 SC 2172; Nardev Singh v. Mahabir Singh, AIR 2006 All 289.

[24] Gadiraju Sanyasi Raju v. Kandula Kamappadu, AIR 1960 AP 83 (FB); Nirav Deepak Modi v. Najoo Behram Bhiwandiwala, AIR 2012 Bom 50.

[25] Brij Mohan v. Sugra Begum, (1990) 4 SCC 147; Ouseph Varghese v. Joseph Aley, (1970) 1 SCR 921; Krishnan Kesavan v. Kchukunju Karunakaran, AIR 1988 Ker 107.

[26] Sir Frederick Pollock et. al., Pollock & Mulla, The Indian Contract and Specific Relief Acts 1880 (Lexis Nexis 2013).

[27] VR Sudhakara Rao v. TV Kameswari, (2007) 6 SCC 650.

[28] Wakeham v. Mackenzie, (1968) 2 All ER 783.

[29] Hungerford Investment Trust Ltd. v. Haridas Mundhra, AIR 1972 SC 1826.

[30] Code of Civil Procedure, 1908, Or. 21, R. 32, No. 5, Acts of Imperial Legislature, 1908 (India).

[31] Kartik Chandra Pal v. Dibakar Bhattacharjee, AIR 1952 Cal 362.

[32] Shyam Parshad v. Kuldip Singh, AIR 2007 HP 51.

[33] Id.

[34] Bai Karimabibi v. Abderehman Sayad Banu, AIR 1923 Bom 26; Heramba Chandra Maitna v. Jyotish Chandra Singha, AIR 1932 Cal 579.

[35] Hungerford Investment Trust Ltd. v. Haridas Mundhra, AIR 1972 SC 1826.

[36] Raminder Singh v. Sham Lal, AIR 1984 P&H 145.

[37] Specific Relief Act, 1963, PART II, Chapter II, No. 47, Acts of Parliament, 1963 (India).

[38] Arbitration and Conciliation Act, 1996, No. 26, Acts of Parliament, 1996 (India).

[39] Avtar Singh, Contract and Specific Relief 829 (Eastern Book Company 2013).

[40] M.S. Madhusoodhanan v. Kerala Kaumudi P Ltd, (2004) 9 SCC 204.

[41] M.K. Usman Koya v. C.S. Santha, AIR 2003 Ker 191.

[42] Surjit Kaur v. Naurata Singh, (2000) 7 SCC 379.

[43] Meenakshisundara Mudaliar v. Rathnasami Pillai, ILR (1918) 41 Mad 959.

[44] Specific Relief Act, 1963, § 14A, No. 47, Acts of Parliament, 1963 (India).

[45] Id. at § 15.

[46] Id. at § 16.

[47] Id. at § 21.

[48] Id. at § 22.

[49] Id. at § 23.


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