Enforceability of Specific Performance as a part of Contract

Introduction

Specific performance acts as a remedy for breach in contract, where the court orders the party who breached the contract to perform a specific act to protect the interest of the innocent party who suffered loss because of that breach. That’s why it can also be termed as an Equitable Remedy. It is used in rare cases, mainly we can say like land sales, but it is not used where damages can be an appropriate course. Specific performance can be called as a type of forced action because here the court ordered one party to do any specific work, usually that work is something which was promised earlier or any other established action, so whatever gains the other party expects from that contract may be given to him/her.

In earlier times, in the Common law system the only relief available for breach of contract was damages. But later the court of equity developed the concept of specific performance, in the cases where damages are deemed inadequate for the loss.

Usually, specific performance is mostly used in the cases for land sales, where one party is going to hand over the title to another party. Here specific performance will be used because the land is unique and there could be no other remedy which could put the innocent party in the same position which he would have got if the contract would have been performed. Even in earlier times the remedy for specific performance was given in rare cases. The Court of Equity provided the relief for specific performance of contract mainly for cases which involved chattels, and not just normal, it should be of rare kind like any unique art or antique piece. Because, here other relief could prove inadequate for the innocent party.

Specific Performance as a part of Contract

The act of The Specific Relief was first codified in the year 1877 in India. Under section 5 of the Specific Relief Act, 1877 specific performance was given. Its provisions were later considered by the law commission in their 9th report. And then it was replaced by The Specific Relief Act, 1963. Under section 10 of The Specific Relief Act 1963 the condition to grant the specific relief as a remedy is mentioned, while the section 14  mentions what type of contract can’t be enforced. Before moving further let’s study specific performance in more detail.

Specific performance can be defined as fulfilling the promises made under any contract by the party who breached the contract to the party who suffered the losses because of that breach. Suit for the remedy of specific performance can be filed in a court which has jurisdiction over that matter by the aggrieved party who suffered the damage because of the breach of the contract by the other party. Now the important thing here is; this remedy is not available as a right for the plaintiff. It can be granted only at the discretion of the court, if the court feels that the damages will be inadequate for the loss, then it can grant this remedy. Now under Section 16(c) of Special Relief Act 1963 the burden of proof lies on the plaintiff to give evidence stating that he had performed his part according to the contract or he was willing to perform that work. It is an essential condition for the remedy of specific performance.

In our country maximum cases in which this remedy is granted are mainly related to transfer of shares, transfer of title of a land or any immovable property. Here damages won’t give that position to the plaintiff who he/she would have gotten if the contract had been fulfilled.

The Supreme court has held under the section 19(a) and (b) of Special Relief Act 1963 that “specific performance of a contract can be enforced against either party thereto and any person claiming under him by a title arising subsequent to the contract, except a transferee for value, who has paid his money in good faith and without notice of the original contract.”

Elements involved in Remedy for Specific Performance as a part of Contract

Now just understand specific performance more clearly, we have to understand various elements involved in specific performance of part of contract:

• Valid contracts – To get specific performance as a remedy for breach of contract the most essential element is the validity of the contract. If the contract is void because of any illegality or uncertainty, then the remedy of specific performance can’t be exercised. To understand this, we can refer to the case Vimleshkumarikulshrestha vs. Sambhajirao whose facts and judgement are as follows:

The plaintiff was a tenant who filed the suit for specific performance for the defendent who was the owner of the premise where plaintiff resides. Plaintiff came into an agreement with the defendant to buy that house. But the description of the house was uncertain. On the ground of uncertainty that contract was void. And that’s why the court didn’t grant the relief of specific performance.

• Unregistered agreement of sale – Under the section 49(c) of Registration Act, an unregistered agreement of sale can be admitted as a proof for a suit of specific performance. To understand this, we have to refer to the case S. Kaladevi vs. V.R. Somasundaram in which The Supreme Court held that:

“When an unregistered sale deed is tendered as evidence, not as a evidence of a completed sale but as proof of an oral agreement of sale, that it can be received in evidence making an endorsement that it was received only as evidence of an oral agreement of sale under the provision to Section 49 of the Registration Act, 1908.

By admission of an unregistered sale deed in evidence in a suit for specific performance as evidence of contract, none of the provision of the 1908 is affected; rather the court acts in consonance with the provisions appended to proviso Section 49 of 1908 act.”[1]

• Conduct of parties – Any person who wants to seek specific performance as a remedy for himself/herself has to show to the court that his/her conduct has been spotless. Applying the same rule to the defendant, the conduct of the defendant also can’t be ignored by the court. In the case Aniglase Yohannan v. Ramlath 2005 (7) SCC 534 it was held that if the plaintiff shows his conduct spotless and without any deformity, then the plaintiff must not be denied this remedy. But still this remedy depends upon the discretion of the court. The Supreme Court in Para 12 of its judgment in Aniglase Yohannan v. Ramlatha held that:

“The basic principle behind Section 16(c) read with Explanation (ii) is that- any person seeking benefit of the specific performance of contract must manifest that his conduct has been blemish less throughout entitling him to the specific relief. The provision imposes a personal bar. The Court is to grant relief on the basis of the conduct of the person seeking relief. If the pleadings manifest that the conduct of the plaintiff entitles him to get the relief on perusal of the plaint, he should not be denied the relief.”

• Readiness and willingness – Section 16(c) of Specific Relief Act 1963 make it mandatory for the plaintiff to prove by evidence that he/she has performed his/her part of the contract or he/she is willing to do his/her part as according to the contract. Here Readiness refers to the financial situation of the plaintiff regarding the work mentioned in contact and willingness means the conduct of the plaintiff if he/she wants to perform it or not. However, the readiness and willingness of the plaintiff should be in accordance or with compliance according to the terms of contract and the plaintiff doesn’t need to carry money in his hands to show his readiness regarding contract. It can be understood through the paragraph 14 of judgement Mehboob-ur-Rehman vs. Ahsanul Ghani [2019 SCC OnLine SC 203] in which the Supreme Court observed that –

“Though, with the amendment of the Specific Relief Act, 1963 by Act  18 of 2018, the expression “who fails to aver and prove” is substituted by the expression “who fails to prove” and the expression “must aver” stands substituted by the expression “must prove” but then, the position on all the material aspects remains the same that, specific performance of a contract cannot be enforced in favour to the person who fails to prove that he has already performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than the terms of which, the performance has been prevented or waived by the other party.”

• Time is essence of contract – We all know that if a contract is made with the stipulation of time, it means the contract has to be performed within a fixed time. And if one party fails to comply with the terms and the time expires, then the aggreived party who suffered damage because of this breach can discharge the contract of wish. But a Constitutional Bench of the Supreme Court in “Chand Rani vs. Kamal Rani: 1993 (1) SCC 519,” held that “In the case of immovable properties, time is never regarded as the essence of contract.” For specific performance the suit should be filed within a reasonable time which can vary with the facts and circumstances of that case. But even if the contract is not within a time limitation the court can infer the part to be performed within a particular time if deemed necessary to the Court.

• Adding parties in specific performance suits – Order 1 Rule 10 of Code of Civil Procedure has a wider scope in comparison to Order 22 Rule 10 of Code of Civil Procedure as to “person whose presence before the court is necessary or proper for effective adjudication of the issue involved in the suit.”

• Essential elements to constitute ‘ Lis Pendens’ – Lis Pendens can be defined as a pending suit. It is mentioned under Section 52 of the Transfer of Property Act,1882. To constitute Lis Pendens there are certain requirements which are as follows –

• A suit should be held pending in a court which has competent jurisdiction over that matter.
• That suit must not involve any type of collusion.
• The question of law involved in that case should be related to the right to an immovable property.
• The property involved in that dispute should have been the subject of deal or transfer between both parties.

Circumstances in which Specific Performance can be Enforced

• Where damages awarded by the Court proves to be inadequate –

The remedy of Specific performance can be exercised only in exceptional cases, where if the court provides damages to the plaintiff, they proved to be inadequate. In such a situation the court awards the remedy of specific performance, where the defendant has to perform a specific work, which can be proved adequate for the plaintiff and his loss.

Illustration – Suppose Party X offers Party Y to sell a certain number of shares of a particular company. Party Y agreed to the offer and they both entered into a contract. Later Party X refused to sell the shares. So here the Court can award the remedy of Specific performance because damages could be proved inadequate in this scenario and also those shares are limited and are not easily available.

• If there exist no way to ascertaining the loss plaintiff –

In some exceptional cases there doesn’t exist any standard which can be used by the Courts to measure the loss suffered by the plaintiff because of breach. In such situations if the Court provides some damages to the plaintiff without ascertaining actual loss, then that may act as an injustice for the plaintiff. So here the Court can award the remedy of specific performance.

Illustration – Suppose Party A agreed to sell Party B a painting of a famous painter who is dead. But later Party A refused to sell the painting. Here Court can’t ascertain the damage suffered by Party B. So here the Court can force Party A to sell the painting as agreed in the contract.

• Where the act is in performance of trust –

There are many cases in which the performance which has to be specifically performed is connected with trust enforceability. So, in such a case the court can grant the remedy of specific performance.

Illustration – Suppose Mr. X appoints Mr. Y as a trustee of a particular property which will benefit Mr. A. But Mr. Y misappropriated that property for himself. So, here Mr. A can file a case in a Court with a competent jurisdiction. And the Court at its discretion can grant the remedy of specific performance.

• Where the party who breached the contract is unable to pay damages –

We already know sometimes damages are inadequate. That’s why the remedy of specific performance is provided. But in some instances where damages can be proved adequate but the non-complying party is unable to bear the expenses of those damages. So here the Court can grant the remedy of specific performance.

Illustration – Party A has to pay damages to Party B. But Party A has already been declared insolvent. So here the Court can grant the remedy of specific performance.

Situations where Specific Performance can not be Granted

• Where damages are adequate relief for plaintiff –

In Cases where the loss suffered to the innocent party from the breach of contract cannot be compensated by damages, then in such case the Court can grant remedy of specific performance.

Illustration – Party A offered the Party B to sell 10 boxes of mangoes; but later refused to sell. So here damages will be adequate remedy.

• Where the technicalities of the contract can’t be interpreted by Court correctly –

In many cases the details and terms are mentioned abruptly and without any sequence. And they contain many minute details in a large quantity. So, in such case court may refuse to give the remedy of specific performance.

Illustration – A contracts B to write a critique of Bollywood movies not offending some particular famous movie producer. Here the Court won’t give the remedy of specific performance.

• Where the Contract is made on basis of work requiring a particular skill –

In many instances the contract which is breached requires one party to perform a work based on his/her skill or expertise. So here the remedy of specific performance won’t be given because the Court may deem it inadequate. Because it’s obvious, if given the remedy, the party has to do that work unwillingly. And that will definitely be not good; had he done it willingly. So specific performance can’t be given here as an adequate remedy.

Illustration – A contracts B to write an awesome script for a sci-fi movie. But B didn’t write the script or he couldn’t do that task. So here specific performance won’t act as an adequate remedy.

• Where the contract is uncertain –

Contracts in which the terms and conditions are uncertain or vague, such contracts are not eligible for the remedy of specific performance. If the contract is uncertain on  terms and conditions then  as a remedy the performance on such uncertain terms will not be possible.

Illustration – A contracts with an engineer to make a house with a modern point of view, and developed standards. Here specific performance can’t be given as a remedy because the words modern point of view and developed standards don’t hold value in the eyes of law. So, the court can refuse to grant specific performance as a relief.

• When the trustee enters into a contract in breach of trust –

In some cases where a trustee enters into a contract for which he has no authority. Here we can say that the contract made by the trustee is in breach of trust or excess of trust. So here the court won’t give the remedy for specific performance.

Illustration – Mr. A was entitled as a trustee of a property for a period of 1 year by Mr. B. After that Mr. A made a contract to lease that property for 5 years with Mr. C. Here if Mr. C files suit for specific performance then Court won’t grant him that remedy. Here Mr. A doesn’t have the authority to lease the property for 5 years.

• When the contract in dispute is revocable –

Revocable contracts are those which can be revoked or cancelled by either party. The Court doesn’t grant the remedy of specific performance of part of a contract for a contract which is revocable.

Illustration – A contracts with Mr. X and Mr. Y for partnership in a firm. The contract is of revocable nature. Later Mr. X refused to move forward in the contract. And Mr. Y filed the suit for specific performance. Here the Court won’t grant the remedy of specific performance. Even if it would have been provided that partnership could have been revoked at the wish of either party.

• Where the time of performance of a continuous act is longer than 3 year –

The Contract in which the time of performance of a certain act continuously is for a period of more than three year cannot be subject to the remedy of specific performance if it gets breached.

Conclusion

In many instances the remedy of specific performance is the only adequate measure or step which can serve the true justice to the plaintiff. if given damages, they won’t compensate for the plaintiff’s loss. The cases and facts mentioned above are the one in which the court relies while granting the remedy of specific performance. In a suit of specific performance conduct of parties play an important role, that’s why appellant should try to file suit with clean hand, and spotless conduct. Here it is also important to note that the Court should not grant the remedy of specific performance merely because it will be lawful. Because there are many factors which play important roles in these decisions like validity of contract, certainty of contract, conduct of parties and many more other factors. Court should consider that aren’t they giving the plaintiff an unfair advantage over that of the defendant because of this specific performance. We all know how this concept was developed in earlier times in the court of equity as an equitable remedy. But we have to understand that this remedy also depends upon the precedents. That’s why it will still take a long time for the concept of specific performance of part of the contract to develop fully.

This article is authored by Nitesh Shukla, student at National Law Institute University, Bhopal.

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[1]S. Kaladevi v. V.R. Somasundaram 2010 SCC OnLine SC 460

What is Specific Performance of Contract?

Specific performance can be defined as the fulfilling the promise made under any contract by the party who breached the contract to the party who suffered loss because of that breach. Suit for the remedy of specific performance can be filed in a court which has jurisdiction over that matter by the innocent party who suffered damage because of the breach of contract by the other party.

What are the elements involved in the remedy of Specific Performance of Part of Contract?

Elements involved in remedy of Specific Performance of Part of Contract are:
● Valid Contract
● Unregistered Agreement of Sale
● Conduct of Parties
● Readiness and Willingness
● Time as a essence of Contract
● Adding Parties in Specific Performance Suits
● Elements constituting ‘Lis Pendens.’

What are the circumstances in which specific performance can be enforced ?

Circumstances in which specific performance can be enforced are:
● Where damages awarded by the Court proves to be inadequate.
● If there exist no way to ascertaining the loss plaintiff.
● Where the act is in performance of trust.
● Where the party who breached the contract is unable to pay damages.

What are the situations where specific performance cannot be granted ?

Situations where specific performance cannot be granted:
● Where damages are adequate relief for plaintiff.
● Where the technicalities of the contract can’t be interpreted by Court correctly.
● Where the Contract is made on basis of work requiring a particular skill.
● Where the contract is uncertain.
● When the trustee enter into a contract in breach of trust.
● When the contract in dispute is revocable.