(..14 c..)

SPECIFIC PERFORMANCE OF CONTRACT

(Ss. 9 to 25)

QUESTION BANK

Q.1. Explain the various modes in which a contract is discharged.

Q.2. Explain the contract, which cannot be specifically enforced under Specific Relief Act.

Q.3. Who may obtain specific performance of a contract?

Q.4. Enumerate and explain the general principles relating to specific performance of contract. Which contract can be specifically performed? Which cannot be specifically enforced? What are the defences in a suit for specific performance?

Q.5. Discuss the circumstances wherein specific contract can be enforced. Enumerate the contract which cannot be specifically enforced. State what are the defences in suit for Specific performance of contract?

Q.6. Who are the persons for or against whom contracts may be specifically enforced?

Q.7. What are the contracts that can be and can not be specifically enforced?

Q.8. What do you understand by the term ‘specific performance of contract’?

Q.9. Who are the persons for or against whom specific performance can be ordered?

SHORT NOTES

Discretion powers of court in awarding specific performance.

Contracts that can not be specifically enforced.

SYNOPSIS

I. Introduction-

II. When specific performance of Contract enforceable (S. 10)-

A) According to S. 10 in following circumstances, it is in discretion of the court to enforce contract specifically. Viz,

1. Existence of no standard for ascertaining the actual damages.

2. Inadequacy of the pecuniary compensation.

a) Not ordinary article of commerce or available in market.

b) Where property is held as agent or trustee.

B) Some more contracts enforceable specifically are stated in S. 14(3).

1. When contract is to execute mortgage or furnish security.

2. When contract is to take and pay for any debentures of a company.

3. Formal deed of partnership.

4. Purchase of share of a partner.

5. Contract for construction of any building.

III. Which Contract cannot be specifically enforced (S. 14)-

1. Where Compensation is adequate.

2. Contracts involving personal skill.

3. Contracts of determinable nature.

4. Contracts requiring constant supervision.

IV. Defenses for suits in respect of reliefs based on contract-

1. Under Contract Act-

2. Under S. 14 of the Specific Relief Act

3. Contract of trust beyond his powers (S. 11 (2))

4. Conduct of plaintiff himself (S. 16)

5. Defective title (S. 17)

6. Contract giving unfair advantage to plaintiff (S. 20)

7. Performance involving hardship (S. 20)

8. When it is inequitable to enforce contract

V. Who may/ may not obtain specific performance (S. 15)?

A) Persons who may obtain specific performance of contract

1. Any party to the contract-

2. Representative in interest-

3. A beneficiary under the contract-

4. The reminder -

5. A revisioner in possession -

6. A revisioner in reminder-

7. New company by amalgamation-

8. A company-

B. Persons who cannot obtain specific performance of contract (S. 16)-

1. Person not entitled to recover compensation for its breach-

2. Inability of person to perform his part of contract-

3. Person not ready and willing to perform his part of contract-

VI. Discretion and powers of the Court (S. 20)-

A) Discretion of court (S. 20)-

1) When in its discretion court can refuse specific performance?

a) An unfair advantage to the plaintiff-

b) Performance involving hardship (S. 20)-

c) When it is inequitable to enforce contract-

2) When in its discretion court can enforce specific performance-

a) Substantial performance by one side-

b) Mutuality of remedy-

B) Powers of the court-

a) Power of the court to award compensation (S. 21)-

b) Power to grant relief for possession, petition etc.-

c) Liquidation of damages not a bar to specific performance (S. 23)-

Specific Performance of Contracts

I. Introduction and The Statutory Paradigm Shift

When a party to a contract breaches their obligation, the aggrieved party has two primary alternative remedies:

An action for monetary damages under Section 73 of the Indian Contract Act, 1872.

An action for Specific Performance under the Specific Relief Act, 1963, seeking a decree compelling the literal execution of the contract as agreed.

The 2018 Amendment Note:

Crucial Update: Prior to the Specific Relief (Amendment) Act, 2018, specific performance was an entirely discretionary remedy under Section 20. The 2018 Amendment fundamentally modified this by deleting the court’s broad discretion. Under the modern Section 10, specific performance is a mandatory statutory right. The court must enforce specific performance unless the contract falls explicitly within the restrictive exceptions listed under Sections 11(2), 14, or 16.

Statutory Presumptions regarding Property:

The law maintains a distinct dichotomy based on the nature of the underlying property:

Immovable Property: The court maintains a strong presumption that a breach of a contract to transfer immovable property cannot be adequately relieved by monetary compensation. Specific performance is the standard rule.

Movable Property: Specific performance is an exception. The court presumes that monetary damages are an adequate remedy for chattels, unless the goods are unique or not easily obtainable in the open market.

Cuddee v. Rutter, (1720) 5 Vin. Abr. 538: The court held that an agreement for the sale of ordinary personal chattels or public stock will not be specifically enforced, as identical goods can be purchased in the market using monetary damages.

II. Contracts which are Specifically Enforceable

A. Statutory Grounds (Section 10)

Specific performance must be enforced by the court in the following circumstances:

Absence of Standard for Ascertaining Damages: When there exists no tangible or commercial standard for calculating the actual damage caused by the non-performance of the agreed act.

Inadequacy of Pecuniary Compensation: When the act agreed to be done is of such a nature that monetary compensation for its breach would not afford adequate relief.

Statutory Exceptions for Movable Property:

A contract to deliver movable property can be specifically enforced under Section 10 only if:

The asset is not an ordinary article of commerce, is of special historical/artistic interest to the plaintiff, or consists of goods not easily obtainable in the market (e.g., shares of a private limited company, unique antiquities, or artwork by a deceased painter).

The defendant holds the specific movable property as an agent or trustee of the plaintiff.

B. Special Infrastructure & Commercial Contracts Enforceable under Section 14(3)

(Note: Post-2018, these provisions are restructured under the amended Section 14 to provide robust enforcement for commercial development).

┌────────────────────────────────────────┐

│ SPECIFICALLY ENFORCEABLE EXCEPTIONS │

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│

┌────────────────────────────────┼────────────────────────────────┐

▼ ▼ ▼

┌────────────────┐ ┌────────────────┐ ┌────────────────┐

│ To Execute a │ │ To Execute │ │ Building & │

│ Mortgage or │ │ a Partnership │ │ Construction │

│ Security Deed │ │ Deed │ │ Contracts │

└────────────────┘ └────────────────┘ └────────────────┘

Contracts to Execute a Mortgage: Where a suit is filed to compel the execution of a mortgage or to furnish security for the repayment of a loan that a borrower is unwilling to repay immediately, provided the lender has already advanced the loan amount.

Subscription of Debentures: Suits to enforce an agreement to take and pay for debentures of an incorporated company.

Formal Partnership Deeds: Where parties have already actively commenced a partnership business but have failed to execute a formal partnership deed, the court can compel its execution.

Building and Construction Contracts: A contract for the construction of a building or execution of structural work on land can be specifically enforced if three criteria are met:

The construction work is described in the contract in sufficiently precise terms.

The plaintiff possesses a substantial interest in the performance, and the breach cannot be compensated by money.

The defendant has obtained physical possession of the land on which the building is to be constructed.

Mayor of Wolverhampton v. Emmons, [1901] 1 KB 515: The Court of Appeal held that where a developer obtained plot transfers under an explicit covenant to build houses according to approved architectural plans, specific performance was properly ordered because the plans were perfectly precise and the authority had a substantial structural interest.

III. Contracts which Cannot be Specifically Enforced (Section 14)

The amended Section 14 explicitly enumerates four categories of contracts that are barred from specific performance:

1. Where a Substitute Performance is Obtained (Section 14(a) read with Section 20)

Where the aggrieved party has successfully obtained substituted performance through a third party or their own agency under Section 20, they can no longer seek specific performance against the original breaching party. Instead, they can sue for the recovery of the actual costs incurred.

2. Contracts Involving Continuous Duty and Personal Skill (Section 14(b))

The court will not enforce a contract that runs into minute or numerous details, or is heavily dependent on the personal qualifications, artistic skill, volition, or trust of the promisor (e.g., contracts of personal employment, marriage, writing a book, or singing).

Illustrations: An author contracting with a publisher to complete a literary work, or an artist contracting to paint a portrait, cannot be forced by a court decree to execute the work, as the court cannot oversee artistic quality.

3. Contracts of a Determinable Nature (Section 14(c))

A contract is determinable if a party can legally revoke or terminate it at will without cause. The courts will not pass a decree for specific performance that can be rendered entirely useless if the defendant exercises their lawful right to terminate the contract immediately afterward.

Illustration: An agreement to form a partnership without specifying a fixed duration (partnership at will) cannot be specifically performed, since either party could dissolve it immediately upon the passing of the decree.

4. Contracts Requiring Constant Judicial Supervision (Section 14(d))

Where the contract involves the performance of a continuous duty that extends over a prolonged period, which the court cannot practically oversee or superintend.

IV. Statutory Defenses Against Specific Performance

A defendant resisting a suit for specific performance may raise the following statutory defenses:

1. Defenses under the Law of Contract (Section 9)

Any defense available under the Indian Contract Act, 1872 is fully available to a defendant under Section 9 of this Act. These include:

Lack of capacity (e.g., minority or unsoundness of mind).

Absence of a lawful and concluded agreement.

Absence of free consent (e.g., fraud, coercion, misrepresentation, or undue influence).

Mutual mistake of fact rendering the agreement void.

2. Breach of Trust or Excess of Power by Trustees (Section 11(2))

A contract made by a trustee or an agent in direct excess of their registered powers, or in structural breach of their fiduciary trust, cannot be specifically enforced against the estate.

Illustration: A trustee empowered to lease land for a maximum of 7 years enters into an agreement to grant a 7-year lease with a mandatory renewal clause. The contract is ultra vires the trust deed and cannot be specifically enforced.

3. Personal Bars and Conduct of the Plaintiff (Section 16)

Specific performance cannot be enforced in favor of a person who:

Has become incapable of performing their part.

Acts fraudulently or acts in subversion of the relationship intended to be established by the contract.

Suryagandhi v. Lourduswamy, AIR 2004 Mad 8: Where a purchaser waited for 9 years before issuing a notice claiming readiness, the Court held that while time was not explicitly the essence of the contract, 9 years was completely unreasonable. The suit was dismissed due to the plaintiff’s own laches and lack of due diligence.

4. Failure to Prove Readiness and Willingness (Section 16(c))

The plaintiff must explicitly aver and prove that they have continuously been, and remain, ready and willing to perform their essential obligations under the contract from the date of the agreement up to the final hearing of the suit.

Badru Nisha v. Yogendra Prasad Sinha, AIR 2006 Pat 71: The Court emphasized that readiness refers to the financial and structural capacity (the logistical equipment) to perform, whereas willingness is the continuous mental intent to complete the transaction. Failure to satisfy both elements is fatal to the suit.

Sandhyarani Debbarma v. Sudha Rani Debbarma, AIR 1978 SC 537: The Supreme Court clarified that to prove readiness, it is not an absolute requirement that the purchaser physically produce or cash-vouch the exact currency notes in court; readiness is a question of fact to be inferred from the plaintiff's genuine financial arrangements.

5. Defective Title (Section 17)

A contract to sell or lease property cannot be specifically enforced in favor of a vendor or lessor who does not possess a clear title free from reasonable doubt, or who entered the contract knowing they did not hold ownership rights.

V. Parties Who Can and Cannot Obtain Specific Performance (Sections 15 & 16)

A. Persons Entitled to File for Specific Performance (Section 15)

Specific performance of a contract may be obtained by:

Any Party to the Contract: Subject to the general rules of privity.

Representative-in-Interest: Includes legal heirs, executors, assignees, or transferees, provided the contract does not depend on the unique personal skill or quality of the original party.

Shyam Singh v. Daryao Singh, AIR 2004 SC 348: The Supreme Court affirmed that the expression "representative-in-interest" must be interpreted broadly to include bonafide transferees and assignees of the contractual rights.

Beneficiary Under a Family Settlement: A stranger to the contract can sue if the agreement constitutes a valid marriage settlement or a family compromise.

Khwaja Muhammad Khan v. Husaini Begum, (1910) ILR 32 All 410 (PC): An agreement between the parents of a bride and groom stipulated that the groom's father would pay a monthly allowance (Kharch-i-Pandan) to the bride, secured against a specific immovable property. The Privy Council held that even though the bride was not a direct signatory to the agreement, she was the express beneficiary of the family charge and was fully entitled to enforce the contract.

Amalgamated Companies: The new corporate entity arising out of a formal statutory merger or amalgamation can enforce contracts executed by the erstwhile component companies.

Incorporated Companies via Promoters: A company can enforce pre-incorporation contracts entered into by its promoters prior to its incorporation, provided the contract is warranted by the terms of incorporation, and the company has formally accepted and communicated its ratification to the other party.

VI. Ancillary Powers of the Court

A. Power to Award Compensation (Section 21)

In a suit for specific performance, the plaintiff may additionally or alternatively pray for monetary compensation for the breach.

If the court determines that specific performance should be granted but is insufficient to secure absolute justice, it may award additional compensation.

If the court determines that specific performance cannot be granted but a valid contract was indeed breached, it can award alternative compensation governed by the principles of Section 73 of the Indian Contract Act, 1872.

Smt. Jamila Khatoon v. Ram Niwas Gupta, AIR 1998 All 138: Where an inordinate delay in pursuing litigation made a decree for specific performance inequitable, the High Court substituted the primary relief with an alternative decree ordering the full refund of earnest money along with 9% interest per annum and compensatory damages.

B. Power to Grant Possession or Partition (Section 22)

To prevent a multiplicity of proceedings, a person suing for the specific performance of a contract for the transfer of immovable property may also claim additional reliefs, such as:

Actual physical possession of the property.

Partition and separate possession of a shared estate.

VII. Specific Performance of Part of a Contract (Section 12)

General Rule (Section 12(1)): The court shall not direct the specific performance of a part of a contract, except as expressly provided under the statutory exceptions in subsections (2), (3), and (4).

┌────────────────────────────────────────┐

│ SECTION 12: SPECIFIC PERFORMANCE OF │

│ PART OF A CONTRACT │

└───────────────────┬────────────────────┘

│

┌─────────────────────────────┴─────────────────────────────┐

▼ ▼

┌────────────────────────────────┐ ┌────────────────────────────────┐

│ Unperformed Part is Small │ │ Unperformed Part is Large │

│ (Section 12(2)) │ │ (Section 12(3)) │

├────────────────────────────────┤ ├────────────────────────────────┤

│ • Litigated by either party. │ │ • Litigated ONLY by innocent │

│ • Relates to minor deficiency. │ │ party. │

│ • Money compensation awarded │ │ • Requires complete waiver of │

│ for the minor unperformed │ │ compensation & relinquishment│

│ portion. │ │ of the remaining portion. │

└────────────────────────────────┘ └────────────────────────────────┘

The Three Statutory Exceptions:

1. Where the Unperformed Part is Small (Section 12(2))

Where a party is unable to perform the entirety of their obligation, but the part left unperformed bears only a small proportion to the whole in value and can be adequately compensated in money, the court may direct partial performance. The court will order the transfer of the performable portion and award monetary compensation to cover the small deficiency.

Illustration: contracts to sell a 100-acre estate to . It is later discovered that 2 acres belong to a stranger who refuses to sell. Since the 2 acres are non-essential and do not affect the enjoyment of the remaining 98 acres, the court can direct to convey the 98 acres to with a proportionate reduction or compensation in money for the missing 2 acres.

2. Where the Unperformed Part is Large (Section 12(3))

Where the unperformed part forms a considerable portion of the whole or does not admit of monetary compensation, the defaulting party cannot demand partial performance. However, the innocent party can file a suit to obtain a decree for partial performance, provided they satisfy two strict conditions:

They pay the full stipulated consideration without any reduction.

They completely relinquish and waive all claims to further performance and all rights to compensation for the deficiency.

Illustration: If in the previous example, the stranger owns 98 acres and the seller owns only 2 acres, the purchaser cannot force to perform the whole contract. However, can compel to convey the 2 acres, provided pays the full price originally agreed for the entire 100 acres and waives all future rights to sue for damages or compensation.

3. Independent Parts of a Contract (Section 12(4))

When a contract consists of multiple separate, independent, and distinct parts, where one part can and ought to be specifically performed while the other part cannot or should not be enforced, the court can separate the segments and grant a decree for specific performance for the independent, viable part alone.