Specific performance of a contract

Specific performance of a contract

Specific performance is equitable relief given by a court in case of breach of contract in the form of a judgement that the defendant is to actually perform the contract according to its terms and stipulations.

A contract, according to the Indian Contract Act, is an agreement enforced by law. From every contract there immediately and directly results an obligation on each of the contracting parties towards the other to perform such of the terms of the contract as he has undertaken to perform. And if the person on whom this obligations rests, fails to discharge it, there results in morality to the other party a right at his election either to insist on the actual performance of the contract or to obtain satisfaction for the non-performance of it.

An obligation includes every duty enforceable by law. Consequently, whenever a man comes under a liability to do or forbear from doing anything, he remains under the obligation. This liability may be a consequence of either a contract or a tort. An obligation to forbear is a positive duty generally imposed by a contract. This form of specific relief is described as the specific performance of a contract.

  1. Defenses under law of contracts

Section 9 of the specific relief act, 1963 provides that except as provided in this chapter all the defenses open under the law of contracts shall be open to the defendant, where any relief is claimed under this chapter in respect of a contract. Defenses that are available under the law of contract , such as incapacity of parties, the uncertainty of contracts, coercion, undue influence, misrepresentation, mistake, etc., have all been dealt with in the Indian Contract Act, 1872. This section avoids their repetition in the Specific Relief Act. Thus it is necessary that the contract in question should be valid and enforceable. The Supreme Court refused to grant relief of specific performance where the contract was in an alternate form and one form had failed to materialize and the other was void, being not enforceable by virtue of uncertainty. It was a contract of sale stipulating that the co-seller failed to sign the deed then the principal seller would execute a sale deed of her own “one of two shares” , otherwise payback the advance and compensation in the same amount. The co-seller did not sign. The alternative for the promisor was either to sell her share or pay compensation. If she opted for compensation there was no breach and no question of specific performance, which was not possible because her share was not defined nor was there any indication of the part of the lump sum consideration which was applicable to her share.

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A contingent c ontract to the effect that the mortgaged house would be sold as soon as the mortgage was redeemed was held by the Supreme Court to be specifically enforceable on the redemption of the mortgage, though no relief could be provided on facts because the claim was filed more than three years after the date of redemption.

  1. Contracts which are specifically enforceable

  • Where no other remedy is suitable:

In a case before the Supreme Court a family woman (appellant’s mother) borrowed a sum of money from a family member (respondent’s father) and executed a deed of sale of her property in favor of the lender’s minor son with an agreement of reconveyance on repayment of the loan. The dues under the loan were paid back and on denial of reconveyance, the Supreme Court upheld the decree of specific performance ordering reconveyance. The mortgage having disposed of the property, the decree was allowed to be enforced against such a buyer also.

The shares of a private company have been held to be goods of such a nature as they are not easily obtainable in the market. The court, therefore, laid down that specific performance should be granted in such cases.

  • Valid contract in existence:

There should be a concluded contract. In the present, there was an agreement for transfer of property. The transferor did not dispute the agreement in his reply to the notice from the transferee. He did not even dispute in his written statement averments made in the plaint as to the agreement. No such plea was raised before the High Court or the trial court. Hence, the existence of the agreement was not disputed.

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The other two requirements for seeking specific relief are that the defendant committed breach of contract and the plaintiff was always ready and willing to perform his part of the obligation in terms of the contract.

Where an agreement for sale prescribed a retrospective date for execution, the court said that it was not permissible. It would make the contract vague, and therefore, incapable of execution. Such an agreement cannot be sought to be specifically enforced.

  • Contract not extinguished by decree
    :

The passing of decree for specific performance does not extinguish the contract between the parties. The parties continue to be entitled to their rights and bound by their obligation under the contract. The decree for specific performance merely recognizes entitlement to the claim for specific performance.

  1. Performance of trusts

Section 11(1) provides another circumstance under which contract is specifically enforced.

The creation of a trust imposes a duty on the trustees, which maybe enforced even by strangers to the transaction who may not have been in existence at its date, if they have an interest under the contract. Thus contracts connected with trustees can be specifically enforced either at the instance of the beneficiaries or at the instances of the trustees.

  1. Specific performance of a part of contract

Section 12 deals with specific performance of a part of contract. It provides in clause (1) that as a general rule, the court shall not grant specific performance of a part of contract. The section, however, recognizes in clauses (2) and (4) certain exceptions to the above rule.

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Conclusion

Therefore, this is specific performance of contracts.

Author: Vaishnavi Makne,
Symbiosis Law School, Nagpur

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