Specific performance of a contract
| Specific performance of a contract is a vital concept in contract law, ensuring that parties fulfill their contractual obligations as agreed between them. This remedy compels action rather than mere payment, making it essential for upholding the enforceability of contracts. This article explores the basics of specific performance, when it may be enforce, and when the specific performance is barred. |
Specific Relief Act outlines seven types of specific relief that can be claimed under the provisions of this Act. The following specific relief can be claimed:
2. Specific performance of contract.
3. Rectification of Instrument
4. Rescission of contracts
5. Cancellation of Instrument
6. Declaratory Decrees
7. Injunction
Specific Performance of Contract: Meaning -
Specific performance of a contract refers to a legal remedy where a court orders a party to perform its obligations under a contract according to the terms agreed upon. It is an equitable remedy sought when monetary damages would not adequately compensate the non-breaching party for the breach of contract.
When specific performance of a contract may be granted:
As per Section 10 of the Specific Relief Act. 1963 specific performance of a contract shall be enforced by the court subject to sections 11(2), 14, and section 16.
Before the Amendment Act 2018, the specific relief of granting specific performance of a contract was at the discretion of the court but, by the Amendment Act 2018 it shall be enforced by the Court.
Relief of a Specific Performance of a contract may be granted in the following cases:
Relief of specific performance may be granted by a court when monetary damages are inadequate to compensate for a breach of contract. It compels a party to perform their obligations under the contract according to its terms, rather than simply paying damages for failing to do so.
1. when the subject matter of contract is unique and rare, monetary compensation would not provide adequate relief for the breach of such contract, court may grant specific performance of contract.
2. When the plaintiff is not able to determined the damages caused by its loss in such case court may grant specific performance of contract.
Limitation period for claiming specific performance of contract:
Article 54 of the Limitation Act, 1963 prescribe the limitation period within which the suit for specific performance of contract shall be filed: Three year.
as observed in case K. Shanmugam v. C. Samiappan 2013 by the Madras High Court that for the purpose of article 54 of Limitation Act agreement can be divided into two categories:
1) Agreements wherein time has been prescribed for performance or a date is mentioned on the date on or before which the performance is to be made; the limitation for filing the suit for specific performance shall start from the date of expiry of the period stipulated in the agreement or the date mentioned in the agreement as the date on or before which performance is to be made.
2) Agreements wherein no such time or date is prescribed for performance - limitation shall not start running till performance is refused and the plaintiff gets notice of such refusal to perform. Only from the date of getting notice that the performance is refused, limitation for filing suit for specific performance in the second category of cases will start running. In this case, one year period has been prescribed in the agreement as the time for performance. Therefore, a suit for specific performance should have been filed within three years from the date of expiry of one year.
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Contract which cannot specifically enforceable:
1. Contract made by trustee in excess of power:
As per section 11(2) of specific relief act, a contract made by a trustee in excess of his power or in breach of trust cannot be specifically enforceable.
When a trustee enters into a contract that exceeds their powers or breaches the terms of trust, the contract is considered voidable or unenforceable. This means that if the trustee acts outside the scope of their authority or fails to fulfill their duties such contract cannot be specifically enforceable.
In Sachchidanand Banerjee vs. Moly Gupta and ors 2014 Calcutta High Court
In this particular case, the first defendant was one of the trustees. When the sale agreement was made on August 13, 1988, both trustees appointed in the trust deed dated November 26, 1983 were alive, including the first and second defendants. The court observed that the trust deed did not allow any trustee to act alone when there are multiple trustees, and they must act jointly in such cases. The court found that the first defendant breached the terms of the deed and exceeded the power granted to him. Based on this, the parties are guided by Section 11 of the Specific Relief Act, 1963, and the sale agreement cannot be specifically enforced.
2. Where a party to the contract has obtained substituted performance of contract under section 20 of the Specific relief Act:
As per section 14(a) of the SRA, if one party obtained substituted performance then he cannot claim specific performance of contract.
Substituted performance occurs when a party to a contract arranges for someone else to perform their obligations under the contract instead of doing so themselves. This may happen with mutual agreement or under circumstances where one party is unable or unwilling to perform. If a party to the contract obtained substituted performance then, court shall not grant specific performance of contract. However, Instead of specific performance, the aggrieved party may seek alternative remedies such as damages for any losses suffered due to the other party's breach of contract.
3. When it involves performance of continuous duty of the Court:
As per section 14(b) of the Specific relief Act specific performance of contract cannot be granted when the contract, performance of which involves the performance of continuous duty which the court cannot supervise though, he may claim for alternative in terms of compensation or injunction.
In Indu Bhushan Dey and ors v. Anita Paul 2006 Gauhati High Court observed that:
In the private sector, an employee has the freedom to accept or reject the offered conditions of service. These terms cannot be changed unilaterally, and the employer-employee relationship is essentially that of an authority and a subordinate. Since a private employee's conditions of service are based on their contract, which is entered into voluntarily, it is not possible for such contracts to be specifically enforced. Section 14(b) of the Specific Relief Act, 1963, clarifies that a contract cannot be specifically enforced if the performance involves a continuous duty that the court cannot supervise.
4. Contract is dependant on the personal qualification of parties:
Section 14(c) of the Act clearly states that the contract which is dependant on the personal qualification of the parties cannot enforce specific performance of it. These contract often involve services or performances where the quality and ability of the individual play a crucial role in fulfilling the contractual obligation.
Example:
1. Personalized services: the contract requires specialized knowledge, experience or personal qualification.
2.Unique expertise: contract is directly link to unique expertise, skills or reputation of the individual party.
when any party fails to perform obligation which is depend on the personal qualification in such contract court cannot grant specific performance. The reasons behind it may be compelling an individual to perform may not result in the desired quality or outcome or it may challenging for the court to monitor and ensure the quality of performance in these specialized areas.
Example: A contract with B to make a painting for him for Rs. 50,000. B makes a breach of contract. No specific relief shall be granted to A.
5. Contract is in nature determinable:
A determinable contract means a contract can be terminated under specific conditions or upon certain events outlined within the contract itself, meaning it is not meant to continue indefinitely but rather has defined circumstances under which it can be terminated or ended. A determinable contract usually includes details about when it can be ended, often based on performance, changes in circumstances, or meeting specific deadlines, which offers flexibility in its duration compared to contracts with fixed terms.
Example : Lease Agreement -
Facts:
The appellant Corporation and respondent No. 1 had an agreement for selling Liquefied Petroleum Gas (LPG) Cylinders to consumers. The appellant-Corporation terminated the distributorship, leading respondent No. 1 to sue for a declaration that the termination was illegal and void.
Arbitrator Award:
The arbitrator ruled that the appellant Corporation breached the contract and must restore the distributorship and provide compensation.
Hon'ble Apex Court held that:
1. The finding of award that the Distributorship Agreement can be revoked, and since it involves personal service, it falls under the contracts that cannot be specifically enforced according to Section 14 of the Specific Relief Act.
2. Either party can cancel the agreement by following clause 28 and giving thirty days' notice. In this case, the only available relief would be granting compensation for the 30-day notice period.
3. Granting the relief of restoration of the distributorship even on the finding that the breach was committed by the appellant-Corporation is contrary to the mandate is Section 14(1) of the Specific Relief Act and there is an error of law apparent on the face of the award which is stated to be made according to 'the law governing such cases'. The grant of this relief in the award cannot be sustained.
Personal bars to relief (Section 16):-
1. who obtained substituted performance
2. specific performance of contract shall not be granted when:
who has become incapable of performing
any party become incapable of performing a contract other party may not enforce the contract against him. such incapability may arise be due to unsoundness of mind or physical incapacity or by any other reasons. If a party becomes incapable of performing their obligations due to any of the reasons, the contract may be voidable or unenforceable.
Who violates any essential terms of the contract :
specific performance is considered an equitable remedy and not automatically granted by courts. One of the key principles is that specific performance will generally not be granted if the party seeking it has violated essential terms of the contract. Essential terms typically refer to fundamental obligations or conditions that go to the heart of the contract's purpose or performance. If any person has violated the essential terms of the contract then he is not entitle to specific performance of contract.
Contract on his part remains to be performed
specific performance shall not be granted if the party seeking it has not fully performed or is not ready, willing, and able to perform their own obligations under the contract. This principle ensures fairness and equity in the enforcement of contractual obligations, encouraging parties to fulfill their promises under the contract.
Who acts in fraud of the contract
The party seeking specific performance of contract if acts in fraud of the contract then he cannot entitled to the specific performance. There is well established doctrine that he who seeks equity must do equity. therefore if he fails to do equity then he is not entitled to relief.
Who willfully acts at variance with the contract:
specific performance is a remedy that may be granted by a court to compel a party to perform their obligations under a contract. However, if a party willfully acts at variance with the terms of the contract, specific performance may not be granted. Acting at variance with the contract means deliberately deviating from the agreed-upon terms or frustrating the purpose of the contract in a way that undermines the integrity of the agreement.
Who acts in subversion of, the relation intended to be established by the contract:
Specific performance aims to enforce the terms of a contract when monetary damages are inadequate to remedy the breach. However, courts may refuse to grant specific performance if the party seeking it has acted in a manner that subverts the intended purpose or undermines the relationship envisioned by the contract.
In Mrs.A.Kanthamani vs Mrs.Nasreen Ahmed 2006 this case defendant claimed time is not the essence of the contract hon'ble Court observed that it's not true to say that time wasn't important in the contract. The contract clearly states that time is important, as both parties agreed to a long timeline (almost 10 months) for contract fulfillment. The plaintiff can't now claim that time wasn't important, as the defendant had informed them about keeping the property vacant and the plaintiff is not entitled to compensation or specific performance. The plaintiff falsely claimed ownership of 847.25 sq.ft and a share in the land for the same price, which contradicts the sales agreement. Also, the plaintiff misrepresented facts to the LIC.
Hon'ble Madras High Court held that, the plaintiff who has not come forward with clean hands is not entitled to the equitable remedy of specific performance. By claiming a large extent of property, she is not entitled to the relief under the agreement. The plaintiff has violated one of the essential terms of the contract. She has also acted at variance with or in subversion of the relation intended to be established by the contract. Hence under section 16 of the Specific Relief Act, the plaintiff is not entitled for specific performance of the contract.
3. Who fails to prove readiness and willingness to perform the essential terms of the contract:
Readiness and willingness to perform mean that the party seeking specific performance must show that they are prepared and eager to fulfill their obligations under the contract as outlined in its essential terms. This includes being able to meet the deadlines, conditions, and requirements specified in the contract. If he fails to prove that he has performed or has always ready and willing to perform the essential terms of the contract, then he is not entitle to specific performance of contract.
However if he prevented by the defendant or the any terms waived by the defendant to perform he is entitled to specific performance.
For getting relief under this section he must prove that he performed the contract or he is ready and willing to perform the contract as per the true construction of the contract. (explanation b of section 16(c).
As per explanation (a) of section 16(3) if the contract involves the payment of money it is not essential for the plaintiff to actually tender to the defendant or to deposit such money in court except when directed by the court.
Readiness and willingness both are different terms, readiness pertains to capacity of the plaintiff to perform the contract while willingness pertains to performance of his part. therefore it is necessary that the plaintiff who claims specific performance must prove both ready and willingness to perform his part.
In the case of H.H.Acharya Swami Ganesh Dassji v. Sita Ram
Thapar (1996) Hon'ble Apex Cour held that 'readiness' means
the capacity of the plaintiff to perform the contract, which
includes his financial position to pay the purchase price; and to
determine his willingness to perform his part of the contract,
the conduct has to be properly scrutinized. The Supreme Court
held that even if the plaintiff had the funds, he has to prove his
willingness to perform his part of the contract, which has to be
adjudged with reference to the conduct of the party and
attendant circumstances.
also it was held by Hon'ble Supreme Court in J.P.Builders v. A.Ramdas Rao (2011) readiness refers to
the financial capacity of the plaintiff, willingness refers to the
conduct of the plaintiff warranting performance and that
generally, readiness is backed by willingness.
In George M. Mathews @ George V. Muhammed Haneefa Rawther 2023 Kerala High Court held that According to section 16(c) of the specific relief act, 1963, being ready and willing are different. Readiness means the plaintiff's ability to enforce a contract, while willingness refers to the plaintiff's behavior warranting performance. The court says specific performance can only happen if readiness is supported by willingness.
Conclusion:
In conclusion, specific performance of contract is a legal remedy which is granted under section 10 of the specific relief act by compelling parties to fulfill the obligation under contract where the monetary compensation is not adequate relief to the plaintiff. However, if the plaintiff is failed to proved his case and if his claim attracted sections 11(2), 14 and section 16 then the plaintiff is not entitle to specific performance of contract.
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