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Laws on Specific Performance of Contract

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Laws on Specific Performance of Contract

Specific Performance of contract refers to the obligation to perform the contract as per the terms and conditions. In case, a party fails to perform his part of the contract, the aggrieved can approach the court and seek the remedy of specific performance. Under the current Indian Legal System, the courts are inclined towards granting relief of specific performance mainly in cases where compensation in the form of monetary damages would be an inadequate remedy for the aggrieved party.

The law relating to specific performance has been comprehensively dealt with under the Specific Relief Act, 1963. However, due to the outdated provisions and with the objective of seeking greater certainty of contractual enforcement and to ensure a time bound adjudication of any dispute, the Parliament passed the Specific Relief (Amendment), Act, 2018 amending the principle law and the sections 10 to 25 of the amended Act deal with the specific performance of contracts.

One of the most significant change that was introduced is that prior to the amendment, the Court had the discretion to grant the relief of specific performance in certain special circumstances, however, under the amended Act, the court is under an obligation to enforce specific performance except in cases which are expressly laid down under the amended Act such as:
1) Contract made by trustee in excess of power or in cases of breach of trust. (Section 11(2))
2) Party in accordance with section 20 of Amended Act has received substituted performance of contract. (Section 14(a))
3) Contract involves performance of continuous duty which is not possible for the court to supervise. (Section 14(b))
4) Contract involves personal qualification of the parties to fulfill the obligation. (Section 14(C))
5) Contract of determinable nature. (Section 14(d))

Further, under the amended Act, the Court can grant specific performance in favor of any person other than a person:
1) Who has received substituted performance under section 20. (Section 16(a))
2) Who has become incapable of performing the contract. (Section 16(b))
3) Who has violated an essential term of the contract in respect of his part of performance. (Section 16(b))
4) Who has acted with fraud. (Section 16(b))
5) Who fails to prove that he has performed his part of contract or is at all times ready and willing to perform his part of the essential terms of the contract. (Section 16(c))

Another major amendment is the insertion of the provision relating to substituted performance under section 20 of the amended act. Under substituted performance, the aggrieved party can get the incomplete part of the contract done by a third party or through their own efforts. This provision is advantageous for both, the defaulter, who gets a period of 30 days to honour his obligations and for the aggrieved party, who gets the obligation under the contract completed and also recovers the excess cost incurred from the defaulter.

In the case of Surinder Kaur v. Bahadur Singh Civil Appeals Nos. 7424-7425 of 2011 before the Hon’ble Supreme Court, where a property already in dispute was sold with the condition of the sale deed to be registered only after settlement of dispute by Court and the remaining money other than the earnest money already paid, were to be on paid at that time. However, the possession of property was transferred on the date of entering into sale deed on the condition to pay a customary rent in case the suit is not disposed of by the court within 1 year. The purchaser however, failed to pay the rent for 13 years but claimed specific performance of the sale deed that had to be registered. The question before the Court was whether a person who himself has not performed one of the promise under the contract, entitled to seek the relief of specific performance. The Court held that, as per section 16(3) of the Specific Relief Act, 1863 for a party to seek specific relief a party should be willing or should have fulfilled their part of the contract. Therefore, in this case the party claiming specific relief has himself failed to comply with an essential condition of the contract, therefore, he would no longer be entitled to seek specific performance of the contract.

Therefore, the amendments made to the Specific Relief Act, 1863 would result in the reduction of litigation and will also make sure the performance of contractual obligations in a time bound manner with the introduction of the concept of substituted performance. Changing the nature of specific relief from an exceptional rule to be used at the discretion of the court to a general rule will ensure a greater contractual enforcement.
Authored By: Adv. Anant Sharma & Ananya Jain

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