Specific Performance of Contract: A Brief Overview

Introduction

The domain of specific performance of contracts in India is principally governed by the Specific Relief Act, 1963 (hereinafter “enactment” or “the Act”). This enactment provides for the various remedies that can be granted by the court with a view to ensure the enforcement of contractual rights.

Specific relief pursuant to the enactment is requested when the plaintiff has been affected by breach of contractual terms by the defendant and when ordinary reliefs are insufficient. However, specific relief is granted by the court only when certain criteria are met.

Ordinary reliefs pursuant to the Indian Contract Act, 1872

Ordinarily, in the event of breach of promise pursuant to the contract, the general remedy available to the party so affected by the breach is to institute a civil lawsuit pursuant to Sections 73, 74 & 75 of the Indian Contract Act, 1872, against the party in breach of the contract for compensation or damages arising out of such a breach.

Section 73 of Indian Contract Act, 1872, states as follows:

“Compensation for loss or damage caused by breach of contract.—When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. —When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.[…]”

Section 74 of Indian Contract Act, 1872, states as follows:

“Compensation for breach of contract where penalty stipulated for:- 34 [When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.[…]”

Section 75 of Indian Contract Act, 1872, states as follows:

“Party rightfully rescinding contract, entitled to compensation.—A person who rightfully rescinds a contract is entitled to compensation for any damage which he has sustained through the non-fulfilment of the contract. —A person who rightfully rescinds a contract is entitled to compensation for any damage which he has sustained through the non-fulfilment of the contract. […]”

However, at times monetary compensation or damages for breaches of contracts falls insufficient of remedying the damages suffered by the affected contracting party, in such an instance the affected party may request that the concerned Court grant specific relief in order to sufficiently remedy the damage done.

Specific Performance pursuant to the Specific Relief Act, 1963

Specific performance thereby is an equitable relief granted to a contracting party who suffers due to the breach of contractual terms. Court has the can grant specific relief when monetary damages are insufficient to remedy the damages suffered by the affected contracting party due to breach or non-performance of contractual obligations.

Chapter II pursuant to the enactment pertains to specific performance of contracts. Section 10 thereto states that:

“The specific performance of a contract shall be enforced by the court subject to the provisions contained in sub-section (2) of section 11, section 14 and section 16.”

It is important to note that prior to the amendment of the enactment in 2018, Section 20 of the Act prescribed for the discretionary power of the Court in granting specific relief. After the 2018 amendment this discretionary power of the court to grant specific relief to the affected contracting party has been excised. In Sughar Singh v. Hari Singh (Dead) Through LRs. & Ors., wherein the Supreme Court of India in its decision, reiterated that specific performance is no longer a discretionary relief after the 2018 amendment to the enactment.

However, notwithstanding the amendment made to the enactment in 2018, the long-standing set of criteria and principles which are usually employed by the Court to determine whether specific performance pursuant to Section 16 clause (c) of the enactment is to be granted or denied has not been abandoned by the way-side by the Court. Section 16 clause (c) (as amended in 2018) states that:

“(c) [who fails to prove] that he has 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 terms of the performance of which has been prevented or waived by the defendant.”

Thus, the above-stated provision prescribes that in order for a plaintiff to be eligible for specific performance of a contract in his favor, the plaintiff shall have to prove his performance of, or his readiness and willingness to carry out the performance of his portion of the terms under the contract.

In Mehboob-Ur-Rehman (Dead) v. Ahsanul Ghani, the Supreme Court of India held that the expression “who fails to aver and prove” stands 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.

Conclusion

When ordinary remedies fall insufficient to remedy the damages suffered by the plaintiff due to breach of contract committed by the defendant, specific performance pursuant to the Specific Relief Act, 1963, can be granted to the plaintiff by the Court. However, the plaintiff is eligible for equitable remedy of specific performance of a contract in his favor only when longstanding criteria and principles enshrined under the Specific Relief Act, 1963, are fulfilled.

Sources:

  1. The Specific Relief Act, 1963, No. 47, Acts of Parliament, 1963.
  2. The Indian Contract Act, 1872, No. 09, Acts of Imperial Legislative Council, 1872.
  3. Sughar Singh v. Hari Singh (Dead) Through LRs. & Ors., Civil Appeal No. 5110 of 2021.
  4. Mehboob-Ur-Rehman (Dead) v. Ahsanul Ghani, Civil Appeal No. 8199 of 2009.
  5. Vasanth Rajasekaran , Saurabh Babulkar and Harshvardhan Korada, Specific Performance Cannot Be A Discretionary Relief: Supreme Court Of India, mondaq.com (Mar. 07, 2022, 6:45 PM), https://www.mondaq.com/india/trials-appeals-compensation/1132260/specific-performance-cannot-be-a-discretionary-relief-supreme-court-of-india-
  6. Yash Kansal, Specific Performance of Contract and its enforceability, ipleaders.in (Mar. 07, 2022, 6:45 PM), https://blog.ipleaders.in/when-specific-performance-of-contract-is-enforceable/
  7. Pragati Dehliwal, Specific Performance of Contracts, aishwaryasandeep.com (Mar. 07, 2022, 8:34 PM), https://aishwaryasandeep.com/2022/02/15/specific-performance-of-contracts/

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