SUIT FOR SPECIFIC PERFORMANCE OF CONTRACTS

An introduction to Specific Performance in contracts with analysis on the remedies available in case of failure of performance, circumstances under which performance is mandatory and the word of courts on the performance of certain provisions ambiguously and unambiguously agreed upon in the contract.

Fri Apr 29 2022 | Business Law | Comments (0)

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Specific performance means fulfilling a promise made under a contract as agreed. A suit for specific performance can be filed by any party, in a court of competent jurisdiction, who has suffered loss due to non-performance of contract on part of the other party to the contract. Remedy of specific performance, which is affected in case of breach of contracts, is provided by the equity courts. However, this cannot be asked for as a right because it is provided at  the  discretion of the court. It is an alternative to awarding damages, and is classed as an equitable remedy commonly used in the form of injunctive relief concerning confidential information or real property. Section 16(c) of the Specific Performance Act  puts the onus of proof on the plaintiff to prove, by way of evidence, that he had performed his part of the contract or was willing to perform his part of the contract. Clause (c) emphasizes the phrase ‘readiness and willing’. It is the most important pre-requisite on the part of the plaintiff to file a suit for specific performance. This clause provides that the person seeking specific performance must prove that he has performed or has been ready and willing to perform the essential terms of the contract which were agreed upon. . 

In India, most of the specific performance suits relate to sales of immoveable properties and, to some extent, transfer of shares. In a suit for specific performance, the plaintiff must approach the Court with clean hands . Right from the date of the execution till date of the decree, he must prove that he is ready and has always been willing to perform his part of the contract. The court should come to this conclusion by taking into consideration, the conduct of the plaintiff prior to  filing of the suit. An intention to make time the essence of the contract must be expressed in unequivocal language. “In sale of immovable property, time is never regarded as the essence of contract. The presumption is against time being the essence of the contract. Under law of equity, governing rights of parties to specific performance of contract to sell real estate law looks not at the letter, but substance of the agreement. Where under terms of contract parties mentioned specific time, it has to be ascertained whether parties intended to complete the transaction in reasonable time. The expression to make time the essence of the contract must be expressed in unequivocal language. ” As  far as the point of limitation is concerned, the suit for specific performance has to be filed within reasonable time, which depends upon facts and circumstances of each case. No strait-jacket formula can be laid down in this behalf. However, where the intention of the parties is to exclude this remedy, they can do so by explicitly mentioning it in the contract. In such a case, the court will provide for  liquidated damages, as mentioned  in the contract.     

The Supreme Court has held that, under Section 19(a) and (b) of the Specific Relief Act, 1963, specific performance of a contract can be enforced against either party thereto and any person claiming under him by a title arising subsequent to the contract, except a transferee for value, who has paid his money in good faith and without notice of the original contract.

The courts grants the relief of specific performance in the following situations- 

  1. If the compensation to be awarded cannot be determined. Remedy of specific performance is awarded in cases where it is impossible to fix compensation. In this case, the court directs the defendant to perform his promise in  agreement as agreed at the time of making the contract.  
  2. Remedy of specific performance is awarded when there is no substitute or alternate for the subject matter of the contract.    
  3. Remedy of specific performance is awarded in case of goods, the value of which cannot be easily ascertained and the goods have a unique character. For example, buildings, land or goods having special value for the plaintiff.   
  4. Remedy of specific performance is awarded at the sole discretion of the court.   

However, there are certain circumstances when this remedy cannot be awarded. For instance, when the specific performance is impossible, when the contract is too vague to be enforced, when the element of ad-idem-consensus is missing, the contract was made for no consideration, when the contract is void or unenforceable etc.

There is an ongoing debate in  legal literature regarding the desirability of specific performance. Economists, generally, take the view that specific performance should be reserved to exceptional settings, because it is costly to administer and may deter promisors from engaging in efficient breach.

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