Specific Performance Of Contracts

Nishitha S., B.A. LL.B, 3rd year
University College of Law, Osmania University
Email Id : nishitha.sheguri.0309@gmail.com

Date : 24/04/2024
Location : Hyderabad, Telangana
📱 +91-7981576264

Specific Performance Of Contracts

INTRODUCTION

The contracts have become an inextricable part of the globalised world. The contracts are formed on the foundation of offer and acceptance by the parties to the contract, this offer and acceptance binds the parties to the contract. The contract creates legal obligation on the parties. The breaches of the promises are inevitable hence there arise the need for the remedy. Common law provides for two types of remedies i.e. legal remedy and equitable remedy.

Specific performance is one of the equitable remedy ensuring the delivery of equitable justice, offering a unique avenue for enforcing contractual obligations through the compelling force of court orders. Defined as the court-ordered performance of a contractual obligation as opposed to mere monetary compensation, specific performance occupies a pivotal position in legal discourse, embodying principles of fairness, efficacy, and the sanctity of agreements. Let's delve deep into the matter of specific performance of contracts in this article.

ORIGIN OF SPECIFIC PERFORMANCE

The concept of specific performance of contracts traces its origins back to English Common Law, where breaches of contract typically resulted in the awarding of damages by the common law courts. However, the adequacy of damages as a remedy in all instances of breach came under scrutiny. The question arose: are damages always equitable and just? Common law courts were limited in their ability to address this question comprehensively.

The court of equity in many cases regarded in many cases that the damages as a remedy were inadequate and couldn't meet the purpose of justice. They interposed considering it is in violation of equitable principles and mandated the performance of his duties under the contract, which the offender otherwise would have purchased. This equitable stand of the court, in certain circumstances compels the offending party to perform what he had agreed upon.

Beswick v. Beswick, [1967] UKHL 2 : [1968] AC 58, where a uncle and nephew entered into a contract where nephew pays annuity to aunt in exchange for transfer of business's good will by uncle, with the aunt not being directly involved in the agreement, the court ruled that the nephew could be compelled by the uncle's personal representative (the aunt) to fulfil the terms of the contract through specific enforcement.

EVOLUTION OF SPECIFIC PERFORMANCE OF CONTRACTS IN INDIA

The courts in India are both the court of law and equity i.e, the courts of India have the jurisdiction of awarding both legal remedies and equitable remedies. Hence there was no need for the chancery courts in India. This exercising of dual jurisdiction by the Indian courts faced challenges similar to the chancery courts which entertained equity jurisdiction. These challenges pertain to the intricate nature of equitable relief, which often involves nuanced considerations of fairness and individual circumstances. Relief, a form of equitable remedy aimed at enforcing precise obligations or rights, requires a higher degree of precision and discretion from judges.

There was need for a statute for the judges in awarding the equitable remedies, there came up the Specific Relief Act, 1877. In India we followed the doctrine of equity even post-independence. On recommendations of 9th report of the Law Commission, The specific relief bill was introduced in June, 1962. It thereby become an act in 1963, The Specific Relief Act, 1963 replaced the Specific Relief Act of 1877. The specific performance was mentioned in both the acts. The specific relief act has been amended in 2018 which brought certain changes in the provisions of specific performance of contracts.

SPECIFIC PERFORMANCE OF CONTRACTS AS PER THE SPECIFIC RELIEF ACT, 1963

Who May Obtain Specific Performance of Contracts {Section 15}[1*]

1. The parties to the contract can obtain the specific performance of the contract.

2. The representative in interest or the principal of any of the parties. The representative in interest includes an agent, assignee or legal representative. For example: if A contracts with B, then A's legal representatives or A's principal{if A is an agent} can file a suit.

[1* https://lddashboard.legislative.gov.in/sites/default/files/Specific%20Relief%20Act%201963-47.pdf]

Exceptions:

a. When the knowledge, skill, solvency or any other personal trait is a material part of the contract

b. When the contract provides that the party's interest shall not be assigned.

3. Any beneficiary is entitled to obtain specific performance under contract for settlement of marriage or contracts to compromise on any doubtful rights between members of the same family.

Illustration 1: A {male}'s father and B{female}'s father entered into the contract for marriage of A and B on a condition that A's father will transfer some property in the name of B. If A's father doesn't fulfil his part of promise, then B can obtain specific performance of the contract.

Illustration 2: A, B, C, are brothers and have a joint property in the village. A, B made a contract to give whole property to C. C is the beneficiary entitled here and can claim specific performance of such contract.

4. A remainder in case of a life tenant had entered a contract within his power.

Illustration: P is the life tenant of the property owned by Q and R is Q's son. If P enters into a contract with X for renovation and died before the completion of contract, R can sue x for the specific performance of contract.

5. The reversioner in possession, where the agreement is entered into by his predecessor in title and the reversioner is the beneficiary of that agreement. A reversion occurswhen the property owner transfers the property to another and retain some future interest in the property.

Illustration: If X {grandfather} gives his property to the R on life estate and pays rent to Y, after R's death the property returns to Y who is X's granddaughter. Here Y has a right to obtain the specific performance if there is any breach.

6. The reversioner in remainder, where in the contract the reversioner in remainder is the beneficiary and the breach of contract causes material injury to him. A remainder man is a person who inherits or is entitled to inherit property upon the termination of the estate of the former owner. Usually this occurs due to death or termination of the former owner's life estate.

7. New Limited Liability Partnership arising out of the amalgamation of two limited liability partnership.

8. New company arising out of the amalgamation of two companies can sue for the specific performance.

9. When the business promoters enter into a contract for the purpose of the company before its incorporation and such a contract is guaranteed by the terms of incorporation provided that the company has accepted the contract and the communication of such acceptance is made to the party.

Contracts That Can Be Specifically Enforced {Section 11}[2*]

The court can grant the specific performance of contracts of trusts provided that the trustee does not enter into the contract by exceeding his powers or in breach of trust.

[2* https://lddashboard.legislative.gov.in/sites/default/files/Specific%20Relief%20Act%201963-47.pdf]

Specific Performance Of Part Of Contract: {Section 12}[3*]

1. When the part unperformed is small

When one of the parties to the contract is not able perform whole of the contract and the part which is left unperformed is small part of the entire contract to which moneyas compensation is adequate relief then the court may direct the specific performance of the part which could be performed and award adequate damages to the part which is left unperformed.

[3* https://lddashboard.legislative.gov.in/sites/default/files/Specific%20Relief%20Act%201963-47.pdf]

2. When the part forms a considerable part of contract which admits compensation in money

When one of the parties couldn't perform a large part of his promise and the court may at the suit of other party order the party in default to perform as much part as he can perform if the other party pays or has paid the total consideration by reducing the consideration for the part which is unperformed. In this case the other party relinquishes all his claims for specific performance of remaining part and all the rights to be compensated for the loss/damage/deficiency on part of defendant.

3. When the part forms a considerable part of contract which does not admit compensation in money

When one of the parties couldn't perform a large part of his promise and the court may at the suit of other party order the party in default to perform as much part as he can perform if the other party pays or has paid the whole consideration without any abatement. In this case the other party relinquishes all his claims for specific performance of remaining part and all the rights to be compensated for the loss/damage/deficiency on part of defendant.

4. When the contract consists of separate and independent parts

When a contract can be so separated that a part of contract which can be performed stands on an independent footing with another part of the same contract then the court may order for the specific performance of that part of the contract which can be performed.

Contracts Which Can't Be Specifically Enforced {Section 14}[4*]

1. Where the aggrieved party has obtained a substituted performance of the contract as per section 20 of Specific Relief Act, 1963. A substituted performance means when a party does not fulfil his obligation, the party on whom the breach is committed shall have the option of substituted performance from any third party or his own agency. The aggrieved party can recover the expenses and other costs from the party in default.

2. When the performance under the contract is of continuous duty which the court cannot supervise.

[4* https://lddashboard.legislative.gov.in/sites/default/files/Specific%20Relief%20Act%201963-47.pdf]

3. A contract that relies heavily on the unique skills or attributes of the involved parties to such an extent that the court cannot mandate the specific fulfilment of its essential terms.

4. A contract which is determinable in its nature. A determinable contract means a type of contract where the parties involved have the ability to terminate or end the contractual relationship under specific circumstances defined within the contract itselfor by law.

Personal Bars to Relief of Specific Performance {Section 16}[5*]

1. The persons who have obtained substituted performance to the contract as per section 20.

2. The person who has become incapable of performing or violates the essential stipulations of the contract on his part and the person who wilfully acts in variance or acts in fraud of the contract or tries to subvert the relationships established by the contract.

3. The person who couldn't prove that he was always ready and willing to perform or had performed his part of promise which does not include the performance of terms which are prevented or waived by the defendant.

[5* https://lddashboard.legislative.gov.in/sites/default/files/Specific%20Relief%20Act%201963-47.pdf]

Conclusion

In conclusion, the legal framework surrounding specific performance of contracts is complex yet crucial in ensuring the enforcement of contractual obligations and the delivery of justice. Originating from English Common Law and evolving through statutory provisions and judicial interpretations, specific performance embodies principles of equity. It serves as a powerful tool for enforcing precise contractual obligations, providing aggrieved parties with a unique avenue for relief through court-ordered performance rather than mere monetary compensation.

Despite its significance, the application of specific performance is subject to various legal requirements, exceptions, and limitations outlined in statutes such as the Specific Relief Act, 1963. The Act delineates who may seek specific performance, what contracts may be specifically enforced, and the circumstances under which relief may be granted or denied.

Through a balanced application of the law and equitable considerations, specific performance remains a vital instrument in upholding the integrity of contracts and safeguarding the rights and interests of parties involved.


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