Index

1. Introduction 
2. Specific Enforcement Of Contracts
3. Conditions For Court-Directed Specific Performance
4. Parties Against Whom Specific Performance Can Be Enforced
5. Court’s Discretion And Powers In Granting Specific Performance
6. Contracts Ineligible For Specific Performance
7. Specific Performance And Determinable Contracts
8. Arbitration Agreement Restrictions
9. Rights And Limitations In Contract Performance
10. Conclusion

Introduction 

Performance of a contract refers to the legal obligation of both parties to fulfil their duties as outlined in the contract terms. Each party is required to honour their reciprocal promises. If one party fails to meet their obligations, the affected party can sue for specific performance of the contract. Specific performance is an equitable relief granted by the court, compelling the completion of the contractual obligations. This article explores specific performance under contract law and examines related aspects in detail.

Specific Enforcement Of Contracts

Certain contracts can be specifically enforced under the discretion of the court. When an act agreed upon by the parties is not performed, and the actual damage caused to the purchaser cannot be ascertained, the purchaser can compel specific performance of the act. If compensation is paid in damages for non-performance, a decree for specific performance cannot be issued. However, damages cannot substitute for contracts related to the transfer of immovable property. In the case of movable property, specific performance can be sought if the goods are of unusual beauty, rarity, distinction, or special value to the party suing due to personal or familial associations.

The court may order specific performance of a contract when it pertains to the performance of a trust, provided the trustee does not breach the contract or exceed the powers conferred by it. 

Specific performance of a contract can be sought by any party to the contract, their representative-in-interest, or the principal.

Conditions For Court-Directed Specific Performance

The court will only direct specific performance of a contract in certain circumstances:

According to Section 12(2) of the Specific Relief Act, 1963, if a significant portion of a contract remains unperformed by one party, but this unperformed part represents a small proportion of the contract’s overall value and can be compensated with money, the court may order specific performance. The court can then award monetary compensation to the party who suffered the damage, at the request of either party involved in the contract.

Section 12(3) of the Specific Relief Act, 1963, addresses situations where a party cannot perform the entire contract or a substantial part of it. If compensation in money can be estimated or not, the party seeking specific performance is not entitled to a decree unless:

1. The defaulting party agrees to perform the remaining part of the contract and pays compensation for the unperformed portion, adjusted by the contract’s total consideration.
2. The defaulting party agrees to pay compensation without any reduction.
3. The defendant, due to their default, relinquishes all claims for performance of the contract and compensation for the losses or damages sustained.

Section 12(4) of the Specific Relief Act, 1963, provides that if a contract consists of distinct and independent parts, and one part cannot be specifically performed, the court may enforce specific performance for the remaining parts of the contract.

Section 13 of the Specific Relief Act, 1963, outlines the rights of purchasers who have imperfect titles to immovable property. These rights include:

1. Acquiring interest in the property from the landlord.
2.  Requiring concurrence or conveyance from other persons to validate the title.
3. Addressing situations where mortgaged property is sold with remaining encumbrances or charges.
4. The dismissal of a suit for specific performance filed by a vendor on the grounds of having an imperfect title to the property.

Parties Against Whom Specific Performance Can Be Enforced

1. Either of the parties to the contract.
2. A party who entered into the contract through fraud, mistake of fact, or misrepresentation, where the agreed terms were not included in the contract.
3. A seller who knows they do not have a valid title to the property they have contracted to sell.
4. A seller who is given time to resolve any doubts the purchaser has regarding the title of the property being sold.
5. Any person who, without notice of the original contract, pays money in good faith.
6. Any person who, prior to entering into the contract, knew the plaintiff and had claims under a title that might have been displaced by the defendant.
7. A new company formed after the amalgamation of two companies.
8. A company where the promoters have entered into a contract warranted by the terms of its incorporation.

Court’s Discretion And Powers In Granting Specific Performance

The court’s power to decree specific performance is discretionary but guided by judicial principles and subject to correction by an appellate court. The following are circumstances under which the court may choose not to decree specific performance:

1. When the defendant was misrepresented by the plaintiff or when fraud was committed by the plaintiff.
2. When the defendant enters into a contract with the plaintiff, unforeseen circumstances arise where the contract is silent, leading to the plaintiff refusing specific performance.
3. When the defendant refuses to enforce specific performance.

Conversely, the court may decree specific performance under these circumstances:

1. When the plaintiff has performed a substantial act or suffered losses due to a contract capable of specific performance.
2. When specific performance should not be refused merely because the contract is not enforceable at the instance of either party.

The court awards compensation based on the principles specified in Section 73 of the Indian Contract Act, 1872. Compensation will not be awarded unless the plaintiff claims it for breach of contract. However, the court may allow the plaintiff to add a claim for breach at any stage of the proceedings if it was not initially claimed.

The court additionally has the authority to grant relief for the transfer of immovable property to which the plaintiff may be entitled, even if the plaintiff has not specifically claimed it.

If the contract specifies an amount to be paid for a breach, it does not prevent the court from decreeing specific performance.

Nevertheless, the plaintiff’s right to sue for compensation for a breach is barred after the dismissal of the suit, though this does not apply to other forms of relief. To seek specific performance of a contract, the injured party must demonstrate to the court that the agreement was lawfully executed and that monetary compensation is insufficient. The provisions for specific performance offer relief to the injured party when compensation in money does not adequately address the harm suffered.

Contracts Ineligible For Specific Performance

Adequate Compensation (Section 14(1)(a)): The court will not order specific performance if a party seeking relief can obtain reasonable compensation. In the case of *Meenakshisundara Mudaliar v. Rathnasami Pillai* (1918), it was held that ordinary loan contracts, whether with or without security, cannot be specifically enforced. However, if a loan has already been advanced and security has been agreed upon, that security can be enforced specifically.

Contracts Requiring Personal Skills (Section 14(1)(b)): The court cannot supervise the performance of a contract that relies on the promisor’s personal qualifications or requires their volition. 

According to Chitty’s Contracts, specific performance of a contract to build can be decreed if:

1. The work is precisely defined.
2. Damages will not adequately compensate the plaintiff.
3. The defendant is in possession of the land where the work is to be done, preventing the plaintiff from hiring another builder to complete the work.

Specific Performance And Determinable Contracts

Contracts that are inherently determinable do not typically qualify for specific performance. This concept is aptly illustrated in the example provided under the corresponding provision of the repealed Specific Relief Act of 1877:

In the case of Lewis v. Bond (1980), it was established that if a contract is revocable at the other party’s discretion, specific performance is unlikely to be granted. This category encompasses revocable leases as well.

However, there are exceptions. In Lever v. Koffler (1901), it was ruled that a tenancy from year to year, which can be terminated by either party with a half-year notice to quit, is indeed enforceable through specific performance.

Arbitration Agreement Restrictions

Sub-section (2) of Section 14 states that agreements to refer disputes to arbitration cannot be specifically enforced, except as per the Arbitration Act, 1940 (now the Arbitration and Conciliation Act, 1996). Such arbitration agreements preclude the filing of a lawsuit.

In Ammisetti Chandram v. Chodasani Suryanarayana (2002), the vendor’s plea that the sale deed was executed under distress was not considered in the second appeal as it was not raised in the written statement and was deemed a factual issue. The Court also found a lawful basis for the sale agreement and did not entertain the plea that the decree would cause hardship.

In the case of Kanigolla Lakshmana Rao v. Gudimetla Ratna Manikyamba (2003), the court noted that an agreement for property transfer, as part of a settlement, had sufficient consideration. The presence of a settlement deed containing the provision for the transfer was considered proof of the settlement’s existence. Consequently, a specific performance decree was issued.

Rights And Limitations In Contract Performance

In seeking to substitute performance, a party forfeits the right to enforce the contract officially but retains the option to seek compensation from the breaching party. Courts typically refrain from enforcing contracts of personal service based on legal precedents.

Contracts that provide adequate compensation in monetary form, require personal service, have unclear terms, are determinable by nature, are legally invalid, necessitate continuous court supervision, involve building or repair works, and Hindu parents’ agreements to marry off their child are not enforceable under Section 14 of the Act.

Conclusion 

When monetary compensation is inadequate, a specific performance clause is designed to protect both parties in a contract or agreement. This typically involves unique items such as real estate, works of art, or other valuable assets. A specific performance clause is generally enforceable if it is fair to both parties and the injured party can prove that the defendant breached their obligations while they themselves upheld their own. Additionally, the injured party must demonstrate that monetary compensation alone is insufficient.