Code: Section 23 Specific Relief Act
23. Liquidation of Damages Not a Bar to Specific Performance
(1) A contract, otherwise proper to be specifically enforced, may be so enforced, though a sum is named in it as the amount to be paid in case of its breach, and the party in default is willing to pay the same, if the court, having regard to the terms of the contract and other attending circumstances, is satisfied that the sum was named only for the purpose of securing performance of the contract and not for the purpose of giving to the party in default an option of paying money in lieu of specific performance.
(2) When enforcing specific performance under this section, the court shall not also decree payment of the sum so named in the contract.
Explanation of Section 23 – The Specific Relief Act
Section 23 of the Specific Relief Act deals with situations where a contract specifies a sum of money to be paid in case of breach, often referred to as liquidated damages. The section clarifies that the presence of such a sum in the contract does not necessarily bar the specific enforcement of the contract itself.
Key Provisions:
- Enforcing Specific Performance Despite Liquidated Damages Clause:
- Even if a contract includes a specific amount to be paid in case of a breach, the court can still enforce the specific performance of the contract. However, the court will only do so if it is satisfied that the sum mentioned was intended merely as a security to ensure the performance of the contract and not as an alternative to performance (i.e., not an option to pay money instead of performing the contract).
- No Additional Damages:
- When the court enforces specific performance under this section, it will not also grant the amount specified in the contract as liquidated damages, as the objective is to enforce the performance of the contract, not just the payment of money.
Illustration
Example 1: Specific Performance Despite Liquidated Damages Clause
A person agrees to sell land to another, and the contract specifies that in the event of a breach, a sum of ₹50,000 must be paid. If the seller refuses to transfer the land as per the agreement, and the buyer seeks specific performance of the contract, the court may still order the transfer of the land. The fact that ₹50,000 is mentioned in the contract does not bar the buyer from seeking specific performance.
Example 2: Liquidated Damages Not an Alternative
If the contract is specific to the transfer of land, and the buyer seeks specific performance, the court will enforce the transfer of land and will not additionally order the seller to pay the ₹50,000 mentioned in the contract. The court will focus on performance, not merely on the payment of the agreed sum.
Common Questions and Answers on Section 23
1. Can the court still enforce specific performance if the contract includes liquidated damages?
- Answer: Yes, the court can enforce specific performance, provided that the sum named in the contract is intended to ensure performance and not to offer an alternative of paying money in lieu of performance.
2. Will the court award both specific performance and the liquidated damages amount?
- Answer: No, the court will not grant the liquidated damages in addition to enforcing the specific performance of the contract. The focus is on fulfilling the contract, not on monetary compensation.
3. What happens if the party in default is willing to pay the liquidated damages?
- Answer: Even if the defaulting party is willing to pay the liquidated damages, the court may still enforce specific performance if it determines that the sum was intended to secure the contract’s performance and not as a substitute for performance.
Conclusion
Section 23 of the Specific Relief Act ensures that the presence of a liquidated damages clause in a contract does not prevent the enforcement of specific performance. The section also makes it clear that the court will not award both the specific performance and the liquidated damages, focusing solely on compelling the party to fulfill the contract as agreed.
