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Published : December 14, 2011 | Author : sprshprsd
Category : Contracts laws | Total Views : 22422 | Rating :

  
sprshprsd
Sparsh Prasad
 

Specific performance of a contract

Specific performance is equitable relief, given by the court to enforce against a defendant, the duty of doing what he agreed by contract to do. Thus, the remedy of specific performance is in contrast with the remedy by way of damages for breach of contract, which gives pecuniary compensation for failure to carry out the terms of the contract. Damages and specific performance are both, remedies available upon breach of obligations by a party to the contract; the former is a ‘substitutional’ remedy, and the latter a ‘specific’ remedy. The remedy of specific performance is granted by way of exception.

The plaintiff seeking this remedy must first satisfy the court that the normal remedy of damages is inadequate, the presumption being that in cases of contracts for transfer of immovable property , damages will not be adequate. Even in these cases specific performance is not always granted, as it is a discretionary remedy.

The relief must be specifically claimed. When the plaintiff claims specific performance of a particular agreement, the suit could be decreed for specific performance of only that agreement, and not any other.

The prescribed period of limitation for a suit of specific performance is three years from the date fixed for performance, or, if no such date is fixed, when the plaintiff has noticed that performance has been refused.

Section 10 of the Specific Relief Act, 1963 , states “ Cases in which specific performance of contract enforceable.

Except as otherwise provided in this Chapter, the specific performance of any contract may, in the discretion of the court, be enforced—
(a) when there exists no standard for ascertaining actual damage caused by the non-
performance of the act agreed to be done; or
(b) when the act agreed to be done is such that compensation in money for its non-performance would not afford adequate relief.

Explanation: Unless and until the contrary is proved, the court shall presume—
(i) that the breach of a contract to transfer immovable property cannot be adequately relieved by compensation in money; and
(ii) that the breach of a contract to transfer movable property can be so relieved except in the following cases:—
(a) where the property is not an ordinary article of commerce, or is of special value
or interest to the plaintiff, or consists of goods which are not easily obtainable in the market;
(b) where the property is held by the defendant as the agent or trustee of the plaintiff.”

There is a clear distinction between the cases giving rise to the filling of a suit for specific performance in the event of breach of recitals of an agreement for due performance of which the parties have covenanted to agree and perform and those which the award of compensation will be adequate relief.

Damages cannot be ascertained
The rule is based on the uncertainty of calculation of damages in cases where they cannot be based on anything, but conjecture or surmise. Thus, where A agree to buy, and B agrees to sell, a picture by a dead painter and two rare China vases, A may compel B specifically to perform this contract, for, there is no standard for ascertaining the actual damage which would be caused by its non-performance.

By claiming damages for breach of contract, the plaintiff disentitles himself, on account of his own election, to treat the contract from claiming specific performance of the same contract as an alternative case, either originally or subsequently, by way amendment. Such conflicting terms are not permitted under OVII, rule 7 of the CPC.

However, a stipulation in a contract to be liable to repay the amount paid and to pay compensation if the promisor sold the property to another person , does not detract from the right to specific performance

Compensation not adequate relief
Specific performance will not granted where compensation is enough relief. Damages may be considered to be an inadequate remedy. If it is difficult to quantify them. Thus, specific performance may be ordered of a contract to execute a mortgage for money advanced.

A contract for execution of the work contracted would fall within the types of contracts described in this section as specifically enforceable, but the relief is not appropriate and, therefore, not granted because the work is a kind which a court of justice has no means of supervising. A court will, therefore, not usually grant this remedy on a contract for building or engineering work.

Contract to transfer Immovable property
The view that a breach of contract for land cannot be adequately compensated is not because of the real nature of land, but because damages, even where calculated upon the general money value of land, may not be a complete remedy to the purchaser, to whom the land may have a peculiar and specific value.

Contract regarding Movable property
A contract to deliver specific goods will be enforced by way of specific performance if they are ‘articles of unusual beauty, rarity and distinction or of special value to the party suing by reason of personal or family association or like.

Presumption
This section raises a presumption that compensation would not be adequate in the case of transfer of immovable property, and it would be adequate in case of breach of transfer of movable property. Thus, the party alleging compensation is respectively adequate or inadequate must prove it.

Section 12 states,

“Specific performance of part of contract.

(1) Except as otherwise hereinafter provided in this section, the court shall not direct the specific performance of a part of a contract.

(2) Where a party to a contract is unable to perform the whole of his part of it, but the part which must be left unperformed bears only a small proportion to the whole in value and admits of compensation in money, the court may, at the suit of either party, direct the specific performance of so much of the contract as can be performed, and award compensation in money for the deficiency.

(3) Where a party to a contract is unable to perform the whole of his part of it, and the part which must be left unperformed either—
(a) forms a considerable part of the whole, though admitting of compensa­tion in
money; or
(b) does not admit of compensation in money;
he is not entitled to obtain a decree for specific performance; but the court may, at the suit of the other
party, direct the party in default to perform specifically so much of his part of the contract as he can perform, if the other party—
(i) in a case falling under clause (a), pays or has paid the agreed consideration for the whole of the contract reduced by the consideration for the part which must be left unperformed and in a case falling under clause (b), pays or has paid the consideration for the whole of the contract without any abatement; and
(ii) in either case, relinquishes all claims to the performance of the remaining part of the contract and all right to compensation, either for the deficiency or for the loss or damage sustained by him through the default of the defendant.

(4) When a part of a contract which, taken by itself, can and ought to be specifically performed, stands on a separate and independent footing from another part of the same contract which cannot or ought not to be specifically performed, the court may direct specific performance of the former part.

Explanation: For the purposes of this section, a party to a contract shall be deemed to be unable to perform the whole of his part of it if a portion of its subject-matter existing at the date of the contract has ceased to exist at the time of its performance.”

A court will not, as a general rule, compel specific performance of a contract unless it can execute the whole contract. This section deals with classes of cases in which specific performance may be granted with or subject to special conditions or restrictions. When a part of the contract is not capable of performance is always whether the contract can be executed in substance.

This provision can be invoked only where terms of the contract permit segregation of interests and rights of parties in the property, and if the intention is to the contrary, the provision cannot be attracted.

Section 14 of the Specific Reliefs Act (S.R.A.), 1963 provides for certain circumstances wherein a contract cannot be specifically performed. These have been discussed as follows:-

Contracts not specifically enforceable.-
Where compensation in money is an adequate relief:
Contracts, the non-performance of which can sufficiently be compensated by the payment of damages cannot be specifically performed as per S. 14(a) of the Act. For example, a contract for the supply of commodities is generally not specifically enforceable.

Where specific performance of material terms cannot be enforced:
S. 14(b) states that a contract which runs into such minute or numerous details or which is so dependent on the personal qualifications or volition of the parties or otherwise from its nature is such, that the court cannot enforce specific performance of its material terms. For example a contract for personal service or employment cannot be enforced by or against the employer, only damages can be sought.

A contract which is in its nature determinable:
The term determinable suggests a situation where despite the court’s enforcement; the parties can immediately revert to their original position, thereby making such enforcement futile. For example, where A and B contract for partnership without providing a defined duration, the partnership cannot be enforced as it could easily be dissolved at once.

A contract the performance of which involves the performance of a continuous duty which the court cannot supervise:

The difficulty of supervision by the Court is the main reason why due performance in certain contracts cannot be specifically enforced. Thus the agreement by a landlord to provide a housekeeper cannot be specifically enforced.

Arbitration matters
Any contract to refer differences (existing or future) to arbitration must satisfy the requirements of the Arbitration Act and must be specifically enforced only as per the former. However, the existence of a contract which does not satisfy the former would none-the-less bar a suit for specific performance of a subject that is contracted to be referred. This is provided under S.14(2) of the S.R.A.

Exceptions
Despite the clauses of S. 14(1), the court may enforce specific performance in the circumstances provided under S. 14(3)

Where the suit is for the enforcement of a contract,-
· to execute a mortgage or secure the repayment of any loan which the borrower is not willing to repay at once: Provided that where only a part of the loan has been advanced the lender is willing to advance the remaining part of the loan in terms of the contract; or
· to take up and pay for any debentures of a company;

Where the suit is for-
· the execution of a formal deed of partnership, the parties having commenced to carry on the business of the partnership; or
· the purchase of a share of a partner in a firm,

Where the suit is for the enforcement of a contract for the construction of any building or the execution of any other work on land:
Certain conditions being maintained, these being:-
· the building or other work is described in the contract in terms precise enough for the court to determine the exact nature of work;
· the plaintiff has a substantial interest in the performance of the contract and the interest is of such a nature that compensation in money for non-performance of the contract is not an adequate relief; and
· the defendant has, in pursuance of the contract, obtained possession of the whole or any part of the land on which the building is to be constructed or other work is to be executed.
***************
# Bommaka Nagabhushna Reddy v. W Srinivasa Rao (2002) 9 SCC 664.
# Swiss Bank Corpn v. Lloyds bank Ltd. (1981) 2 All ER 449
# Hari Krishna Agarwala v. K C Gupta AIR 1946 Tr & Coch 93
# HPA International v. Bhagwandas Fateh Chand Daswani AIR 2004 SC 3858
# Verrall v. Great Yarmouth Borough Council (1981) Q.B. 202
# Ram Piari v. Municipal Committee, Pathankot (1956) A. Punj. 220.
# Scott v. Rayment (1868) L.R. 7 Eq. 112
# Barnes v. City of London Real Property Co. (1918) 2 Ch. 18

Authors contact info - articles The  author can be reached at: sprshprsd@legalserviceindia.com




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