SPECIFIC PERFORMANCE OF CONTRACT AND ITS ENFORCEABILITY IN INDIA


Author: Yashika Mishra , Nirma University










INTRODUCTION

Contracts are at the base of almost all economic relations. All employments and professions are bound by Contracts. All property, whether business assets or personal, remain locked up under contracts. Therefore, contracts can be considered as a modern wealth. A contract is more than just a one-time transaction. It is frequently a link in a network of contracts. A breakdown in one site might create substantial economic and social disruption. Contracts must be followed through on. The law of contract, on the other hand, can only enforce a contract by compensating the damaged party. Compensation, on the other hand, frequently fails to serve the contract's economic aim. A hospital, for example, is more concerned with meeting its needs than with receiving reimbursement from a failed provider. As a result, a remedy was required to compel a defaulting contractor to really perform his act under the said contract. Therefore, this important function is undertaken by the Specific Relief Act. Specific Performance is an equitable remedy granted by a court in the event of a contract breach in the form of a judgement requiring the defendant to actually perform the contract in line with the contract's terms and requirements. The Indian Contract Act defines a contract as a legally binding agreement. Every contract imposes an obligation on each of the contractual parties to carry out the conditions of the contract that he has agreed to carry out. And if the person who bears this obligation fails to fulfill it, the other party has the moral right, at his discretion, to demand genuine performance of the contract or to collect satisfaction for the Contract’s Non-performance. Every legally enforceable responsibility is considered an obligation. As a result, anytime a man is obligated to perform or refrain from doing something, he stays obligated. This liability may arise as a result of a contract or a tort. A contract's general obligation to forbear is a positive responsibility. "Specific performance of contract" is the term used to define this type of specific relief.


HISTORY

The Specific Relief Act was passed in 1877 and has since been amended numerous times. The statute was based on the original New York Civil Code of 1862 when it was first written. The common law idea of equity had long been embraced in India. However, the Specific Relief Act, which repealed the earlier Specific Relief Act of 1877, was passed by the Indian Parliament in 1963, implementing the Law Commission of India's advice in its ninth report on the legislation. The specific relief bill 1962 was introduced in Lok Sabha in June 1962 and repealed the earlier Specific Relief Act, which was passed by the Indian Parliament in 1963, following the recommendation of the Law Commission of India in its ninth report on the act. The party who has been harmed might go to court to have the other party fulfill the contract's responsibilities or conditions. In the absence of monetary relief, the Act provides for specific fulfillment of a contract, making it an Alternative remedy. Until, the courts had sole discretion over whether or not to issue specific performance relief. Contracts and contractual reliefs used to be more ambiguous as a result of this. Due to increased difficulties in the performance and execution of contracts based on infrastructure developments, public-private partnerships, and other public projects involving large investments as part of the Government of India's "Ease of Doing Business'' initiative, there is a strong need for a change in the existing legislation. Hence, the bill seeks to amend the clause of Specific Performance under the Specific Relief Act a Rule rather than an Exception to the General rule, which is subjected to certain limitations. This bill [The Specific Relief (amendment) Bill, 2017 was introduced on 22nd December 2017 and was passed by the Lok Sabha on 15th March 2018. The Bill received assent of the President of India on August 1st, 2018 and therefore has come into effect from October 1st, 2018.


SPECIFIC PERFORMANCE UNDER SPECIFIC RELIEF ACT

The term, ‘specific performance’ means enforcement of the exact terms of the contract. As per this provision, the plaintiff claims for specific things of which he is entitled as per the terms of the contract. As a rule, it is another remedy that a court usually agrees upon whenever compensation or damages are not going to suffice. Section 10 of the Act lays down the situations under which the Rule of Specific performance can be provided:


a. When there is no standard for ascertaining the actual damage caused by non-performance of the contract: It is a circumstance in which the plaintiff is unable to calculate the amount of loss he has experienced. Where the damage produced by the breach of contract is quantifiable, the plaintiff is not entitled to particular performance. For example, if a person enters into a contract to acquire a picture by a deceased painter that is the only one on the market and its worth is unknown, he is entitled to the same.


b. When compensation in money would not be an adequate relief for non-performance: In following cases compensation of money would not provide adequate relief:


1. Where the subject matter of the contract is an immovable property.

2. Where the subject matter of the contract is movable property and,

3. Such property or goods are not an ordinary article of commerce i.e. which could be used for transaction in the market.

4. The article is particularly valuable or interests the plaintiff.

5. The article is of such nature that it is inaccessible.

6. The property or goods held by the defendant as an agent or trustee of the plaintiff.


However, even in such cases the relief is subject to the provisions of the Act and is not available as a matter of right, but is subject to the discretion of the court.


SITUATIONS WHERE SPECIFIC PERFORMANCE CANNOT BE GRANTED

Section 14 of the Act lays down the circumstances when Specific Performance cannot be granted i.e. mainly when:


Where Compensation in Money is an adequate relief:

Courts will not mandate particular performance of a contract if the aggrieved party may be suitably compensated financially. An ordinary contract to lend or borrow money, whether with or without security, is an example of a contract that cannot be expressly enforced; but, when a loan has already been granted with the assumption that security will be supplied against it, this can be enforced specifically.


Contracts Involving Personal Skills:

The court cannot monitor the fulfillment of a contract that involves minute and numerous details, is based on the personal qualifications of the promisor, or is otherwise of a volitional nature. Contracts of employment, contracts of personal service, contracts involving creative skill, such as contracts to sing, paint, act, and contracts of authorship, are common instances of items needing human talent and, thus, outside the legal process's ability to compel their real fulfillment.


Contracts of determinable nature:

Specific performance is not ordered of a contract which is in its nature determinable. For instance; X and Y get into contract and if they have agreed that they can refrain from performing their part by, say 30 day notice, so here the contract itself is giving the parties the right to avoid contract and hence in such cases the specific performance cannot be claimed.


Contracts requiring constant supervision:

Clause (d) of Section 14(1) says that a contract cannot be specifically enforced where it involves the performance of a continuous duty which the court cannot supervise.


Contract of Arbitration:

Section 14 provides in sub-section (2) that, except as provided by the Arbitration Act, 1940, (now Arbitration and Conciliation Act, 1996) a contract to refer a present or future dispute to arbitration shall not be specifically enforced. An arbitration agreement operates as a bar to the filing of a suit.


Section 14(3), on the other hand, has several exceptions, and the following types of contracts are explicitly enforceable:

  1. A Contract to execute a mortgage or supply other security for repayment of any debt that the borrower is unwilling to repay immediately, the court would award particular performance to execute mortgage or supply other security.

  2. A contract for a company's debentures to be purchased and paid for.

  3. When a firm has already started, a contract to establish a formal deed of partnership at will.

  4. A contract for the construction of a structure or the completion of any other work on land if the following conditions are met:

  5. The court can decide the actual nature of the structure or activity if the contract provisions have been appropriately described.

  6. The plaintiff has a considerable stake in the contract's fulfillment, and monetary compensation is insufficient.

  7. The defendant has taken ownership of all or part of the land on which the building is to be erected or other work is to be performed in line with the contract.


CONCLUSION

Because awarding damages is complex and involves a fair and precise estimate of losses, it is only natural that this particular amendment has taken place. The bill making the specific performance a rule, is a good improvement, and it is projected to strengthen India's contract enforceability stance. The strain on the country's civil courts, on the other hand, is considerable, and this Bill attempts to prohibit courts from intervening in the process by removing their discretionary powers; nonetheless, such courts will be special tribunals with the capacity to decide matters quickly and with the help of specialists.While the proposed revisions are important, it would be interesting to observe how litigators and courts react to them after the Bill is promulgated as an Amendment by the Upper House of Parliament.





REFERENCES


  1. Specific Relief Act, 1963

  2. Avtar Singh, Contract and Specific Relief 829 (Eastern Book Company 2013)

  3. Sir Frederick Pollock et. Al., Pollock and Mulla. The Indian Contract and Specific Relief Acts 1875 (Lexis Nexis 2013).

  4. Law Commission of India, 9th Report, Specific Relief Act, 1877


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