Understanding Specific Performance: When can a Court Enforce a Contract?
Introduction
Specific performance is a legal remedy where a party has to fulfil a specific action as per the terms of a contract. It is discretionary and usually used when monetary compensation is not enough to compensate. Specific performance can be used only when there is non-performance of the contract, and if compensation is already paid, it cannot be enforced. To enforce a specific performance, the contract must be transparent, fair, and capable of specific enforcement.
Legal Framework Governing Specific Performance in India
Overview of the Specific Relief Act, 1963
The first act related to specific relief in India was passed in 1877, based on the draft New York Code of 1862. The 1877 Act was amended several times and finally established as the Specific Relief Act of 1963 (hereinafter 'The Act'), based on the 9th report of the Law Commission of India.
The Act provides remedies to people whose rights are violated by the other party by a breach of contract. The Act focuses on specific remedies rather than providing monetary compensation and defines the conditions under which remedies can be granted and how the court can grant them.
Conditions for Granting Specific Performance
Essential Elements for granting Specific Performance are:
1. Valid Contract: The contract between the parties should be valid and contain an offer, acceptance, consideration, and the parties' capacity to enter into a contract (Section 10 of the Act).
2. Clear Terms: The terms in the contract should be clear and precise, and plain language should be used to avoid confusion when interpreting them.
3. Willingness to perform: Both parties should be willing to perform the contract for which the offer and acceptance are essential. The offeror must make a clear proposal to the offeree, and the offeree must communicate their acceptance to the offeror.
Situations where courts are likely to order specific performance
The courts will grant specific performance when other remedies are not adequate, such as (Section 15 of the Act):
- Contracts involving inadequate monetary damages, such as those involving intellectual property, rare items, or business relationships, cannot be easily quantified in dollars.
- Contracts where no alternative remedy is present.
- Contracts for the sale of immovable property.
- Contracts where the value of goods cannot be ascertained.
- Contracts involving real estate development agreements, such as development contracts, are contracts where one party seeks to enforce a construction or development agreement.
Case Laws
Pearlite Liners (P) Ltd. v. Manorma Sirsi
In this case, an employee was appointed orally under private employment. The employee did not comply with the transfer order and claimed that it was illegal and that the employer should be restrained from doing so. The court held that granting such relief would amount to personal service matters and employment; hence, such relief cannot be granted under the Specific Relief Act of 1963. It is a well-settled principle of law that a contract of personal service cannot be specifically enforced, and a court will not declare that the contract exists.
Dheeraj Developers (P) Ltd v. Om Prakash Gupta
The Hon’ble Supreme Court observed that decreeing a suit for specific performance only based on a finding that the agreement was genuine is not enough. Other aspects, such as readiness and willingness, must also be considered. To ascertain readiness and willingness, the parties' conduct must be determined by examining the entire circumstances of each case.
Citadel Fine Pharmaceuticals vs Ramaniyam Real Estates
In this case, the purchaser was required to seek permission to transfer the surplus within a specified time. The seller offered to return his earnest money, but he refused. Without disclosing this fact, he sought recovery of the earnest money. Because of his conduct, the court did not allow him to receive relief for a specific performance.
Practical Considerations for Parties Seeking Specific Performance
When drafting a contract, the terms should be clear and precise so that they are easier to interpret and determine the remedies. Courts assess whether specific performance is an appropriate remedy by examining the circumstances of the case. If the issue involves personal service, the court can reject it. The court will enforce the specific performance mechanism if money or other remedies cannot settle the issue.
Conclusion
The Specific Relief Act provides a framework for enforcing civil rights and granting remedies in cases of breach of contract or other legal obligations. It emphasises the specific performance of contracts, injunctions, and rectification of instruments as primary remedies, offering individuals a means to seek justice where monetary compensation may not suffice. The Act balances the need for fairness and the protection of rights while ensuring that legal remedies are available promptly and efficiently.
References
- Bibliography-Singh, A. (2021 ). Contract & Specific Relief, Lucknow: Eastern Book Company.
- Pearlite Liners (p) Ltd vs Manorma Sirsi, (2004) 3 SCC 172
- Dheeraj Developers (p) Ltd vs Om Prakash Gupta, 2016 SCC OnLine SC 192
- Citadel Fine Pharmaceuticals vs Ramaniyam Real Estates, (2011) 9 SCC 147
