Specific Performance of a Contract Under Indian Contract Act 1872

Table of Contents

Q. What is meant by Specific Performance of a Contract?

Specific performance is equitable relief granted by the courts in case of breach of contract in the form of a judgement that the defendant must actually perform the contract according to its terms and stipulations. From every contract arises an obligation for each party to do or to not do something. A breach of the contract by one creates a moral right on the other to either enforce the performance of the contract or to get a satisfactory compensation.
In many cases, a party to a contract is not interested in the compensation for breach of contract but the actual object of the contract. In some case, no compensation can be considered enough. In such cases, law provides a way to enforce the parties to actually fulfill their obligations.  This is called “specific performance of a contract”.

The obligations may not necessarily arise from contract but may also arise from tort.

Q. What contracts can be specifically enforced?

Section 10 of Specific Relief Act 1963 specifies the conditions in which a contract can be specifically enforced. These are as follows –

  1. When there exists no standard for ascertaining the actual damage caused by non-performance of the act agreed to be done.
  2. When the act agreed to be done is such that a compensation in the form of money would not afford adequate relief. Unless contrary is proved, the court shall presume that 
    1. the breach of a contract  to transfer immovable property cannot be adequately relieved by compensation in money.
    2. the breach of a contract to transfer a movable property can be so relieved except 
      1. when 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 available in the market.
      2. where the property is held by the defendant as the agent or trustee of the plaintiff.

Nivarti Govind Ingale vs R B Patil 1997 SCC – A woman took a loan from a relative and executed a deed of sale in favor of the relative’s minor son with an agreement of re-conveyance at the repayment of loan. This contract was held to be specifically enforceable. The relative had sold the property off to a buyer. This decree was allowed to be enforced against such buyer also.

M S Madhusoodhanan vs Kerala Kaumudi Pvt. Ltd. 2003 SCC – Shares of a private company were held to be goods of such a nature as are not easily obtainable in the market. Thus, SC allowed specific performance to be granted in such cases.

Section 11 says that specific performance can be enforced when the act agreed to be done is wholly or partly is in the performance of a trust. An exception is that the contract must not be in excess of the power of a trustee.

Section 12 says that if, in the discretion of the court, only a small part of a contract cannot be specifically performed and if such part can be alternatively compensated, the rest of the part can be specifically enforced.

According to Section 23, even if a contract includes a penalty or fixed amount of damages in case of default, its specific performance can be ordered depending on the intention of the penalty. If the intention of the compensation for damages is to secure the performance of the contract and not to give an alternative way of fulfilling the contract, it can be specifically enforced.
This principle was adopted in the case of  Manzoor Ahmed Magray vs. Ghulam Hasan Aram 1999 and M L Devender Singh vs Syed Khaja 1973 by SC.

Q. What contracts cannot be specifically enforced?

Section 14 (1)  of Specific Relief Act 1963 specifies the conditions in which a contract can be specifically enforced. These are as follows –

  1. when compensation in money is an adequate relief.
    Ordinary contract to lend or borrow money, whether with or withour security, is an example of a contract which cannot be specifically enforced.
    Mennakshisundara vs Rathnasami 1918 –  When a loan has already been advanced on the understanding that a security will be provided against it, this can be specifically enforced.
  2. when a contract runs into such minute and complex details or is dependent on personal qualifications or volition of the defendant, or otherwise from its nature is such that a court cannot enforce specific performance of its material terms.
    Personal services such as painting, singing etc. cannot be specifically enforced. However, a contract to publish a piece of music or to build a house can be specifically enforced because they are purely mechanical functions.
  3. when a contract is in its nature determinable i.e. can be brought to an end under given conditions.
    Illustration – A and B enter into a partnership to do certain business, without specifying the duration of the partnership. This cannot be specifically enforced because if enforced, either A or B might at once dissolve the partnership.
    A contract to employment is not specifically enforceable. The remedy in such cases is to sue for damages.
    Indian Oil Corp. vs Amritsar Gas Agency 1991 – A contract for distributorship cannot be specifically enforced.
  4. when a contract, the performance of which involves performance of continuous nature, which the court cannot supervise.
    Examples – An agreement to keep an airfield in operation, or an agreement by railway to keep signals operating.
    Rayner vs Stone 1792 – A tenant’s undertaking to cultivate a farm in a specific way was held to be not specifically enforceable.

Section 14(2) – A contract to refer a present or future dispute to an arbitration cannot be specifically enforced.
Section 14(3) – A contract to execute a mortgage or furnish any other security for repayment of a loan, which the borrower is not willing to repay at once.
Section 17 – A contract involving transfer of property when the party does not have the title or ownership of the property.

Q. Can the following be specifically enforced – a contract to give money on loan, contract to write a book, contract to marry, an invitation to dinner, a contract to sell all goods of a class that a party may require, a contract to run a franchised shop?

1. No, because as per 14 (1) (a), a contract that can be adequately compensated in money cannot be specifically enforced.
2. No, because as per 14(1) (b), an act that depends on personal skills or volition of a party cannot be specifically enforced. Here, it depends on personal skills.
3. No, because as per 14(1) (b), an act that depends on personal skills or volition of a party cannot be specifically enforced. Here, it depends on personal volition.
4. No, because as per 14(1) (b), an act that depends on personal skills or volition of a party cannot be specifically enforced. Here, it depends on personal volition.
4. No, because as per 14(1) (b), a contract that is too complex to be supervised by the court cannot be specifically enforced. 
5. No, because as per 14(1) (c), a contract that is determinable, i.e. can be ended, cannot be specifically enforced. Here, a franchisee agreement can be terminated.

Q. What grounds may be taken by a defendant in a suit for specific performance of the contract?

  1. All the grounds upon which a contract is voidable – no free consent.
  2. Plaintiff has not performed the whole or part of his part of contract.
  3. All grounds in section 14 i.e. Compensation in money is adequate, Depends on personal qualification, or determinable contract.
  4. breach of trust or beyond its powers.
  5. Contract when made gave unfair advantage to the plaintiff.
  6. Involves hardship.
  7. Plaintiff has chosen his remedy and obtained satisfaction for the alleged breach of contract.

Keywords: Specific Performance of a Contract in India, Concept of Specific Performance, Definition of Specific Performance.

Click here to read the Indian Contract Act 1872

S.4 Contract Act | Party Can’t Dispute Legally Enforceable Liability Until ‘Communication’ Regarding Termination Of Contract Is Complete: Sikkim HC

S 171 Contract Act – Bank Can’t Retain Title Documents after Repayment of Loan Citing Pendency of another Loan: Bombay High Court

Section 28 Contract Act – Clause Barring Payment Of Interest Not Hit: Supreme Court