Specific Performance of Contracts

Introduction

When a contract is broken (breach of contract), the usual remedy is damages, which means payment of money as compensation. However, in some situations, money is not enough to solve the problem.

In such cases, the court may order specific performance, which means the court directs the party to actually perform the promise they agreed to in the contract.

This remedy is mainly governed by the Specific Relief Act, 1963.

Meaning / Definition

Specific Performance is a remedy where the court orders a party to carry out the exact promise made in the contract instead of paying money as compensation.

In simple terms:

• Damages = Money paid for breach of contract
• Specific Performance = Court orders the contract to be actually performed

This remedy is usually granted when money cannot adequately compensate the injured party.

The relief is discretionary, which means the court has the power to decide whether it should grant the remedy or not.

The person asking for this remedy must specifically request it in the lawsuit.

The limitation period (time limit to file the suit) is 3 years from:

• the date fixed for performance, or
• the date when the plaintiff learns that the contract will not be performed.

When Specific Performance Can Be Granted

Under Section 10 of the Specific Relief Act, 1963, the court may grant specific performance in certain situations.

When actual loss cannot be easily measured

Sometimes it is difficult to calculate the exact financial loss caused by breach of contract.

In such cases, the court may order specific performance.

Example:

A person agrees to buy a rare painting by a famous deceased artist. If the seller refuses to deliver the painting, it may be difficult to calculate its true value. Therefore, the court may order delivery of the painting instead of awarding damages.

When money compensation is not adequate

Specific performance may also be granted when money cannot properly compensate the loss.

This generally happens in the following situations:

• Contracts involving immovable property (land or buildings)
• Contracts involving unique movable property (items that cannot be easily purchased in the market)
• Goods having special value or personal importance to the buyer
• Goods that are not easily available in the market
• Property held by the defendant as an agent or trustee (person holding property on behalf of another)

The law presumes that breach of a contract relating to immovable property cannot be adequately compensated with money.

Contracts connected with trust (Section 11)

Specific performance may also be granted when the contract involves performance of a trust.

Example:

If a person holding property in trust agrees to transfer it according to the terms of the trust, the court may enforce that obligation.

However, if the trustee makes a contract beyond his legal powers or in violation of the trust, the contract cannot be specifically enforced.

Specific performance of part of a contract (Section 12)

Generally, courts do not enforce only part of a contract.

However, the court may enforce part of the contract in certain situations.

This may happen when:

• A small part of the contract cannot be performed.
• The remaining part can still be performed.
• The loss from the missing part can be compensated with money.

Example:

A agrees to sell 100 acres of land to B.

Later it is discovered that:

• A owns 98 acres
• 2 acres belong to another person

If the 2 acres are not essential, the court may order:

• transfer of the 98 acres, and
• payment of compensation for the remaining 2 acres.

Contracts Which Cannot Be Specifically Enforced

Section 14 of the Specific Relief Act lists certain contracts that cannot be enforced through specific performance.

When money compensation is sufficient

If the injured party can be properly compensated with money, the court will not order specific performance.

Examples:

• ordinary sale of goods
• repair contracts

Contracts involving personal skills or personal choice

Some contracts depend on personal talent, skill, or personal decision of a person.

Courts cannot force a person to perform such personal services.

Example:

A contract for a singer to perform at a concert.

Determinable contracts

A determinable contract is one that can be ended by either party according to the terms of the contract.

Such contracts cannot usually be specifically enforced.

Example:

A partnership at will, where any partner can end the partnership by giving notice.

Contracts involving continuous supervision by the court

If the performance of the contract requires the court to continuously monitor or supervise the work, the court will not grant specific performance.

Example:

• long-term employment contracts
• agreements requiring repeated actions over many years

Arbitration agreements

A contract that requires disputes to be referred to arbitration (private dispute resolution outside courts) cannot be specifically enforced.

However, certain exceptions exist under law.

Important Case Law

Ram Karan v Govind Lal

A buyer paid the full price for agricultural land, but the seller refused to execute the sale deed.

The court held that money compensation was not adequate, and therefore ordered the seller to complete the sale.

K.S. Vidyanandam v Vairavan

The court held that unreasonable delay by the plaintiff in performing his obligations can prevent him from obtaining specific performance.

Executive Committee, State Warehousing Corporation v Chandra Kiran Tyagi

The Supreme Court held that contracts of personal service are generally not specifically enforceable, except in limited situations.

ITC Ltd v George Joseph Fernandes

The court held that a person who enters into an illegal contract cannot enforce specific performance.

Rakha Singh v Babu Singh

The court held that if a buyer shows that he was ready and willing to pay the purchase price, the requirement of readiness and willingness is satisfied.

Who Can Claim Specific Performance

Under Section 15, the following persons may claim specific performance:

• Any party to the contract
• The legal representative of a party
• A person beneficially entitled under certain family settlements
• The new company formed after amalgamation (merger of companies)
• A company enforcing a contract made by its promoters before incorporation, if the company accepts the contract

However, if the contract depends on personal skill or personal qualities, the representative cannot claim specific performance unless the original party had already performed his part.

Who Cannot Claim Specific Performance

Under Section 16, specific performance cannot be granted to a person who:

• has already obtained substituted performance (another method of completing the contract)
• has become incapable of performing the contract
• has violated essential terms of the contract
• has acted fraudulently (dishonestly) in relation to the contract
• has failed to prove readiness and willingness to perform his obligations

Practical Example

A agrees to sell his house to B for ₹50 lakhs.

B pays the advance amount, but later A refuses to complete the sale.

Since land and houses are unique properties, B cannot easily purchase the exact same property elsewhere.

Therefore, the court may order specific performance, directing A to complete the sale and transfer the property to B.

Summary

• Specific performance is a remedy where the court orders a party to actually perform the contract.
• It is granted when money compensation is not adequate.
• It is commonly granted in contracts relating to immovable property.
• The remedy is discretionary, meaning the court decides whether it should be granted.
• Certain contracts cannot be specifically enforced, such as personal service contracts, determinable contracts, and contracts requiring continuous supervision.
• The plaintiff must show that he was ready and willing to perform his part of the contract.