This article is written by ROZY PARVEEN during her internship with LeDroit India.
ABSTRACT
A fundamental idea in contract law, part performance guarantees equity and justice in business dealings. Its foundation is in English equity jurisprudence, which has changed throughout time as a result of significant rulings and legislative changes. Part performance, which usually refers to the transfer of immovable property, calls on both parties to carry out their end of the bargain. In order to invoke part performance, there must be a written contract, possession of the contract or acts that further the contract, and a willingness to carry out the obligations of the contract. To safeguard genuine transferees of wealth who are ignorant of previous transactions, there are, nevertheless, exclusions. Part performance is still a strong concept that upholds integrity in the legal system and offers fair resolutions to contractual conflicts in spite of obstacles.
KEY WORDS: – Part performance, contract, property.
INTRODUCTION
Part performance in contract law refers to the partial fulfillment of obligations or duties outlined in a contract between parties. It occurs when one party to the contract performs some, but not all, of their contractual obligations. Part performance can have significant implications for contract enforcement, as it raises questions about whether the performing party should be entitled to benefits under the contract despite incomplete performance.
According to contract law, parties enter into agreements expecting that all terms and conditions would be met in accordance with what was previously agreed upon. Nonetheless, circumstances can occur in which a party is unable or unwilling to carry out their full commitment under the terms of the agreement. In these situations, the idea of part performance comes into play when figuring out the parties’ rights and appropriate remedies[1].
ILLUSTRATION
Alice and Bob’s contract for the sale of a vintage motorcycle highlights the concept of part performance in contract law. While Alice fulfills her obligation by paying $5,000, Bob only partially performs by delivering the motorcycle’s engine and frame, falling short of delivering the complete motorcycle within the agreed timeframe. This partial performance raises questions regarding breach of contract and the rights and remedies available to both parties. Alice may seek specific performance or contract cancellation with a refund, while Bob may argue for retention of payment or negotiation for compensation. The situation underscores the complexities and implications of part performance in contractual relationships.
THE DEVELOPMENT OF THE PRINCIPLE OF PART PERFORMANCE OVER TIME
The Court of Equity, formerly known as the Court of Chancery, is credited with helping to establish the idea of part performance in English law. Contracts were subject to restrictions after the Statute of Frauds was passed in 1677. It required that any agreement pertaining to the transfer of real estate be recorded in writing. As a result, those who, in good faith, partly or completely performed their contractual duties and occupied the property were unable to acquire legal ownership. They were exposed to harassment and exploitation because of this. As a result, equitable principles were created to help and protect these people, including situations in which the transferee fulfilled their end of the bargain including oral agreements[2].
The Walsh v. Lonsdale (1882)[3] case had a big impact on the development of the part performance doctrine’s jurisprudence. Lonsdale’s intention in this case was to provide Walsh a lease, subject to the requirement that rent be paid in advance. Nevertheless, the deed did not specifically mention this need. Rent arrears mounted after Walsh seized ownership, leading Lonsdale to order an execution against the property. In its decision, the Court of Appeal emphasised the idea that one must act fairly in order to attain equity. It emphasised the fact that intent, not technicalities, determines equity. In addition, the court upheld the idea that equitable considerations need to take precedence, recognising the lease as enforceable from the agreement’s date onward, regardless of any formal documentation shortcomings.
COMPONENTS OF THE DOCTRINE OF PART PERFORMANCE IN SECTION 53-A
The Bombay High Court emphasised the requirements outlined in Section 53-A that must be fulfilled in order for the Doctrine of Part Performance to be relevant in the Kamalabai Laxman Pathak v. Onkar Parsharam Patil [4]case. These prerequisites are listed below:
- Section 53-A is based on the equity concept, which requires fair and just behaviour from individuals seeking its protection. A fundamental component of this principle is the transferee’s willingness to carry out their contractual responsibilities. Therefore, to claim the benefits of this section and protect their ownership, the transferee needs to demonstrate that they will carry out their end of the bargain.
- There are other forms of part performance besides just gaining control of the item. After the contract is executed, the transferee is required to take an extra step that advances its conditions, even if they already possess the item.
- The transferee must have either obtained possession of the property or maintained possession of it as a partial fulfilment of the contract in order for Section 53-A to be activated. Alternatively, as indicated in the case of A.M.A Sultan (dead by LRs) and Ors. v. Seydu Zohra Beevi[5], the transferee must have taken an activity that advances the implementation of the contract.
- A formal agreement involving the transfer of immovable property in exchange for compensation is required for Section 53-A to be applicable. It is imperative that the written agreement, which serves as the basis for property possession, clearly state the purpose of the transfer. In cases where the document is not clear or explicit, Section 53-A cannot be used. The written contract must contain provisions that are sufficiently definite and unambiguous.
- This section only deals with the transfer of immovable property; agreements involving the transfer of movable property, whether or not consideration is included, are not covered. It is not possible to use the defence of partial performance when it comes to moving property ownership[6].
OBJECTIVE OF THE PART PERFORMANCE
- It ensures that the parties to a contract the transferor and the transferee fulfill their respective roles and adhere to the terms set forth in the agreement.
- The party receiving property or rights under the terms of a contract is known as the transferee, and this concept protects their rights. By guaranteeing that each party carries out their responsibilities, the concept safeguards the transferee’s right to own or own the property[7].
- This idea serves as a deterrent to dishonest behaviour by transferors looking to take advantage of gullible transferees. The idea of part performance lessens the possibility that dishonest transferors would mislead or exploit innocent transferees by requiring both parties to abide by their contractual duties.
- Except as expressly provided in the contract, the transferor and any parties connected to them are not permitted to seek any rights or claims over the property against the transferee. This implies that beyond what is specified in the contract, any persons or organisations associated with the transferor are legally prohibited from enforcing rights over the property. This clause guarantees the protection of the transferee’s rights against any disputes or claims by third parties connected to the transferor while also upholding the integrity of the contractual agreement.
THE PART PERFORMANCE DOCTRIN’S STANDING IN INDIA
The origins of the doctrine’s application in India can be found in the Mahomed Musa v. Aghore Kumar Ganguly (1914)[8] case, in which the Privy Council affirmed the principles of part performance and established the congruence between Indian and English law. In this case, an unregistered written compromise deed dividing the land between the parties was contested. In spite of the written deed’s lack of registration, the Privy Council recognised it as legally enforceable by invoking the law of part performance.
But the Privy Council deviated from the precedent established in the aforementioned instance in G.F.C. Ariff v. Rai Jadunath Majumder Bahadur (1931)[9]. There have been questions expressed about the doctrine’s applicability in situations where registering papers that are crucial to establishing title is required. The respondent’s right to sue was impeded by a verbal contract, leading the Council to find that the doctrine could not be applied in this particular case. The disagreement over the doctrine’s applicability in India was prompted by this disparity, which led to the formation of a Special Committee in 1927 to investigate the matter. This committee’s findings are mentioned in the Mahadeo Nathuji Patil v. Surjabai Khushalchand Lakkad (1993)[10] case. The Committee stressed the need of following the recommendations and suggested that the doctrine be publicly recognised through statutory procedures. regarding laws pertaining to registration. The Committee suggested the following principles in order to make the application of the concept easier:
First and foremost, a written record of the agreement is required.
Second, either by partial execution or by taking steps to further the terms of the agreement, the transferee must have come into possession of the property.
Thirdly, in order to apply the doctrine, the transferee must show that they are prepared to carry out their end of the bargain.
Fourthly, in the event that the contract is partially performed, the parties shall have created enforceable rights and obligations. Finally, the rights of other transferees participating in the transaction should not be hampered by the application of the theory.
THE EXCEPTION TO DOCTRINE OF PART PERFORMANCE
A transferee who has acquired property for consideration without knowledge of the contract or its partial execution is protected by an exemption found in the proviso to Section 53-A of the Transfer of Property Act. This implies that if a transferee is not aware of the contract or its implementation, they are not obligated by this clause.
The Supreme Court upheld the section’s proviso, which protects the interests of a transferee who gives consideration, in the Hemraj v. Rustomji [11]case. In other words, a bona fide transferee who paid value and was not aware of the previous transaction cannot use any entitlements the transferee may have based on an unregistered document and partial execution of the contract against them. The onus is on the party asserting benefits of partial performance to prove that the subsequent transferee was aware of the transaction earlier. Moreover, the Supreme Court decided that even in cases where the claim for acquiring title through adverse possession is rejected, making the possession unlawful, or in cases where the statute of limitations for bringing a lawsuit for specific performance of the sale agreement has passed, the entitlement under Section 53-A is still valid[12].
LANDMARK JUDGEMENT
Shrimant Shamrao Suryawanshi v. Pralhad Bhairoba Suryanvanshi (2002)[13]
FACT OF THE CASE
In the present case, the respondent and appellant had a contract for the sale of agricultural land. The appellant thereafter moved into the land in accordance with the terms of the agreement. But it turned out that the respondent was talking to someone else about selling the same piece of land at the same time. The respondent sold the property to the aforementioned third party despite the appellant obtaining an injunction against the respondent that barred further transactions. The appellant objected to the third party’s legal action when it was brought to assert ownership of the land. However, the appellant’s opposition was dismissed by the trial court due to the absence of a recognised title. The respondent filed a follow-up Letter Patent Appeal, and the court found that the appellant was not.
ISSUES
Whether, in this case, the appellant can use the theory of part performance in the event that the claim for particular performance is limited?
JUDGEMENT
the court observed that the appellant showed that they were ready and eager to carry out their end of the bargain. The appellant may still exercise their rights if they could demonstrate that they had taken an action advancing the agreement or were prepared to do so, the court stressed, even though the complaint was barred by limitations. As a result, the court determined that the appellant is qualified to receive the advantages provided by the part-performance theory as outlined in Section 53A of the Act.
CONCLUSION
A fundamental instrument for handling the intricacies of contractual interactions is part performance, a concept ingrained in contract law. It was first based on English equity jurisprudence and guarantees equity by making both parties carry out their end of the bargain. Legislative changes and significant cases have shaped the doctrine over time. A signed contract for the transfer of immovable property, possession of the property or an act furthering the contract, and the willingness to carry out contractual obligations are requirements for invoking part performance. Notably, these conditions are summarized in Section 53-A of the Transfer of Property Act in India. There are, however, some instances in which a bona fide transferee’s rights for value are protected, as proved in Hemraj v. Rustomji. Part performance is resilient in the face of difficulties and offers fair resolutions to economic conflicts.
[1] Indian contract act 1872, section 53A.
[2] Monesh Mehndiratta,” Doctrine of part performance and specific performance of contract” (Ipleaders, 10 january 2024) < https://blog.ipleaders.in/doctrine-of-part-performance/#Meaning_of_the_doctrine_of_part_performance > accessed on 19 April 2024.
[3] 21 Ch. D. 9 (29 March 1882).
[4] AIR1995BOM113.
[5] ILR (1989) 2 KER 237.
[6] Aishwarya Agrawal,” Doctrine of Part Performance” (lawbhoomi,18 may 2023) < Doctrine of Part Performance (lawbhoomi.com) > accessed on 19 April 2024.
[7] Monesh Mehndiratta,” Doctrine of part performance and specific performance of contract” (Ipleaders, 10 January 2024) < https://blog.ipleaders.in/doctrine-of-part-performance/#Meaning_of_the_doctrine_of_part_performance > accessed on 19 April 2024.
[8] (1915)17BOMLR420.
[9] (1931)33BOMLR913.
[10] (1994)96BOMLR846.
[11]AIR 1953 SUPREME COURT 503.
[12] Ibid.
[13] 2002 BOM LR 2 196.