This article is written by Anurag Pratap Singh, BBA LL.B., 4th Year, Noida International University, Gautam Buddha Nagar, during his internship at LeDroit India.
SCOPE OF THE ARTICLE
- Abstract
- Keywords
- Introduction
- Specific Performance of Part of a Contract
- Statutory Framework
- Judicial Limitations on Specific Performance of Part of a Contract
- Exceptions to the Rule
- Judicial Interpretation and Case Law Analysis
- Comparative Legal Perspective
- Critical Analysis
- Challenges and Contemporary Issues
- Conclusion
- References and Hyperlinked Sources
Abstract
The equitable remedy of specific performance is an important component of the law of contracts as a remedy intended to make the performance of a contract compulsory. Although the court usually tries to give effect to the entire agreement, it is common for there to be instances where only part of the contract can be performed. The concept of specific performance of part of a contract helps in such scenarios by providing a balance between the obligation arising under the contract and the principle of equity and practicality.
In India, which follows the Specific Relief Act of 1963, it has been held that specific performance of part of a contract may be granted only in some exceptional circumstances. The courts have always made it clear that it must never be used as a means of changing the terms of the contract or imposing any obligations which were not intended to begin with. This research paper focuses on the statute governing specific performance of a part of a contract, judicial limitations put forth by the courts, exceptions and leading judicial cases.
Keywords
Specific Performance, Contract Law, Specific Relief Act, Judicial Limitations, Partial Performance, Equity, Contract Enforcement.
Introduction
The basis of contract law is an agreement voluntarily entered into and should thus be kept. Typical remedies in the event of breach of contract include damages, injunction, rescission, and specific performance. Of all the above remedies, specific performance is considered extraordinary since it makes the defaulting party to do what is provided in the contract rather than awarding money to the aggrieved party.
Generally, courts recognize whole contracts since the contract is an entire bargain made by the parties. However, practical challenges can emerge where it is not possible for one party to fulfill the whole contract. The challenge thus emerges whether the court can compel the performance of a fraction of the contract. This challenge is answered by the doctrine of specific performance of a part of the contract.
The doctrine arises out of the conflict between two purposes of the court. While the court tries to ensure compliance with the contract and prevention of unjust enrichment, it must avoid altering the agreements or changing the terms to which the parties agreed. Therefore, there is judicial restriction in making an order for specific performance of a part of the contract.
This notion becomes significant in property dealings, business deals, and contracts having special objects. Several cases in the Indian judicial system have made it clear that partial specific performance of contracts is an exception to the rule. Hence, one must understand the exceptions to this equitable remedy in order to comprehend its nature.
Specific Perfomance of Part of a Contract
Specific performance of a portion of the contract means judicial action that compels a party to fulfill only a portion of the duties under the contract in case it is impossible or impractical to fulfill the entire contract. The principle recognizes the fact that sometimes there is an overriding of the strict rule of specific performance, which may lead to the defeat of justice.
However, even though difficulty of performance does not necessarily mean the right to partial enforcement, there needs to be a careful evaluation by the court on whether the unperformed portion is significant or insignificant. Moreover, the court should also consider whether the enforcement will change the fundamental aspect of the agreement.
It is based on the fact that courts do not make contracts, but enforce them. In cases where substantial portion of the contract is unenforceable, enforcing the other portion amounts to rewriting of the contract itself.
Statutory Framework
The statutory basis for part performance of the contract lies in the Specific Relief Act, 1963. Until the amendments made in 2018, the Act considered the remedy of specific performance as discretionary in nature. Although the amendments have made the enforcement of contract stronger, yet, the principles relating to the part performance of the contract still hold their significance.
Legally, Sections 12 and other relevant sections of the Specific Relief Act deal specifically with the situation where part performance is sought. It is generally provided that there should be no specific performance of any part of a contract. But some exceptions to this provision are made in the Act.
In order to create a balance between the certainty and equity in respect of the enforcement of the contract, the legislative scheme lays down that:
– The extent of the part of the contract that remains to be performed.
– Whether the damage caused due to non-performance of the contract can be compensated through monetary relief.
– The conduct of the parties.
– The importance of the part of the contract which is left to be performed.
– The executability of the remaining part of the contract.
Judicial Limitations on Specific Perfomance of Part of a Contract
Limitations on judicial power act as a check on the arbitrary or overbearing exercise of judicial power. Indian courts have always adopted a restrictive approach to clauses relating to partial performance.
1. Substantial Element
Another important limitation is that the part which is capable of being performed should be substantial. If the part left unexecuted is an essential feature of the contract, then courts do not grant specific performance of such a contract.
This rule has been based on the assumption that people enter into contracts for the entire consideration of their bargains. Performance of just a part of the contract could render one of the parties of the consideration expected from him.
2. Restriction on Rewriting of Contracts
Another restriction which Indian courts have imposed time and again is that it is not possible to rewrite the contract by way of specific performance. The court has no jurisdiction to enforce any other bargain than the one which was made by the parties.
3. Equity and Fairness
Specific performance is an equitable remedy, which means that the courts have to consider the fairness of granting the relief to one of the parties.
If the conduct of the claimant who requests equitable relief is not honest, misleading, and inequitable, the courts can refuse the relief even if all statutory conditions are met.
4. Adequacy of Compensation
Another limitation relates to the possibility of compensation for losses incurred by non-performance.
When it is possible to award damages for losses resulting from the lack of a part of the contract, the courts can find it unnecessary to provide specific performance.
5. Impossibility of Enforcement
The courts cannot provide specific performance when the execution of the contract becomes impossible because of legal impossibility, the destruction of the object of the contract, or statutory limitations.
In those cases, partial performance is also impossible when it does not correspond anymore to the initial contractual arrangement.
Exception to the Rule
While there is a general rule that precludes partial specific performance, certain exceptions are allowed under the law.
1. Small and Trivial Shortage
In situations where there is a small deficiency in contract performance which can be remedied through compensation, specific performance may be granted on the remaining terms.
The justification behind this is that it will cause more harm than good not to enforce the whole of the contract.
2. Large Portion that Can Be Performed
If a large part of the contract can be performed and the plaintiff is willing to accept performance but at the same time compensate for the deficiency, then the court may take jurisdiction to enforce it partially.
3. Divisible and Separable Obligations
When the contract obligations can be divided into parts which are separate from each other, then the enforceable part may be granted specific performance without affecting the rest of the contract.
Severability serves an important factor in deciding whether there is a distortion of the contract or not.
4. Waiver by the Plaintiff
It is possible for the plaintiff to waive the claims made in relation to the unenforceable part and proceed only with the performable part.
Judicial Interpretation and Case Law Analysis
Indian courts have been at the forefront in determining the extent of partial specific performance.
1. Kartar Singh v. Harjinder Singh
https://indiankanoon.org/doc/641551
Citations: (1990) 3 SCC 517
Judgment by: Supreme Court of India
Year: 1990
Facts of the case
This case involved an agreement for the sale of immovable property. According to the agreement, the seller was required to convey certain property to the buyer. However, it was later revealed that the seller was incapable of conveying all the property because he lacked complete ownership over some of it. The buyer requested for specific performance of the contract to the extent possible.
Issues
Is there any possibility of partial specific performance where the seller is incapable of fulfilling the entire agreement?
Judgment
The Supreme Court laid down that partial specific performance of an agreement is not allowable automatically. The relief is to be granted only as per the restrictions placed on the grant of such relief by virtue of Section 12 of the Specific Relief Act, 1963.
The Court pointed out that partial performance will be possible where the remaining part of the agreement is of little importance and damages can compensate for any shortfall. Where the grant of relief will change the whole bargain made by the parties, the grant of relief is not proper.
Significance
This judgment highlighted the fact that partial specific performance should be given only cautiously in the courts. This case also highlighted the principle that judicial intervention should not lead to the formation of a new agreement which is different from the initial one.
2. Sardar Singh v. Krishna Devi
https://indiankanoon.org/doc/641551
Citation: (1994) 4 SCC 18
Court: Supreme Court of India
Date: 1994
Facts of the Case
It was a case pertaining to the sale of immovable property. There was a contract made for selling the property, but at a later stage, the vendor was found to be incapable of transferring the total amount of interest which he had committed to deliver under the agreement. The purchaser wanted the execution of the contract to the extent possible.
Issue
Can the remedy of specific performance of the contract be granted if the vendor is not capable of transferring the entire property which he has undertaken to do so under the contract?
Judgment
The Supreme Court went into the ambit of Section 12 of the Specific Relief Act and clarified that the partial specific performance of the contract is an exception to the general principle. The Court ruled that for giving such remedy to the purchaser the court has to first see:
Whether the part which cannot be performed constitutes a substantial part of the contract.
Whether the deficiency can be compensated by some other method.
And Whether the other parts can be effectively enforced.
Importance
This case set out the circumstances in which partial specific performance may be ordered by the court in cases involving property transactions. This case reiterated the point that equitable relief cannot go beyond statutory parameters just because one of the parties desires its enforcement.
3. Kalyanpur Lime Works Ltd. v. State of Bihar
https://indiankanoon.org/doc/641551
Citations: AIR 1954 SC 165
Court: Supreme Court of India
Year: 1954
Fact of the Case
The case was a result of contractual duties associated with mining and business rights. The issues raised in the case pertained to the possibility of enforcing the contract where some of the terms of the contract were not able to be performed as expected.
Issue
Whether courts are permitted to remake or modify the contractual duties in such a way that relief can be granted if complete performance of the original contract is no longer feasible.
Judgment
The Supreme Court ruled that courts lack the power to form an entirely new contract for the parties. Courts must only interpret and enforce the contract that really exists between the parties.
The Court stated that courts lack the power to change fundamental provisions of the contract or impose duties on the parties which they did not intend to accept in the first place. In cases where the fulfillment of the original contract has become impossible or changed in a substantial way, courts must not grant any relief which will in effect rewrite the contract.
Significance
The ruling became an influential precedent for the rule that courts do not have the power to remake the contractual relationship under the pretense of equitable relief.
This case was not a purely Section 12 case but dealt with principles related to contracts generally.
Analysis of the Cases
The common element that is visible in the above decisions is that in all the three decisions, it was clearly laid down by the Supreme Court that partial specific performance of any contract is an exception and should not change the essence of the contract.
In general, these judgments provide the following guidelines:
Strict Adherence to Statutory Requirements: Any relief granted must comply with the provisions of Section 12 of the Specific Relief Act.
Creation of a New Agreement: Courts cannot make a new agreement between the parties.
Maintaining the Essence of the Contract: Partial performance is allowed only in order to maintain the original contract.
The above judgments form the basis of Indian jurisprudence regarding specific performance of part of a contract.
Comparative Legal Perspective
It is observed through comparative analysis that similar principles are followed by different jurisdictions but in varying degrees of flexibility.
English Law
English law considers specific performance as an equitable remedy which can be provided only if the damages are found to be inadequate. It is not preferred for courts to compel any part of the contract unless the other obligations are severable.
The equity-based principles of English law have had a major influence on the development of Indian jurisprudence.
United States
The courts in United States generally consider the practicality and equity in enforcing the contract. The partial specific performance would be enforced if it would lead to the result which is just and will not cause undue hardship to either of the parties.
Courts are generally careful before enforcing obligations which are much different than those agreed to in the contract.
Comparative Analysis
There is a consistent pattern that comes out in the discussion made above: partial specific performance is rare exception rather than rule.
Critical Analysis
The concept of specific performance of part of a contract represents an effort to achieve balance between legal precision and equity. It is important to put limits to partial enforcement as it may threaten the freedom of the contractual relations.
On the other hand, excessive stringency can lead to the occurrence of unjust results. A rigid position that refuses the enforcement of contracts due to the impossibility of performing only a small part of them is likely to yield unreasonable consequences.
Most Indian courts have traditionally taken a moderate attitude. The courts have attempted to strike a balance between flexibility and contractual integrity. Still, there are some problems which arise.
One problem relates to the determination of whether there is a substantial or insignificant deficiency of performance.
The other one is related to the discretion of the court. The fact that specific performance has equitable nature makes its outcome somewhat uncertain.
Lastly, commercial dealings have grown complicated. Many agreements these days contain numerous duties, which complicates the issue as to whether an individual duty is a severable one or not.
Consequently, although the rule plays a critical role, some additional clarity of the judicial standards would be of great help.
Challenges and Contemporary Issues
Some recent developments have impacted the application of the doctrine.
Commercial Complexity
In today’s commercial world, business dealings are increasingly interrelated. Deciding on the possibility of enforcing partially is becoming more and more difficult.
Disputes over Real Property Sales
Disputes over real property sales keep cropping up due to issues of specific performance. In such cases, where the seller has either defective title or partial ownership, there are issues of enforceability.
Recent Developments after 2018
Recent changes in the Specific Relief Act have made the doctrine of specific performance much stronger. The only issue that needs clarification is that of traditional rules concerning part performance under the revised law.
Litigation Delays
Extended period of legal battles may render specific performance useless since, by the time the issue is sorted out, the circumstances of the market might change.
Conclusion
The specific performance of part of a contract is one such exception which can come handy when a complete performance of a contract cannot be ordered as it would be unjust in some way or the other. While doing this, the doctrine attempts to strike a balance between the obligations created under the contract and equity to ensure that justice is not frustrated just because complete performance has become impracticable. Under the law of India, especially the Specific Relief Act, 1963, specific performance of part of a contract is granted only under certain strict conditions and the courts have always ensured that the remedy is not used to rewrite a contract or change its very essence.
There seems to be an attempt by the judiciary to reconcile these two principles through judicial pronouncements but there seem to be some difficulties associated with judicial discretion, commercial reality and interpretation problems.
References and Hyperlinked Sources
- Pollock & Mulla, Indian Contract and Specific Relief Acts (15th ed., LexisNexis).
- Avtar Singh, Law of Contract and Specific Relief (Eastern Book Company).
- The Specific Relief Act, 1963.
- Kartar Singh v. Harjinder Singh, (1990) 3 SCC 517
- Sardar Singh v. Krishna Devi, (1994) 4 SCC 18.
- Kalyanpur Lime Works Ltd. v. State of Bihar, AIR 1954 SC 165.
- G.C. Cheshire & C.H.S. Fifoot, Law of Contract.
