HAVE AN IM­PACT WITH ‘SPE­CIFIC PER­FOR­MANCE’

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - Payal Chawla The au­thor is a found­ing -part­ner of Jus Con­trac­tus, a Delhi-based full ser­vice law firm and can be reached at -ht­es­tates@hin­dus­tan­times.com (This ar­ti­cle is for gen­eral in­for­ma­tion and not in­tended to be a le­gal ad­vice and the reader is advi

En­forc­ing ‘spe­cific per­for­mance’ means forc­ing ac­tual per­for­mance of an obli­ga­tion by a party bound to ful­fill it. Ba­si­cally, the process of the law is used to force a party to ful­fill its prom­ise. For ex­am­ple, if some­one prom­ises to sell you their house for a price by a par­tic­u­lar date, but fails to ful­fill such a prom­ise, you could force such a sale through the process of the court, at an agreed price.

Spe­cific per­for­mance is a se­vere rem­edy and, there­fore, not all con­tracts and not all obli­ga­tions in a con­tract are ca­pa­ble of spe­cific per­for­mance. The Spe­cific Re­lief Act, 1963 (“the Act”) not only pro­vides for the con­tracts that are ca­pa­ble of spe­cific per­for­mance, but also specif­i­cally pro­vides for con­tracts that can­not be specif­i­cally per­formed. An agree­ment to lease, how­ever, would be one such con­tract that can be specif­i­cally per­formed.

There is a dif­fer­ence be­tween an agree­ment to lease and a lease deed, both of which are dif­fer­ent con­tracts and serve dif­fer­ent pur­poses in law. An agree­ment to lease is merely a prom­ise to lease an im­mov­able prop­erty at an agreed rent and date with a lessee. How­ever, the ac­tual trans­fer of ti­tle of lease oc­curs only upon the ex­e­cu­tion of a lease deed. An agree­ment to lease im­poses an obli­ga­tion on the lessor to per­form his obli­ga­tion ie, to en­ter into a lease deed with the lessee.

In the event the lessor breaches such an obli­ga­tion, the lessee can en­force spe­cific per­for­mance and force the lessor to lease the promised premises in terms of Sec­tion 10 of the Act.

Take the case of party A en­ter­ing into an agree­ment with party B, promis­ing to lease a par­tic­u­lar prop­erty at a monthly rent of say

` 10,000 at a fu­ture date. say Oc­to­ber 1, 2014. In the in­terim, how­ever, party A gets an of­fer of a higher rent of say ` 12,000 from a third party. Lured by the prospect of higher rent, party A re­fuses to ex­e­cute the lease deed in ac­cor­dance with the terms agreed with party B. If such a thing hap­pens, party B will be well within its rights to force party A to ex­e­cute the lease on the same terms as pre­vi­ously agreed and to hand over the premises sought to be ten­anted to party B.

En­forc­ing spe­cific per­for­mance has its lim­i­ta­tions. The agree­ment to lease must state the date of com­mence­ment. The date of com­mence­ment of a lease has been held to be a ma­te­rial term for grant of spe­cific per­for­mance of lease in the mat­ter of Ru­dra Das v Ka­makhya Narayan Singh by the Patna High Court in 1925. The court held that where the date of com­mence­ment of a lease did not ap­pear in the con­tract, whether by ex­press terms, or by in­fer­ence, the con­tract was in­com­plete.

The pro­vi­sion for da­m­ages in a con­tract how­ever, is a death knell for seek­ing spe­cific per­for­mance. Sec­tion 14 of the Act specif­i­cally de­bars the en­force­ment of a con­tract for which com­pen­sa­tion in money is an ad­e­quate re­lief. How­ever, in cases of a lease (since it re­lates to im­mov­able prop­erty), the pre­sump­tion of law is that com­pen­sa­tion will not be an ad­e­quate re­lief. There­fore, the party that al­leges that com­pen­sa­tion is ad­e­quate or in­ad­e­quate must prove it. So, for in­stance, in the ex­am­ple above, if the agree­ment to lease had a pro­vi­sion that party A would give party B da­m­ages, say of a sum of `25,000, in the event that A re­scinds the con­tract, B would not be en­ti­tled to en­force per­for­mance by A to com­pul­so­rily lease the agreed premises. In fact, party A would suc­cess­fully be able to use the pro­vi­sion of da­m­ages as a valid de­fense to per­for­mance.

In­ter­est­ingly, if a per­son en­ters into an agree­ment to lease hav­ing no ti­tle to the prop­erty in ques­tion at the time of en­ter­ing into such con­tract but sub­se­quently ac­quires an in­ter­est and tries to re­nege out of such com­mit­ment, the rem­edy to com­pel such party to make good the con­tract would be avail­able.

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