HAVE AN IMPACT WITH ‘SPECIFIC PERFORMANCE’
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.