What if some­one re­neges on a sale agree­ment?

Non-de­fault­ing par­ties should get an agree­ment to sale en­forced under the Spe­cific Re­lief Act or claim dam­ages for breach of con­tract

HT Estates - - HTESTATES - Su­nil Tyagi

Though a sale or trans­fer of a prop­erty is com­plete only upon e xe­cu­tion of a sale deed by the seller in favour of the buyer, in some cases a buyer may need extra time to pur­chase a prop­erty or the seller may also need some time to va­cate the prop­erty and com­plete the sale. Here, the par­ties may find it ap­pro­pri­ate to ex­e­cute an agree­ment to sell ( ATS) con­tain­ing terms and con­di­tions on which they agree to sub­se­quently ex­e­cute the sale deed. How­ever, no one can rule out the like­li­hood of a sit­u­a­tion whereby one party is will­ing to per­form its obli­ga­tions con­tained in the ATS and the other party is not. In such a case usu­ally, the non-de­fault­ing party is en­ti­tled to claim dam­ages from the de­fault­ing party for breach of con­tract. There’s a prob­lem though for con­tracts of im­move­able prop­erty such as ATS as it is dif­fi­cult to as­cer­tain the ac­tual dam­age done by the de­fault­ing party in not ful­fill­ing its obli­ga­tions. In such cases, the non-de­fault­ing party has two kinds of le­gal reme­dies at hand - to get the ATS specif­i­cally en­forced under Spe­cific Re­lief Act, 1963 (SRA) or claim liq­ui­dated dam­ages for breach of con­tract. An or­der of ‘spe­cific per­for­mance’ of a con­tract refers to the court’s or­der re­quir­ing the de­fault­ing party to per­form its part of the con­tract.

A sit­u­a­tion may also arise wherein the seller dies in the pe­riod be­tween the agree­ment to sell and ex­e­cu­tion of sale deed. Now, in that case the le­gal heirs may not want to carry out the sale- pur­chase trans­ac­tion. In such a sit­u­a­tion, the ques­tion that arises is whether the rem­edy of spe­cific per­for­mance is also avail­able against the heirs of a de­ceased seller.

In a case the Hon’ble Bom­bay High Court dealt with this ques­tion. An agree­ment of sale was ex­e­cuted be­tween A (seller) and B (buyer) for sale of cer­tain agri­cul­tural land owned by A. A also ac­cepted one- third of the sale amount as earnest money. The bal­ance amount and pos­ses­sion was to be trans­ferred at the time of ex­e­cu­tion of sale deed when A died and B filed a suit for spe­cific per­for­mance against heirs of A.

The Hon’ble Bom­bay High Court held that as long as other pro­vi­sions which would have vi­ti­ated the spe­cific per­for­mance against A had he been alive did not get hit; spe­cific per­for­mance would be awarded against the heirs of the de­ceased seller as well.

The court held that since it was a breach of a con­tract to trans­fer im­move­able prop­erty which can­not be ad­e­quately re­lieved by com­pen­sa­tion money, spe­cific per­for­mance was granted.

Thus, when an agree­ment to sell has been ex­e­cuted, spe­cific per­for­mance may be granted by the court de­pend­ing on the facts and cir­cum­stances of the case against the le­gal heirs of the seller in case of demise of the seller.

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