AAP Tax Law

Specific Relief Act, 1963 / Specific performance of contracts

Sections 17, 18 and 19 of the Specific Relief Act, 1963

These provisions explain when a seller or lessor with defective title cannot enforce a contract, when a written contract may be enforced only with a variation, and against whom a decree for specific performance may operate.

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Section 17: Contract to sell or let property by one who has no title, not specifically enforceable

Section 17 protects a purchaser or lessee against an attempt by a vendor or lessor to compel completion where the latter knew that the title was absent, or cannot deliver a title free from reasonable doubt by the prescribed time. A title is the legal entitlement to transfer or grant an interest in property; a title free from reasonable doubt is one not exposed to substantial and reasonable uncertainty concerning ownership or authority to transfer.

Statutory provisions

(1) A contract to sell or let any immovable property cannot be specifically enforced in favour of a vendor or lessor-

(a) who, knowing himself not to have any title to the property, has contracted to sell or let the property;

(b) who, though he entered into the contract believing that he had a good title to the property, cannot at the time fixed by the parties or by the court for the completion of the sale or letting, give the purchaser or lessee a title free from reasonable doubt.

(2) The provisions of sub-section (1) shall also apply, as far as may be, to contracts for the sale or hire of movable property.

Practical effect: This restriction operates against enforcement in favour of the vendor or lessor. The purchaser's or lessee's separate remedies where the vendor has no title or imperfect title are addressed in Section 13.

Section 18: Non-enforcement except with variation

Section 18 concerns a written contract whose recorded terms do not reflect the agreement as affected by fraud, mistake, misrepresentation, an intended legal result, or a subsequent agreed variation. A variation means a difference or alteration in the contractual terms relied on by the defendant. Where the statutory conditions are established, the plaintiff cannot insist on enforcement of the writing without the relevant variation.

Statutory provisions

Where a plaintiff seeks specific performance of a contract in writing, to which the defendant sets up a variation, the plaintiff cannot obtain the performance sought, except with the variation so set up, in the following cases, namely:-

(a) where by fraud, mistake of fact or mis-representation, the written contract of which performance is sought is in its terms or effect different from what the parties agreed to, or does not contain all the terms agreed to between the parties on the basis of which the defendant entered into the contract;

(b) where the object of the parties was to produce a certain legal result which the contract as framed is not calculated to produce;

(c) where the parties have, subsequently to the execution of the contract, varied its terms.

Example: If both parties subsequently agree to change the completion date, and the defendant proves that change, the plaintiff cannot insist on the original date while disregarding the established variation under this provision.

Section 19: Relief against parties and persons claiming under them by subsequent title

Section 19 identifies persons against whom specific performance may be enforced. It includes the contracting parties and, subject to statutory protection, persons who later acquire title through them. A transferee for value in good faith without notice is a subsequent acquirer who pays consideration honestly and without notice of the earlier contract; Section 19(b) expressly protects such a transferee.

Statutory provisions

Except as otherwise provided by this Chapter, specific performance of a contract may be enforced against-

(a) either party thereto;

(b) any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract;

(c) any person claiming under a title which, though prior to the contract and known to the plaintiff, might have been displaced by the defendant;

(ca) when a limited liability partnership has entered into a contract and subsequently becomes amalgamated with another limited liability partnership, the new limited liability partnership which arises out of the amalgamation.

(d) when a company has entered into a contract and subsequently becomes amalgamated with another company, the new company which arises out of the amalgamation;

(e) when the promoters of a company have, before its incorporation, entered into a contract for the purpose of the company and such contract is warranted by the terms of the incorporation, the company:

Provided that the company has accepted the contract and communicated such acceptance to the other party to the contract.

Important distinction: Protection under Section 19(b) is subject to its cumulative requirements of payment of value, good faith and absence of notice. A transfer made during pending litigation may also attract the doctrine of lis pendens under Section 52 of the Transfer of Property Act, 1882; the timing and facts of the transfer are material.