Where the contract is in writing and, as against the party seeking specific performance, the other party set up the defence of various, then in the following cases specific performance cannot be awarded:
(a) where by reason of fraud, mistake of fact or misrepresentation, the written contract is different from what the parties agreed to, or does not contain all the terms on the basis of which they 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 varied the terms of the contract subsequent to its execution.
The word "court" includes an "arbitrator". Only because Section 20 confers discretion on courts to grant specific performance it does not mean that the parties cannot agree that the discretion may be exercised by a forum of their choice.
Relief against parties, legal representatives or subsequent transferee [S. 19]
Section 19 provides that the relief of specific performance can be obtained against the following parties:
1. against either party to the contract;
2. against any other person who claims title arising subsequently to the contract, but not against a transferee for value who paid for the property in good faith and without notice of the original contract;
3. against any person claiming under a prior title which was known to the plaintiff, where the title was such that it could have been displaced by the defendant;
4. when a limited liability partnership (LLP) has entered into a contract and subsequently becomes amalgamated with another LLP, the new LLP which arises out of the amalgamation;
5. against a new company which arises out of the amalgamation of the transferor company;
6. against a company whose promoters entered into a contract for the purposes of the company before its incorporation, provided that the contract is warranted by the terms of the incorporation of the company.
Substituted performance of contracts, etc. [S. 20]
The new Section 20 provides as follow in its four sub-sections.
The section comes into play when a contract is broken due to non-performance of the promise by any party; the party suffering from the breach has been given the option of substituted performance by a third party or any of his own agency and recover the expenses other costs actually incurred, spent or suffered by him. [Sub-s(1)]
No substituted performance is to be undertaken unless the party suffering from the breach has given a notice in writing, of not less than 30 days, calling upon the party in breach to perform the contract within such time as may be specified in the notice.
On his refusal or failure to do so, the performance may be given to a third party or his own agency. Expenses and costs of substituted performance can be recovered from the other party, only when the contract has been actually performed by the third party or his own agency. [Sub-s(2)]
Where substituted performance has been attained, performance cannot be claimed from the party in breach. [Sub-s(3)]
A party suffering from the breach is not prevent from claiming compensation from the party who was in breach. [Sub-s(4)]
Section 20 of the Specific Relief Act further lists certain circumstances in which the court may at its discretion refuse specific enforcement.
The Supreme Court has restated the factors which have to be kept in mind in exercising the discretionary power.
(1) Whether the plaintiff was ready and willing to perform his part of the contract in terms of Section 16;
(2) Whether it was a case for exercise of discretion by the court for decreeing specific performance under Section 16;
(3) Whether there were laches on the part of the plaintiff in approaching the court.
Buyer with notice of previous sale
Sub-section (2) of Section 20 then enumerates situations in which the court can property at its discretion refuse to order specific performance.
1. Unfair contracts - The court may refuse specific performance where a contract gives an unfair advantage to the plaintiff over the defendant.
2. Hardship - Specific enforcement is refused where it would cause considerable hardship to the defendant which he did not foresee, whereas non-performance would cause no such hardship to the plaintiff.
Price escalation.- Where the court is considering whether or not to grant a decree for specific performance for the first time, the rise in the price of the land agreed to be conveyed may be a relevant factor in denying the relief of specific performance.
3. Inequitable, unconscionable - Where the circumstances of a contract are such that, though they do not make the contract violable, they definitely render specific enforcement inequitable, the contract is one-sided, an imposition by one upon the other, the parties are not on equal footing, are some of the circumstance which the court keeps in mind in considering whether an order of specific enforcement would give rise to inequitable results, as held in Hills v. Croll.
4. Substantial performance by one side - Where a party to a contract has already substantially performed his part of it, it would be highly inequitable to him if the other is not compelled to perform his part.
5. Mutuality of remedy - Sub-section (4) of Section 20 declares that the court shall not refuse to any party specific performance of a contract merely on the ground that the contract is not enforceable at the instance of the other party.
The contract for transfer of property stipulated a time-period for payment of full consideration and registration of sale deed. The transferee made only part payment and that too after expiry of the stipulated date, but the transferor accepted it without stipulating any further date.
The court said that limitation would start from the date of refusal by the vendor in response to the notice by the vendee of specific enforcement and not from the date stipulated in the agreement.