Introduction:-
- The law of contract in India is contained in the Indian Contract Act,1872.
- It extend to whole of India except the state of Jammu and Kashmir
- It came into force on the 1/09/1872.
- The act is not exhaustive - It does not deal with all the branches of law of contract. there are separate acts which deal with contracts relating to negotiable instruments, sale of goods Act, partnership, insurance etc.
Definition of Contract
According to Section 2(h) of Indian Contract Act -"A contract is an agreement enforceableby law".
Salmond defines the contract in the following words "An agreement creating and defining obligations between the parties". So there are two conditions for the contract.
1. An Agreement: - Agreement is defined in the following words :
Sec. 2(e)-" Every promise or every set of promises forming the consideration for each other"
Example :- Mr. Sam invites Miss Sarah to a marriage party at his house. Miss Sarah does not go to the party, Mr. Sam cannot claim any compensation because this agreement is not enforceable at law.
Promise - Sec. 2(b) - "when a person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted becomes a promise."
Promise = Proposal + Acceptance.
Agreement = Promise + Consideration of both the parties
On analysis of above definition the following characteristics of an agreement:-
(a) Plurality of person - there must be two or more person to make an agreement.
(b) Consensus-ad-idem - both parties to an agreement must agree about the subject-matter of the agreement in the same sense at the same time.
2. Legal obligation - An agreement to become a contract must give rise to a legal obligations
i.e., a duty enforceable by law.
Contract = Agreement enforceable at law.
Any agreement which enables a man to compel another to do something or not do something, it is called contract. Agreement becomes a contract when it is enforceable by law.
Example: - Suppose there is an agreement between Mr. Khan and Miss. Lucy that Mr. Khan will bring the car from Washington for Miss. Lucy and Miss Lucy will pay Rs. 10 lac to Mr. Khan. Now this agreement is a contract because it enables Mr. Khan to compel Miss. Lucy for purchase of car. It also compels to Mr. Khan for the sale of car. So agreement is a contract because it is at law.
An agreement cannot turn into a contract unless it can be enforceable by Law. So, in order to be enforceable, a contract must contain all the essential elements of a valid contract as defined in Section 10 of the Indian Contract Act 1872.
Important Note: - All agreements are not contract but all contract are agreement. Because agreement is not enforceable by law. It may exist without any legal obligation.
Essential elements of a valid contract
According to Section 10, all agreements are contracts if they are made by the free consent of the parties, competent to contract, for a lawful consideration, with a lawful object, are not expressly declared by the Act to be void, and, where necessary, satisfy the requirements of any law as to writing or attestation or registration.
1. Offer and acceptance [Sec. 2(a) and 2(b)]
2. Capacity of parties and soundness of mind [Sec. 11 and 12]
3. Consent and Free consent [Sec. 13, 14 and conditions not mentioned from Sec. 15-22]
4. Lawful consideration [Sec. 2(d), 23]
5. Lawful objects. [Sec. 23]
6.Not expressly declared void by any law or law in force.[Sec. 24-30,36,56]
7. Intention to create legal relations.
8. Certainty of terms. [Sec. 29]
9. Possibility of performance.[Sec. 37-56]
10.Legal Formalities.
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Theories of Contract
Contract law has neither a complete descriptive theory exploring what law is nor a complete normative theory explaining what the law should be. Few theories that are in practice are discussed below:
1) Classical Contract Theory/ Market Individualist
Laissez-‐faire- court should not intervene. The contract is all in the ‘four corners’, a definite arrangement. Main points: freedom and sanctity of contract reinforced by contract law to provide certainty.
Challenges: the law is challenged to accommodate for changes principles in the modern marketplace. Inequality of bargaining power or fair market place (main point of CLS).
2) Critical Legal Scholar Theory (CLS)
Contracts do not necessarily represent the will of the parties; inequality of bargaining power (reinforces a dominant hierarchy of values &interests in society), does not take into a/c the complexity of social behaviour. Contract law conceals politics. Courts should intervene. CLS is implacably opposed to liberalism.
3) Social Contract Theory (SCT)/Sociology Theory
SCT holds that there is a sort of contract between the governors & governed in any civil society (Rousseau). Theory grounds its legitimacy in political authority, rights & duties of rulers & subjects.
Durkhiem-‐ contract is an expression of individual free will.
Selznick-‐ contract exhibits voluntariness, implies a limited commitment (through terms), consists of mutuality & exchanges & is a narrowly bounded relationship.
4) Relational Theory
We don’t need a law of contract as parties can enforce their own agreement. Focuses on long-‐term contracts with long-‐term performances.
5) Promise Theory
Promises should be enforced by the law (vitiating the need for consideration in contracts) as they are the ‘moral basis’
6) Autonomy based theories
Agreement in a contract implies a level of autonomy to participate & conclude a contract. 3 autonomy theories that show the power of individuals to change their legal relations.
Raz-‐ the obligation concept embraces the concept of promising-‐ contract law protects undertaking voluntary obligations & the individuals who rely on this practice.
Fried-‐ for promises to be binding, there must be a general convention that provides individuals with a way to commit themselves to future performances.
Barnett-‐ essential basis for obligation is that a party has manifested an intent to alienate his/her rights to another.
7) Teleological Theories
The contract is based on its purpose, not its cause.
Gordley-‐ a party’s obligations depend on which virtues they exercise. A commitment counts as a promise, & is enforceable by promisee.
Kronman-‐ contracts must achieve a fair division of wealth & power among contracting citizens.
8) Feminism Theory
- Liberal feminism: need for gender equality in society.
- Socialist feminism: desires reconstruction of economic & social structures & rejects capitalist thought.
- Radical feminism: argues modern society is shaped by male values.
9) Economist Theory
A contract is a mere mechanism of exchange. Non-‐economically efficient to set aside a “sacred” document
E-CONTRACTS
Essentials of E-contracts:
Nature of E-Contract
1) The parties do not, in most cases, meet physically.
2) There are no physical boundaries.
3) Mostly, no handwritten signature.
4) Digital Signatures are used and electronic records are used as evidences in court and when need arises.
5) The subject matter includes:
a) Physical goods where goods are ordered online and paid over internet and physical delivery is made.
b) Digitized products such as software which can also be ordered for.
c) Services like electronic banking, sale of shares, financial
Types of E-Contract:
a) Click-wrap agreement- These agreements require the user to give his consent to the terms and conditions of the agreement by clicking the “I accept”, “Ok”, “Allow” or “I agree” button.
b) Browse Wrap Agreements- These agreements do not require the user to give his consent to the agreement. It stated that, automatic acceptance of the agreement by using the website. In this agreement, terms or conditions of service are provided at the bottom of the website.
c) Shrink-wrap agreements- These agreements are formed when the user gives his consent to a printed agreement on software like CD-ROM by opening in the shrink to fit a plastic wrapper over the product. The terms\ and conditions in such agreements are enforced upon the user as he cannot use it without opening the wrapper.
d)Email Contract
e)Smart Contract
f)Electronic Data Interchange Contract (EDI) Contract
g)Customized Online agreements
h)Scroll Wrap agreements
Procedure for Forming E-Contracts
• Email - The parties may create a valid contract by exchanging e-mail communications.
• Website Forms - In many cases, an e-commerce website offers for sale goods or services that are ordered by customers, by filling in and submitting an on-screen order form. The seller will enter into a contract once the order has been accepted. The products and services can be delivered physically.
• End User License Agreements (EULA)– This is also a form of valid contracts in which end users click “I Accept” or “I Accept the Terms.”
(i) receipt occurs at the time when the electronic record enters the designated computer resource; or(ii) if the electronic record is sent to a computer resource of the addressee that is not the designated computer resource, receipt occurs at the time when the electronic record is retrieved by the addressee;
ELECTRONIC SIGNATURE/DIGITAL SIGNATURE [Section 2(1)(p) of IT ACT]
- Authentication: They prove the identity of the sender, as only the person with the private key could have generated the correct signature.
- Integrity: They ensure that the document or data has not been tampered with during transmission. Even a small change in the document would result in a completely different signature.
- Non-repudiation: The sender cannot deny having signed the document, as the signature is mathematically tied to their private key
- Efficiency: Digital signatures are efficient and can be used to sign electronic documents quickly and without the need for physical paperwork.
- Security: Uses cryptographic algorithm to secure the signing process.
- Saves time and cost
- Enhances Security
- Better Efficiency.
- Environmental Friendly.
- Global Accessibility.
- Can be audited from anywhere.
- High dependency on technology.
- Potential to errors.
- Complexity to non technical users.
- Revocation challenge.
- potential for forgery is high.
Contracts that can be specifically enforced
Section 10
Section 11-Cases in which specific performance of contract associated with trust
Section 12- Specific performance of contract
12(1) - Court declares that specific performance must be for whole contract and not parts
Case: Merchants Trading v Banner 1851
Court cannot specifically perform the contact piecemeal, but it must be performed in its entirety if performed at all.
Exceptions:
12(2) When part to be performed is small
12(3) When part to be performed is large
12(3) when the contract consist of several and independent parts
Cases:
Ramalingam v Subramahnyam 2003
B Santoshamma v D Sarala 2012
Mukesh V Saurab Choudary 2012
Section 13-Contracts having imperfect Titles
Section 73- Determines the compensation amount.
By Whom the contract can be specifically enforced.
Section 15
a) Any party thereto.
b)Representative in interest of principle or any party thereof
c)Contract is a settlement of marriage or family business.
d)Contract entered in to by tenant for life.
e)Reversioner in possession.
f) Reversioner in the remainder
fa)when a limited liability partnership has entered into a contract and subsequently becomes amalgamated with another limited liability partnership, the new limited partnership arises out of the amalgamation.
g)When a company entered into a contract subsequently became amalgamated with another company.
h)when promoters of company have ,before its incorporation, entered into a contract.
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THE SPECIFIC RELIEF ACT 1963
The Specific Relief Act (“Act”) consists of 3 parts, 8 Chapters, 42 Sections
It was enacted on 13th December, 1963 and commenced its operation on 1st March, 1964
Kinds of Specific Relief
Part I - Preliminary- Section 1-4
Part II Specific Reliefs-
Chapter I Recovery of possession of property Section 5-8
Chapter II Specific Performance of Contracts Section 9-25
Chapter III Rectification of Instruments section 26
Chapter IV Rescission of Contracts Section 27-30
Chapter V Cancellation of Instruments Section 31-33
Chapter VI Declaratory Decrees Section 34-35
Part III Preventive Relief
Chapter VII Injunctions Generally Section 36-37
Chapter VIII Perpetual Injunction Section 38-42
This Act provides remedies for the person who’s civil or contractual rights have been violated.
There is either breach of a contract or the contract is to be breached.
In case, where there is a breach of a contract two types of remedies are available; firstly, compensation or damages and secondly, Specific Relief. However, if the contract is to be breached then preventive relief or injunction is provided to the party(ies).
Specific Relief is granted on the following principles: -
Damage is not an adequate remedy
Only for enforcing individual civil rights
Specific Relief Act
It is also known as equitable relief and it aims at the exact fulfilment of an obligation.
Part I - Preliminary
Section 1 - It is called the Specific Relief Act, 1963. It extends to the whole of India.
Section 2 – Definitions
Obligation - includes every duty enforceable by law;
Settlement - means an instrument (other than a will or codicil as defined by the Indian Succession Act, 1925 (39 of 1925), whereby the destination or devolution of successive interests in movable or immovable property is disposed of or is agreed to be disposed of;
Trust - has the same meaning as in section 3 of the Indian Trusts Act, 1882 (2 of 1882), and includes an obligation in the nature of a trust within the meaning of Chapter IX of that Act;
Trustee - includes every person holding property in trust;
All other words and expressions used herein but not defined, and defined in the Indian Contract Act, 1872, have the meanings respectively assigned to them in that Act
Section 3 – Savings
The provisions of this Act shall not-
deprive any person of any right to relief, other than specific performance, which he may have under any contract; or
affect the operation of the Indian Registration Act, 1908 on documents.
Section 4 – Specific Relief is granted only for the enforcement of the individual civil rights and not for enforcing penal laws.
Part
II – Specific Relief
Chapter
I - Recovering Possession of Property
Section
5
-
Recovery
of
specific
immovable
property
-
Person entitled to the possession of specific immovable property may recover such property as per the Code of Civil Procedure, 1908.
Section 6 - Suit by person dispossessed of immovable property
When a person in possession of immovable property is dispossessed without his consent, otherwise than in the due course of law, he or any person through whom he has been in possession or any person claiming through him, may by a suit, recover possession of immovable property, notwithstanding any other title that may be set up in such suit.
No suit can be brought under this section: -
after the expiry of 6 months from the date of dispossession
against the Government
No appeal shall lie from any order or decree passed in any suit instituted under this section, nor any review of any such order or decree be allowed.
No bar on any person to sue to establish his title and to recover possession of such property.
NOTE: Both the sections 5 & 6 provide for alternative remedies and are mutually exclusive. However, under section 5, a person dispossessed can get possession on the basis of title/ownership, whereas under section 6, claim is based on possession and no proof of title required. Further, under Section 5 the limitation period for filing a suit is 12 year while under section limitation is only 6 months from dispossession.
Section 7 - Recovery of specific movable property
A person who is entitled to the possession of specific movable property may recover it as per the CPC, 1908.
a trustee may sue for the possession of movable property to the beneficial interest in which the person for whom he is trustee is entitled
the presence of a special or temporary right to the present possession of movable property would be sufficient as an essential to file a suit.
There must be a presence of movable property which is capable of being delivered or disposed of.
The person suing must have the possession of the property in question.
There may be an existence of a special or temporary right on the property.
Section 8 - Liability of person in possession, not as owner, to deliver to persons entitled to immediate possession
Any person having the possession or control of a particular article of movable property, of which he is not the owner, may be compelled specifically to deliver it to the person entitled to its immediate possession when: -
Defendant holds it as the trustee or agent of the plaintiff;
Compensation in money would not afford the plaintiff adequate relief for the loss of the thing claimed;
It would be extremely difficult to ascertain the actual damage caused by its loss to the plaintiff;
The possession of the thing claimed has been wrongfully transferred from the plaintiff.
Chapter II – Specific Performance of Contracts
Section 9 - Defences respecting suits for relief based on contract
Defendant may plea by way of defence any ground which is available to him under any law relating to contracts.
Section 10 - Cases in which specific performance of contract enforceable
Specific performance of contracts shall be enforced by the court subject to the provisions contained in section 11(2), section 14 and section 16.
Section 11 - Cases in which specific performance of contracts connected with trust enforceable
Specific performance of a contract shall be enforced when the act agreed to be done is in the performance wholly or partly of a trust
A contract made by a trustee in excess of his powers or in breach of trust cannot be specifically enforced
Section 12 - Specific performance of part of a contract
Court shall not direct the specific performance of a part of a contract, except
as under: -
If a party is unable to perform a small portion of his part of the contract out of the whole in value and admits of compensation in money, the court may, at the suit of either party, direct the specific performance of so much of the contract as can be performed, and award compensation in money for the deficiency.
If a party is unable to perform whole of his part of the contract, and part left unperformed forms a considerable part of the whole though admitting compensation or does not admit of compensation in money, he is not entitled to obtain a decree for specific performance. However, the Court may, at the suit of the other party, direct the party in default to perform specifically so much of his part of the contract as he can perform, if the other party
if other party has paid or agreed to pay the consideration for the whole of the contract reduced by the consideration for the part which must be left unperformed; or
has paid for the whole contract without abetment; and
in either case, relinquishes all claims to the performance of the remaining part of the contract and all right to compensation, either for the deficiency or for the loss or damage sustained by him through the default of the defendant.
When a part of a contract which, taken by itself, can and ought to be specifically performed, stands on a separate and independent footing from another part of the same contract which cannot or ought not to be specifically performed the court may direct specific performance of the former part.
Section 13 - Rights of purchaser or lessee against person with no title or imperfect title
The purchaser or lessee has the following rights, if a person contracts to sell or let certain immovable property having no title or only an imperfect title: -
if the vendor or lessor has subsequent to the contract acquired any interest in the property, the purchaser or lessee may compel him to make good the contract out of such interest;
where concurrence of other person is necessary for validating the title, and they are bound to concur at the request of the vendor or lessor, the purchaser or lessee may compel him to procure such concurrence/conveyance;
where vendor professes to sell unencumbered property, but the property is mortgaged for an amount not exceeding the purchase money and the vendor has in fact only a right to redeem it, the purchaser may compel him to redeem the mortgage and to obtain a valid discharge, and, where necessary, also a conveyance from the mortgagee;
where the vendor or lessor sues for specific performance of the contract and the suit is dismissed on the ground of his want of title or imperfect title, the defendant has a right to a return of his deposit, if any, with interest thereon, to his costs of the suit, and to a lien for such deposit, interest and costs on the interest, if any, of the vendor or lesser in the property which is the subject-matter of the contract.
The provisions applicable to immovable property shall also apply, as far as may be, to contracts for the sale or hire of movable property.
Section 14 - Contracts which cannot be specifically enforced
Where party to the contract has obtained substituted performance of contract
as per Section 20 of the Act
A contract the performance of which involves the performance of a continuous work/duty which the court cannot supervise
Where contract for its performance depends on the personal qualifications of the party(ies) that the court cannot enforce specific performance of its material terms
A contract whose nature is determinable i.e., damages can be ascertained
Section 14A - Power of Court to engage experts
The court may engage one or more experts, if the court considers it necessary to get expert opinion in order to assist any specific issue involved in the suit and
may secure attendance of the expert for providing evidence, including production of documents on the issue.
Court may require or direct any person to give relevant information to the expert or to produce, or to provide access to, any relevant documents, goods or other property for his inspection.
The opinion or report given by the expert shall form part of the record of the suit; and the court, or with the permission of the court any of the parties to the suit, may examine the expert personally in open court on any of the matters referred to him or mentioned in his opinion or report, or as to his opinion or report, or as to the manner in which he has made the inspection
Fees, cost or expense payable to the expert, as the court may fix, by the parties shall be in such proportion, and at such time, as the court may direct.
Section 15 - Who may obtain specific performance
any party thereto;
the representative in interest or principal of any party thereto; i.e., any assignee, transferee, executor etc.,
provided learning skill, solvency, personal quality of a party is ingredient or where the contract provides that the interest of the party shall not be assigned, the representative in interest or principal shall not be entitled to specific performance of the contract; unless such party has already performed his part of the contract, or the performance thereof by his representative in interest, or his principal, has been accepted by the other party;
Where the contract is a settlement on marriage, or a compromise of doubtful rights between members of the same family, any person beneficially entitled thereunder;
Where the contract has been entered into by a tenant for life in due exercise of power, a remainderman.
A reversioner in possession, where the agreement is a covenant entered into with his predecessor in title and the reversioner is entitled to the benefit of such covenant.
A reversioner in remainder, where the agreement is such a covenant, and the reversioner is entitled to the benefit thereof and will sustain material injury by reason of its breach;
Where an LLP entered into contract and is subsequently amalgamated with another LLP, the new LLP which arises out of the amalgamation
When a new company arises out of amalgamation and subsequently becomes amalgamated with another company, the new company which arises out of the amalgamation;
The company provided the promoters, before its incorporation, entered into a contract and such contract is warranted by the terms of incorporation.
The company has accepted the contract and has communicated such acceptance to the other party to the contract.
Section 16 - Who cannot obtain specific performance/Personal bar to relief
Specific performance of a contract cannot be enforced in favour of a person
who has obtained substituted performance of contract under section 20
who has become incapable of performing, or violates any essential term of, the contract that on his part remains to be performed or acts in fraud of the contract, or wilfully acts at variance with, or in subversion of, the relation intended to be established by the contract; or
who fails to prove that he has performed or has always been ready and willing to perform the essential terms of the contract which are to be performed by him, other than terms of the performance of which has been prevented or waived by the defendant.
Section 17 - Contract to sell or let property by one who has no title, not specifically enforceable
A contract to sell or let any immovable property cannot be specifically enforced in favour of a vendor or lessor-
who knows that he does not have any title to the property but has contracted to sell or let the property;
who although 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.
The above provisions shall also apply, as far as may be, to contracts for the sale or hire of movable property.
Section 18 - Non- Enforcement except with a variation
plaintiff seeks specific performance of a contract in writing, but defendant sets up a variation, the plaintiff cannot obtain the performance sought, except with the variation so set up: -
by fraud, mistake of fact or mis-representation, and the contract in its terms or effect is different from what the parties agreed to, or it does not contain all the terms agreed to between the parties, on the basis of which the defendant entered into the contact;
where the object of the parties was to produce a certain legal result which the contract as framed is not calculated to produce;
where the parties have, subsequently to the execution of the contract, varied its terms.
Section 19 - Relief against parties and persons claiming under them by subsequent title
either party thereto;
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;
any person claiming under a title which, though prior to the contract and known to the plaintiff, might have been displaced by the defendant;
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.
when a company has entered into a contract and subsequently becomes amalgamated with another company, the new company which arises out of the amalgamation;
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.
Section 20
-
Substituted
performance of
contract
-
Breach of contract- Contract if broken due to non-performance of promise by any party, then the party who suffers by such breach shall be entitled to substituted performance through a third party or by his own agency, and, recover the expenses and other costs actually incurred, spent or suffered by him, from the party committing such breach.
Substituted performance cannot be claimed unless the party who suffers gives a notice in writing of not less than 30 days is given to the party in breach calling upon him to perform his contract within such time as specified in the notice
On refusal or failure to do so by the party in breach, the party who suffers can get the same performed by a third party or by his own agency
Party who suffers such breach shall not be entitled to recover the expenses and costs unless he has got the contract performed through a third party or by his own agency.
Where the party suffering breach of contract has got the contract performed through a third party or by his own agency after giving notice shall not be entitled to claim relief of specific performance against the party in breach.
Party who has suffered breach of contract is not prevented from claiming compensation from the party in breach.
Section 20A - Special provisions for contract relating to infrastructure project
No injunction shall be granted by a court in a suit involving a contract relating to an infrastructure project specified in the schedule, where granting of injunction would cause impediment or delay in the progress or completion of such infrastructure project.
The Schedule relating to any Category of projects or Infrastructure Sub-Sectors can be amended by the Central Government depending upon the requirement for development of infrastructure projects, and if it is considered necessary or expedient to do so, may be done by notification in the Official Gazette.
Section 20B Special Courts –
One or more of civil courts to be designated as special courts to try a suit in respect of infrastructure projects, within the local limits of the area to exercise jurisdiction and to try a suit under this Act in respect of contracts relating to infrastructure projects.
Such designation is to be done by the State Government, in consultation with the Chief Justice of the High Court, by notification published in the Official Gazette.
Section 20C - Expeditious disposal of suits
A suit filed under this Act shall be disposed of by the Court within a period of 12 months from the date of service of summons to the defendant. The said period can further be extended for a period not exceeding 6 months in aggregate after recording reasons in writing for such extension by the court
Section 21 - Power to award compensation in certain cases
In a suit for specific performance of contract, the plaintiff may also claim compensation for its breach in addition to such performance.
If the Court decides that specific performance may not to be granted but there has been a breach of contract between the parties which has be broken by the defendant, and that the plaintiff is entitled to compensation for that breach, it shall award him such compensation.
If the Court decides that specific performance ought to be granted, but it is not sufficient to satisfy the justice of the case, and that some compensation for breach of the contract should also be awarded to the plaintiff, it shall award him such compensation.
For the purpose of determining such compensation to be awarded, the court shall be guided by the principles specified in section 73 of the Indian Contract Act, 1872.
No compensation be awarded unless the plaintiff has claimed such compensation in his plaint:
Where the plaintiff has not claimed any such compensation in the plaint, the court shall, at any stage of the proceeding, allow him to amend the plaint on such terms as may be just, for including a claim for such compensation.
Section 22 - Power to grant relief for possession, partition, refund of earnest money, etc.
Any person suing for the specific performance of a contract for the transfer of immovable property may, in an appropriate case, ask for-
possession, or partition and separate possession, of the property, in addition to such performance; or
any other relief to which he may be entitled, including the refund of any earnest money or deposit paid or made by him, in case his claim for specific performance is refused.
Relief shall not be granted by the court unless it has been specifically claimed:
Plaintiff, if not claimed any such relief in the plaint, the court shall, at any stage of the proceeding, allow him to amend the plaint on such terms as may be just for including a claim for such relief.
Section 23 - Liquidation of damages not a bar to specific performance
Even if the damages have been ascertained by the parties, as the amount to be paid in case of breach of contract, for securing performance, still there is no bar to claim specific performance, if the court , having regard to the terms of the contract and other attending circumstances, is satisfied that the sum was named only for the purpose of securing performance of the contract and not for the purpose of giving, to the party in default an option of paying money in lieu of specific performance.
The specific performance if enforced under this section, the court shall not also decree payment of the sum so named in the contract.
Section 24 - Bar of suit for compensation for breach after dismissal of suit for specific performance
A suit which has been dismissed for specific performance of a contract or part thereof, cannot be brought by the party for compensation, for the breach of such contract or part, as the case may be, as it is barred.
However, there is no bar to a party’s right to sue for any other relief to which he may be entitled, by reason of such breach.
Chapter III - Rectification of Instruments
Section 26 - When instrument may be rectified
Rectification means correction and Instrument means any document or contract. So,
rectification of instruments means correction or changes in the contract.
Parties are entitled for the rectification of a contract or other instrument in writing not being the articles of association of a company to which the Companies Act, 1956, applies if it does not express their real intention due to fraud or mutual mistake by both the parties.
Parties entitled to rectification are: -
either party or his representative in interest
the plaintiff may, in any suit in which any right arising under the instrument is in issue, claim in his pleading that the instrument be rectified
a defendant may, in any suit in which any right arising under the instrument is in issue, may, in addition to any other defence open to him, ask for rectification of the instrument.
In a suit where a contract or instrument is sought to be rectified, and the court finds that instrument, through fraud or by mutual mistake of the parties, does not express the real intention of the parties, then the court has discretionary power to rectify the instrument so as to express that intention, so far as it can be done without prejudice to rights acquired by third persons in good faith and for value.
A contract in writing may first be rectified, and then if the party claiming rectification has so prayed in his pleading and the court thinks fit, may be specifically enforced.
No relief shall be granted for rectification of the instrument until the parties specifically claim for rectification of the instrument.
Where a party has not claimed any such relief in his pleading, the court shall, at any stage of the proceeding, allow him to amend the pleading on such terms as may be just for including such claim.
CHAPTER
IV
-
RESCISSION
OF
CONTRACTS
Section
27
-
When
rescission
may
be
adjudged
or
refused
Any person interested in a contract may sue to rescind a contract and the court may adjudge recession if: -
where the contract is voidable or terminable by the plaintiff;
where the contract is unlawful for causes not apparent on its face and the defendant is more to blame than the plaintiff
Court may refuse to rescind the contract
where the plaintiff has expressly or impliedly ratified the contract
where, owing to the change of circumstances which has taken place since the making of the contract (not being due to any act of the defendant himself), the parties cannot be substantially restored to the position in which they stood when the contract was made
where third parties have, during the subsistence of the contract, acquired rights in good faith without notice and for value
where only a part of the contract is sought to be rescinded and such part is not severable from the rest of the contract.
Section 28 - Rescission in certain circumstances of contracts for the sale or lease of immovable property, the specific performance of which has been decreed
Where a suit for specific performance of a contract for the sale or lease of immovable property has been made and the purchaser or lessee does not, within the period allowed by the decree or such further period as the court may allow, pay the purchase money or other sum which the court has ordered him to pay, the vendor or lessor may apply in the same suit in which the decree is made, to have the contract rescinded and on such
application the court may, by order, rescind the contract either so far as regards the party in default or altogether, as the justice of the case may require.
Where a contract is rescinded, the court: -
shall direct the purchaser or the lessee, if he has obtained possession of the property under the contract, to restore such possession to the vendor or lessor
may direct payment to the vendor or lessor of all the rents and profits which have accrued in respect of the property from the date on which possession was so obtained by the purchaser or lessee until restoration of possession to the vendor or lessor, and refund of any sum paid by the vendee or the lessee as earnest money or deposit in connection with the contract.
if the purchase or lessee pays the purchase money or other sum which he is ordered to pay under the decree, the court may, on application made in the same suit, award the purchaser or lessee such further relief as he may be entitled to, including in appropriate cases all or any of the following reliefs, namely:
the execution of a proper conveyance or lease by the vendor or lessor;
the delivery of possession, or partition and separate possession, of the property on the execution of such conveyance or lease.
No separate suit in respect of any relief which may be claimed shall lie at the instance of a vendor, purchaser, lessor or lessee, as the case may be.
The costs of any proceedings shall be in the discretion of the court.
Section 29 - Alternative prayer for rescission in suit for specific performance
A plaintiff instituting a suit for the specific performance of a contract in writing may pray in the alternative that, if the contract cannot be specifically enforced, it may be rescinded and delivered up to be cancelled; and the court, if it refuses to enforce the contract specifically, may direct it to be rescinded and delivered up accordingly.
Section 30 - Court may require parties rescinding to do equity
On adjudging the rescission of a contract, the court may require the party to whom such relief is granted to restore, so far as may be, any benefit which he may have received from the other party and to make any compensation to him which justice may require.
Chapter V - Cancellation of Instruments Section 31 - When cancellation may be ordered
Any person against whom a written instrument is void or voidable, and who has reasonable apprehension that such instrument, if left outstanding may cause him serious injury, may sue to have it adjudged void or voidable; and the court may, in its discretion, so adjudge it and order it to be delivered up and cancelled.
If the instrument has been registered under the Indian Registration Act, 1908, the court shall also send a copy of its decree to the (registration office) officer in whose office the
instrument has been so registered; and such officer shall note on the copy of the instrument contained in his books the fact of its cancellation
Section 32 - What instruments may be partially cancelled
Where an instrument is evidence of different rights or different obligations, the court may, in a proper case, cancel it in part and allow it to stand for the residue
Section 33 - Power to require benefit to be restored or compensation to be made when instrument is cancelled or is successfully resisted as being void or voidable
On adjudging the cancellation of an instrument, the court may require the party to whom such relief is granted, to restore, so far as may be any benefit which he may have received from the other party and to make any compensation to him which justice may require.
Where a defendant successfully resists any suit on the ground
that the instrument sought to be enforced against him in the suit is voidable, the court may if the defendant has received any benefit under the instrument from the other party, require him to restore, so far as may be, such benefit to that party or to make compensation for it;
that the agreement sought to be enforced against him in the suit is void by reason of his not having been competent to contract under section 11 of the Indian Contract Act, 1872, the court may, if the defendant has received any benefit under the agreement from the other party, require him to restore, so far as may be, such benefit to that party, to the extent to which he or his estate has benefited thereby.
CHAPTER VI - DECLARATORY DECREES
Section 34 - Discretion of court as to declaration of status or right
Any person entitled to any legal character, or to any right as to any property, may institute a suit against any person denying, or interested to deny, his title to such character or right, and the court may in its discretion make therein a declaration that he is so entitled, and the plaintiff need not in such suit ask for any further relief
No court shall make any such declaration where the plaintiff, being able to seek further relief than a mere declaration of title, omits to do so.
Section 35 - Effect of declaration
A declaration is binding only on the parties to the suit, persons claiming through them respectively, and, where any of the parties are trustees, on the persons for whom, if in existence at the date of the declaration, such parties would be trustees
Part III PREVENTIVE RELIEF
Chapter VII Injunctions Generally
It is defined by Burney as a judicial process by which one who has invaded or is threatening to invade the rights (legal or equitable) of another, is restrained from continuing or commencing such wrongful act.
According to Halsbury injunction is a judicial process whereby a party is ordered to refrain from doing or to do a particular act or thing.
An injunction may be issued for and against individuals, public bodies or even the state. Disobedience of an injunction is punishable as contempt of court.
Section 36 - Preventive relief how granted
Preventive relief is said to be such a relief by which a person is prevented to do an act, which he is not validly liable to do.
It is granted at the discretion of the court by injunction, temporary or perpetual.
Section 37 - Temporary and perpetual injunctions
Temporary injunctions (for specific time) are such as are to continue until a specific time, or until the further order of the court, and they may be granted at any stage of a suit, and are regulated by the CPC, 1908.
Perpetual injunction (granted at the end of the suit) can only be granted by the decree made at the hearing and upon the merits of the suit; the defendant is thereby perpetually enjoined from the assertion of a right, or from the commission of an act, which would be contrary to the rights of the plaintiff.
Chapter VIII Perpetual Injunctions Section 38 - Perpetual injunction when granted
Granted to the plaintiff to prevent the breach of an obligation existing in his favour, whether expressly or by implication.
When any such obligation arises from contract, the court shall be guided by the rules and provisions contained in Chapter II.
When the defendant invades or threatens to invade the plaintiff’s right to, or enjoyment of, property, the court may grant perpetual injunction in the following cases:
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where the defendant is trustee of the property for the plaintiff;
where there exists no standard for ascertaining the actual damage caused, or likely to be caused, by the invasion;
where the invasion is such that compensation in money would not afford adequate relief;
where the injunction is necessary to prevent a multiplicity of judicial proceedings.
Section 39 - Mandatory injunctions
To prevent the breach of an obligation, it is necessary to compel the performance of certain acts which the court is capable of enforcing the court may in its discretion grant
an injunction to prevent the breach complained of, and also to compel performance of the requisite acts.
Section 40 - Damages in lieu of, or in addition to, injunction
Plaintiff in a suit for perpetual injunction under section 38, or mandatory injunction under section 39, may claim damages either in addition to, or in substitution for, such injunction and the court may, if it thinks fit, award such damages.
No relief for damages shall be granted under this section unless the plaintiff has claimed such relief in his plaint:
Provided that where no such damages have been claimed in the plaint, the court shall, at any stage of the proceedings, allow the plaintiff to amend the plaint on such terms as may be just for including such claim.
Dismissal of a suit to prevent the breach of an obligation existing in favour of the plaintiff shall bar his right to sue for damages for such breach.
Section 41 - Injunction when refused
An injunction cannot be granted: -
to restrain any person from prosecuting a judicial proceeding pending at the institution of the suit in which the injunction is sought, unless such restraint is necessary to prevent a multiplicity of proceedings;
to restrain any person from instituting or prosecuting any proceeding in a court not sub-ordinate to that from which the injunction is sought;
to restrain any person from applying to any legislative body;
to restrain any person from instituting or prosecuting any proceeding in a criminal matter;
to prevent the breach of a contract the performance of which would not be specifically enforced;
to prevent, on the ground of nuisance, an act of which it is not reasonably clear that it will be a nuisance;
to prevent a continuing breach in which the plaintiff has acquiesced/consent;
when equally efficacious relief can certainly be obtained by any other usual mode of proceeding except in case of breach of trust; if it would impede or delay the progress or completion of any infrastructure project or interfere with the continued provision of relevant facility related thereto or services being the subject matter of such project.
when the conduct of the plaintiff or his agents has been such as to disentitle him to be the assistance of the court;
when the plaintiff has no personal interest in the matter.
Section 42 - Injunction to perform negative agreement
Where a contract comprises an affirmative agreement to do a certain act, coupled with a negative agreement, express or implied, not to do a certain act, the circumstance that the court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative agreement.
The plaintiff should not have failed to perform the contract so far as it is binding on him.
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