PERSONS FOR OR AGAINST WHOM CONTRACTS MAY BE SPECIFICALLY ENFORCED

Section 15

 15. Who may obtain specific performance.—Except as otherwise provided by this Chapter, the specific performance of a contract may be obtained by—
(
a) any party thereto;

(b) the representative in interest or the principal, of any party thereto:
Provided that where the learning, skill, solvency or any personal quality of such party is a material ingredient in the contract, or where the contract provides that his interest shall not be assigned, his representative in interest or his 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;

(c) 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;

(d) where the contract has been entered into by a tenant for life in due exercise of a power, the remainderman;

(e) 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;

(f) 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;

(fa) 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.

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

(h) when the promoters of a company have, before its incorporation, entered into a contract for the purposes 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 has communicated such acceptance to the other party to the contract.
 

General Rule, i.e. privity to contract: the parties to the contract can claim specific performance [Section 15(a)]:

It is important to mention that Section 15 mentions who can claim specific performance of the con­tract. The general rule under the law of contract regarding who can enforce the contract is privity to contract, which provides that only parties to the contract can enforce the contract and the stranger to the contract cannot sue. However, Section 15 mentions general rule as well as exceptions where apart from the parties to the contract even third per­son can claim specific relief.

Specific performance by the parties when agree­ment to sell is oral or written but signed only by vendor and not by vendee: When agreement to sell is oral or written but signed only by vendor and not by vendee then two moot questions which need clarification are: whether it is a valid agreement? Can it be specifically enforced?

This controversy was put to rest by the Apex Court of India in case of Aloka Bose v. Parmatma Devi, where it stated that all agreements of sale are bi­lateral contracts as promises are made by both, the vendor agreeing to sell and the purchaser agreeing to purchase. It cannot be said that unless agreement is signed both by the vendor and purchaser, it is not a valid contract. Even an oral agreement to sell is valid. If so, a written arguments signed by one of the parties, if it evidences such an oral agreement will also be valid. Moreover, in India, an agreement of sale signed by the vendor alone and delivered to the purchaser, and accepted by the purchaser, has always been considered to be a valid contract. In the event of breach by the vendor, it can be specifi­cally enforced by the purchaser. There is, however, no practice of purchaser alone signing an agree­ment of sale. (AIR 2009 SC 1527)

Exceptions to privity to contract: Stranger to the contract or persons other than the parties can obtain specific relief-

In following exceptional cases, a stranger to the contract or persons other than the parties can obtain specific relief:

(1) The representative in interest or the principal of any party thereto (15 (b))- The representative in interest or the principal of any party thereto who can claim specific performance of the contract. However, where the learning, skill, solvency or any personal quality of such party is a material ingredient in the contract, or where the contract provides that his interest shall not be assigned, his representative in interest of his 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. Lets understand who is the representative in interest;

The representative in interest-

The representative in interest generally includes those persons who are entitled to the benefit of the contract. It is not necessary that all the representatives in interest must join the case as co-plaintiffs. Where one or more representatives in interest refuse to join the case as they were absent at that time or due to other reason then they can be impleaded as defendants.

  • In Beswick v. Beswick, B transferred his business to A and in return A promised B to pay an annuity to B and B’s widow after B’s death. The House of Lords held that this promise could be specifically enforced by B’s personal representatives, i.e. widow, against A. The House of Lords stated that three factors were considered while granting specific performance; inadequacy of damages (nominal in that case) as a remedy for breach of contract, the fact that the promisor (A) had received the entire consideration for his promise, and the fact that B could have specifically enforced the contract had A refused to perform his part. It has been suggested that the remedy would not have been available, had any of these factors been absent. The court further held that specific performance is given whenever it is the most appropriate method of enforcing the contract which was actually made.

Assignee is “representative-in-interest”-

A contract is ordinarily assignable unless the personal quality of a party is a material ingre­dient in the contract or where the contract shows an intention that the interest shall not be assigned. Where the benefit of a contract has been assigned, the assignee may, as a general rule, enforce spe­cific performance, provided that the assignee can himself perform or procure the performance of the assignor’s obligation under the contract.

Example- A interested in pledging his jewellary or family idol to B but was persuaded by B to sell it him. A agreed to sell with a right to repurchase. Subsequently A assigns his right to repurchase to X. B makes breach of contract. As X is assignee and hence representative in interest and hence can claim specific relief.

Principal-

Under law, act done by the an agent is act done by the principal provided the agent has author­ity to do that act. According to Sections 186-187 of the Indian Contract Act, 1872 where a contract is entered into by the agent having actual, implied or ostensible authority from his principal to enter into the contract on his behalf, then the principal is the actual party to the contract and he can claim spe­cific performance. The circumstances in which the agent may personally enforce a contact entered into by him on behalf of the principal are dealt with in Section 230 of Contract Act, 1872.

Example – A, an agent of X having authority to do so, agreed to sell a flat to B. B made breach of contract. Here X, the principal of A can file a suit for specific relief.

Exceptions where the representative in interest or assignee or the principal of any party cannot claim specific relief [Proviso]:

The following two exceptions are mentioned under proviso:

(i) Where the learning, skill, solvency or any personal quality of such party is a material ingredient in the contract: Where from the contract it is clear that learning, skill, solvency or any personal quality of such party is a material ingredient in the contract then only parties can claim the specific performance and the representative in interest or the principal of any party shall not be competent to claim such relief.

Example- A, a singer or dancer, agent of X has entered into the contract to give her performance on B’s birthday. B made breach of contract. Specific performance can be claimed by A only and not by X, his principal.

In Mohendra Nath Mookerjee v. Kali Prashad Johuri, the court held that where A agreed to grant a lease to B, of a property which was at the date of the agreement in the possession of mortgagee, and B agreed to undergo all the labour necessary for the conduct of a suit redemption which was then pending, and to pay all the expenses of the litigation, and the rent was to commence from the date on which possession was recovered from the mortgagees, it was held that personal quality of B was a material ingredient in the contract, and that his heir was not entitled to specific performance against A.

(ii) Where the contract provides that his interest shall not be assigned- Where it is categorically provided in the contract that interest shall not be assigned then only parties can claim the specific performance and the representative in interest or assignee or the principal of any party shall not be competent to claim such relief.

Example- According to a contract, A has a right to repurchase some ornaments from B. The contract provide that this right cannot be assigned by A to a stranger. If breach is made by B then specific relief can be claimed by A or his heirs and not by his assignee.

  • The Apex Court of India in Shyam Singh v. Daryao Singh, held that in the absence of any words or expressions in the documents indicating prohibition on assignment or transfer of right of repurchase and in the case of clear provision of Section 15(b) of the Specific Relief Act, 1963, an implied prohibition cannot be read into the terms of the documents. Merely because in the documents, there is mention of ‘heirs’ of the contracting parties but not their ‘assignees’ or ‘transferees’, the legal right of assignment available to the benefit of original contracting party under Section 15(b) of the Act cannot be denied to it.

(2) 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- (15(c))

Another exception to the general rule is the family settlement. Where, under a family arrangement, the contract is intended to secure a benefit to a third party then such third party may sue in his own right as a beneficiary.

Example- Four brothers (A, B, C and D) entered into a family settlement to give maintenance to mother or widowed sister-in-law (brother’s wife) or marriage expenses to X, an unmarried sister, then such beneficiary can enforce the contract for specific relief.

(3) Where the contract has been entered into by a tenant for life in due exercise of a power, the remainder man- (15 (d))

Where the contract is entered into by a tenant for life in due exercise of a power, the remainder man can claim specific enforcement. Generally such contracts are made for better management and enjoyment of the property. As per legal dictionary remainder man is a term used in property law to refer a person who inherits or is entitled to inherit property upon the termination of the estate of the former owner. A remainder man holds an interest in the remainder and will become its possessor at some future time. For example, if the owner of property gives a piece of his real property to “to A for life, and then to B, “B is entitled to a future interest, called a remainder, and B is termed a remainder man. B’s interest becomes possessory only on A’s death.

Example- A agrees to give his property on to B on leave where B is tenant for life and after B property will go to C (lessee) if C survives B. Here C is the remainder man if B enters into any contract as per his power for better management and enjoyment of the property then C can claim specific performance after B.

(4) 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- (15 (e))

A reversion in property law is a future interest that is retained by the grantor after the conveyance of an estate to another person. Once the lease expires or the life estate tenant dies the property automatically reverts to the grantor of lease. However, where grantor of lease has died during life time of tenant for life then the property will revert to the reversioner in possession i.e., his legal representative.

(5) 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- (15 (f))

When in reversion a future interest is created in the property in favour of third person rather than the grantor of the lease then such third person is known as reversioner in remainder. Here remainder means the person other than the original grantor to whom the land will pass after the death of tenant for life.

Example- A contracts to grant the property on lease to B for life, then to C. Here B will use the land for the lifetime of B, but on B’s death, the land will go to C. Here C is reversioner in remainder who has future interest in the property. Where breach of contract is made by B then C will suffer material injury and hence can claim specific performance.

Difference between a reversion and a remainder-

The difference between a reversion and a remainder, is that in reversion the particular estate will fall into the possession of the original grantor or his representative after the death of the tenant for life, whereas in remainder the estate which under the same circumstances will fall into the possession of a person other than the original grantor.

(6) When a Limited Liability Partnership (LLP) 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- (15 (fa))

Another exception to the general rule that only the parties to the contract can claim specific enforcement is incorporated by the Specific Relief (Amendment) Act 2018 which provides that amalgamated LLP. Where a contract is entered into by a LLP which subsequently becomes financial unsound (amalgamating LLP) and combines with a rich company, i.e. amalgamation takes place, then this news LLP (amalgamated LLP) can claim specific relief against B.

Example- LLP I is a sick limited liability partnership and there is amalgamation of LLP I and LLP II. In this example, LLP I is amalgamating LLP and LLP II is amalgamated LLP. Therefore, where a contract was entered into by LLP I with B then after amalgamation, LLP II can file a suit for specific relief against B.

(7) When a company has entered into a contract and subsequently becomes amalgamated with another company, the new company which arises out of the amalgamation- (15 (g))

Example- X & Co. is a sick company and there is amalgamation of X & Co. and Y & Co. In this example, X & Co. is amalgamating company and Y & Co. is amalgamated company. Therefore, where a contract was entered into by X & Co. with B then after amalgamation, Y & Co. can file a suit for specific relief against B.

(8) When the promoters of a company have, before its incorporation, entered into a contract for the purposes of the company, and such contract is warranted by the terms of the incorporation, the company- (15 (h))

In last exception, where promoters of a company before incorporation have entered into the contract which is warranted by the terms of the incorporation and after incorporation breach is made by the other Party then Company can enforce the contract. However, two conditions must be fulfilled:

(a) The company has accepted the contract and

(b) Has communicated such acceptance to the other party to the contract.

Example- A, B, C and D (as promoters of a company) entered into a contract with X to purchase property (to be used for company) before incorporation of the company. However, after incorporation X made breach of contract. Now company can file a suit for specific relief against X provided the company has accepted the contract and has communicated such acceptance to the other party to the contract.

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