The doctrine of privity of contract has been integral to commercial relations, ensuring that parties honor their commitments. “The law ought to assure me everything which is mine, withoutAs Bentham put it nicely: forcing me to accept equivalents, although I have no particular objection to them.”
The Specific Relief Act, 1963, as amended in 2018, has reaffirmed this principle to consider specific performance of contracts as a general rule rather than an exception.
Need for Reforms- Enforcement of Contract in India
India was ranked 130 in the World Bank’s Ease of Doing Business report in 2016. The country came in 178 in contract enforcement, by far the worst in the field. Realising the economic impact, the Indian Government constituted an Expert Committee in 2016 to recommend reforms to the Specific Relief Act, 1963 with an objective to:
1. Strengthen contract enforceability.
2. Remove judicial discretion to grant specific performance.
3. Improve Ease of Doing Business rank for India.
This step also aligns with the principle that is observed to be followed by several international bodies like UNIDROIT- International Institute for the Unification of Private Law, as they believe that the enforcement of a contract must be certain and predictable.
Highlights of 2018 Reforms
1. From Discretion to Certainty ( word “discretion” removed from Section 10, 11 & 20 )
Before: Courts had a lot of discretion and frequently did not enforce the contract.
After: Specific performance would be the default, except as provided under Sections 11(2), 14 and 16.
Thus, 2018 amendments discourage breaches of contract by ensuring that contractual obligations are honored rather than simply substituted with monetary compensation or return of earnest money.
2. Substituted Performance (New Section 20)
If a contract is violated, the aggrieved party can have the contract performed by a third party or their own agency and recover expenses, costs, and compensation from the defaulting party. This became law to increase commercial certainty and avoid unnecessary delays in business transactions.
Enforceability Exceptions (Section 11, 14, and 16)
1. Section 11(2): Contract made by a trustee in breach of trust or in excess of his power.
2. Section 14: The specific performance can not be ordered where:-
1. Substituted performance received.
2. The contract is subject to supervision of the court.
3. The assignment is personal or requires specialized skills.
4. The contract is determinable.
3. Section 16: If the plaintiff cannot prove readiness and willingness to perform, relief is denied.
Amendments limits judicial discretion, forcing courts to perform contracts unless covered under exceptions.
Judicial Decision- Kamal Kumar vs. Premlata Joshi [2019] 1 S.C.R. 54
The Hon’ble Supreme Court enunciated five material questions to decide suits for specific performance:-
1. Validity of the contract: Did the parties enter into a contract? (Section 10 of Indian Contract Act, 1972)
2. Plaintiff’s readiness and willingness: Has the plaintiff been consistently ready, willing, and able to perform its obligations? (After the 2018 amendment in Section 16, the focus shifted from pleading to proving readiness and willingness.)
{Equity and fairness will still be checked here}
3. Has the plaintiff performed their contractual obligations: What portion of the plaintiff’s obligation have they already satisfied?
4. Consideration of Equity: Will an order of specific performance create an undue hardship on the defendant? (After the 2018 Amendment– does the refusal of specific performance cause a hardship to the plaintiff?)
5. Alternative relief: Is the plaintiff entitled to an alternative relief? (such as return of earnest money)
Conclusion: Upholding Contractual Integrity
Certainty in enforcement of contracts is furthered by 2018 amendment to the Specific Relief Act, 1963, that provides the remedy of specific performance by default, thereby limiting judicial discretion. While dealing with equitable relief matters, discretion is inherent in the very nature of a court of law and can never been totally prohibited, its scope has been restricted in this respect and confined within the precepts of equity and fairness. The measures of the reform is in line with global practices and enhances the credibility of business climate in India. The amendment helps reduce contract breaches, and offers predictability in the law, thereby enhancing India’s commercial and economic architecture and creating an conducive environment for business and foreign investments.