Specific Performance of Contracts: A Case Study
This article discusses the legal concept of specific performance, which involves enforcing a party to comply with the terms of a contract. It then delves into a recent case where the Delhi High Court refused to grant a decree of specific performance, highlighting the complexities and considerations involved in such decisions.
Specific performance is a legal concept that involves enforcing a party to comply with the terms of a contract. It is an equitable relief granted by the court to enforce contractual obligations between the parties. This article will delve into a recent case where the Delhi High Court refused to grant a decree of specific performance, highlighting the complexities and considerations involved in such decisions.
Case at Hand
In this case, the Delhi High Court refused to grant a decree of specific performance against a suit property after noting that the property had been sold to a third party during the pendency of the suit. The court stated that this circumstance made it inequitable to grant and enforce the specific performance decree.
The court reiterated that it is settled law that specific performance is not granted by the courts due to various hardships which may be caused to the third party in case the specific performance is granted. The court has to balance the interests of justice and equity for the parties involved and has to look into the probable consequences of granting such relief.
The court observed that since the Memorandum of Understanding (MOU) in this case was executed in 1998, almost 25 years have elapsed. The performance of the contract would involve considerable hardship on the parties. The court further noted that a third-party interest has been created to such an extent that revocation of that contract would lead to an increase in hardships warranting unjustified litigations.
Consideration of Property Value
Apart from equity, another factor considered by the court was the steep increase in the price of the property in dispute. The court noted that since 2004, when the suit was instituted, the property price had substantially increased to Rs. 60 Crore. This was a drastic increase compared to the value ascertained by the parties at the time of institution of the suit, i.e., Rs 2.5 Crore. The court stated that it could not grant payment of Rs. 2.50 Crore since the price of the property had increased substantially.
Compensation in Lieu of Specific Performance
Since specific performance was not granted, in terms of Sections 20 and 21 of the Specific Relief Act, 1963, the plaintiffs were entitled for grant of compensation in lieu of specific performance. The court stated that such a circumstance makes it inequitable to enforce the decree and for these reasons, a decree for payment of compensation would meet the ends of justice.
This case highlights how courts exercise discretion when deciding whether or not to grant specific performance. Factors such as elapsed time, creation of third-party interests, and substantial changes in property value can all influence this decision. It underscores how courts strive to balance justice and equity while considering potential hardships and consequences. Ultimately, while specific performance is an important legal tool for enforcing contracts, its application is not automatic and depends on various factors.