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Specific Performance Contracts under the Sale of Goods Act, 1930

Introduction: A Historical Perspective
We reside in a global village where no nation is perfectly sovereign. Trade and commercial activity take place across international borders. We cannot pass a single law that will regulate business terms, although, the laws governing the Sale of Goods are closely related to the laws governing contracts, negotiable instruments, insurance, and the transportation of goods (by land, sea, or air), these laws do not encompass all of the other parts of this Act.[1]

Contracts involving the Sale of Goods are governed under the Sales of Goods Act, 1930. Earlier, The Indian Contract Act, 1872, dealt with this subject. The Sales of Goods Act, 1930 is a law that governs the sale of goods in India. The act was enacted on March 1, 1930, and came into effect on July 1, 1930. It is based on the English Sale of Goods Act, 1893, and was passed to provide clarity and certainty in the sale of goods transactions.

The Act defines the rights and duties of buyers and sellers in a sale of goods transaction, including the formation of contracts, transfer of property, and payment for goods. It also lays down rules regarding the delivery of goods, warranties, and conditions, as well as the remedies available to buyers and sellers in case of a breach of contract.

Like any Contract, a contract for the Sales of Goods is also based on the maxim Pacta Sunt Servanda, or 'one must keep one's promise'. According to Anson, the very purpose of the Law of Contracts is to make sure what one has been promised must be performed, and what a man has been 'led to believe must come to pass'. This was the jurisprudential basis of evolving the Law of Contracts and eventually the law for a contract for Sales of Goods.

"If a contract be made and one party to it make default in performance, there appears to result to the other party a right at his election either to insist on the actual performance of the contract, or to obtain satisfaction for the non-performance of it. It may be suggested from this that it follows . . . that it ought to be assumed that every contract is specifically enforceable until the contrary be shown.

But so broad a proposition has never, it is believed, been asserted by any of the judges of the Court of Chancery or their successors in the High Court of Justice, though if prophecy were the function of a law writer, it might be suggested that they will more and more approximate to such a rule."[2]In short, the court's refusal to decree specific performance shall decrease in value with time. And so it did, we saw the Sales of Goods Act, 1930 enact the clause of specific performance in Section 58 modelled on the section 52 of the British Act.

Justifying Specific Performance

Let's suppose I and Da Vinci, an art collector, entered into a contract, where he promised to sell a painting called the 'Mona Lisa' to be delivered to me on 18th March, 2023 for a sum of Rs. 5000. Mr. Da Vinci also told me that it would be the only one in the world. Da Vinci eventually repudiated the contract, the loss to me was not merely of money and mere damages would not suffice.

The painting in question maybe one of 'pretium affectionis', which the Black's Law Dictionary defines as 'an imaginary value put upon a thing by the fancy of the owner, and growing out of attachment for the specific article, it has more to do with emotions, its associations, his sentiment for the donor, etc. The term is used in the context of property valuation, and it recognizes that certain properties may have an intrinsic value beyond their market value due to their sentimental or emotional significance to the owner. For such circumstances, the principles of equity provide for the remedy of Specific Performance.

Historical foundation of equitable jurisdiction for an action of Specific Performance is that the aggrieved party cannot be assuaged with damages as a remedy. The remedy of Specific Performance is construed to ensure adequate remedy where damages don't suffice. Under early common law, an aggrieved party could neither claim Specific Performance in common law courts or damages in the court of Chancery. However, the Mercantile Law Amendment Act, 1836 and the subsequent Chancery Amendment Act, 1858 have made it possible for the parties to obtain either or both of these remedies.

"Specific performance as a remedy for breach or threatened breach of contract means a decree issued by a court of equity or a court having equitable powers, ordering the defendant to render to the plaintiff the performance promised."[3]

Historically, Common law courts rendered the remedy of Specific Performance only when there was no remedy available at law. It was provided when it was the only way to have the needs of the plaintiff satisfied. Like if the goods are of unique nature or were one of a kind, let's take land as an example. No two plots of land can be the same, it has been traditionally perceived as unique.

In Kitchen v. Herring[4], land was considered unique simply because it was land, this was a favoured subject in England and other countries of Anglo Saxon origin. Logically, it was understood that where a chattel like an original oil painting was the subject of a contract, a buyer can obtain it through a decree for specific performance. Specific Performance was also granted for the transfer of a unique horn belonging to the Pusey family bestowed upon them by the Danish King Canute.[5]

Primitively, only the courts of equity could order the specific delivery of chattels for the remedy at law was imperfect, for only damages could be awarded in an action of trover, and in detinue, the defendant could keep the chattel in question upon payment as assessed by the jury. Section 78 of the Common Law Procedure Act 1854, gave Common Law Courts the power to decree specific delivery of the chattel on the application of the plaintiff in an action of detinue: and by section 2 of the Mercantile Law Amendment Act 1856, similar power was given to those courts in respect of a contract to deliver specific goods for a price, a consideration, always in money. Finally, as it stands today, this enactment was replaced by section 52 of the English Act. The legislation did not intend to change the law, but to remedy the defects and loopholes in the procedure of the Common Law courts.

The basis of the remedy of specific performance is the recognition that a contract creates a legal obligation that must be fulfilled, and that parties should be held accountable for the promises they have made. In other words, the remedy of specific performance is based on the principle that parties should be required to fulfil their contractual obligations in order to ensure that justice is done.

In jurisprudence, the principle of equity recognizes that in some cases, strict application of the law may not result in a fair outcome. Therefore, equitable remedies, such as specific performance, are designed to provide a more just outcome in certain situations. Overall, the remedy of specific performance is based on the fundamental principles of equity and justice, which are key concepts in jurisprudence. The remedy recognizes that parties to a contract have an obligation to fulfil their promises, and it is designed to ensure that justice is done in cases where monetary damages are not an adequate remedy.

In this project, I seek to analyse Specific Performance vis-a-vis the Sales of Goods, 1930, therefore, the discussion will largely pertain to section 58 of the act and the judicial pronouncements surrounding the same.

Section 58 and its scope:

"Specific performance.�Subject to the provisions of Chapter II of the Specific Relief Act, 1877 (1 of 1877), in any suit for breach of contract to deliver specific or ascertained goods, the Court may, if it thinks fit, on the application of the plaintiff, by its decree direct that the contract shall be performed specifically, without giving the defendant the option of retaining the goods on payment of damages. The decree may be unconditional, or upon such terms and conditions as to damages, payment of the price, or otherwise, as the Court may deem just, and the application of the plaintiff may be made at any time before the decree.[6]"

A specific performance contract is a type of contract in which the seller is obligated to deliver specific goods to the buyer. In such a contract, the buyer is entitled to receive the exact goods that were agreed upon in the contract. If the seller fails to deliver the goods, the buyer can seek specific performance, which means that the court orders the seller to deliver the goods as per the terms of the contract.Under the Sales of Goods Act, 1930, a specific performance contract is legally binding and enforceable.

It must be noted that only buyers can benefit from this section, it does not extend any support to sellers. The section is only applicable when the buyer is suing the seller that the contract be performed specifically, also, it is only applicable for the delivery of specific goods or ascertained goods, as held in Thames Sack Co v Knowles.[7] It has been successively held that a seller cannot ask for specific performance under this section, as it is only available for the delivery of specific ascertained goods.

Advantages of Specific Performance:

Specific performance is a legal remedy that can provide several benefits for businesses and individuals involved in contractual agreements. The remedy involves a court ordering the breaching party to perform their obligations under the contract, rather than simply awarding monetary damages. This can have a number of advantages for both parties.
  • Specific performance can reduce conflicts between parties. If the breaching party knows that they will have to perform their obligations under the contract, they are less likely to breach in the first place. This is because they have less, if anything, to gain from the breach. In contrast, if only monetary damages are awarded, the breaching party may be able to profit from the breach if the damages are less than the profit they could make from breaching. This creates an incentive for parties to breach, which can lead to increased conflicts and legal costs.
  • Specific performance can encourage bargaining and negotiation before a breach occurs. If the breaching party has received a better offer, they can use the additional profit they will make to negotiate with the other party for a variation or termination of the original contract. As negotiation is less adversarial than litigation, the level of conflict is reduced even further.
  • Specific performance is the most efficient remedy for breaches of contractual obligations. It ensures that parties allocate the risks associated with the contract during its formation. This reduces transaction costs and allows parties to efficiently allocate resources. Moreover, the number of cases in which damage awards are unable to fully compensate the promisee outweighs the number of cases in which specific performance is granted. Thus, the rationale for the intervention of contract law supports the use of specific performance.
  • Specific performance can be used to prevent irreparable harm. In some cases, monetary damages may not be sufficient to compensate the promisee for the harm caused by a breach. For example, if a unique item is promised under the contract and the breaching party fails to deliver it, the promisee cannot be adequately compensated with monetary damages. In such cases, specific performance is the only remedy that can prevent irreparable harm.
  • Specific performance can help to preserve the expectation interest of the promisee. This means that the promisee can receive the benefit of their bargain under the contract, rather than simply being compensated for the loss caused by the breach. For example, if a contractor promises to build a house for a certain price, and then breaches the contract by failing to complete the house, monetary damages may not be sufficient to compensate the promisee for the loss of the value of the completed house. With specific performance, the promisee can still receive the completed house they bargained for.
  • Specific performance can provide several benefits for parties involved in contractual agreements. It can reduce conflicts between parties, encourage bargaining and negotiation, be the most efficient remedy for breaches of contractual obligations, prevent irreparable harm, and help to preserve the expectation interest of the promisee. As such, it is an important legal mechanism that can promote efficient and fair business dealings.

What do the Courts say?
The courts have held differently on different occasions as we shall analyse further. On occasions it has laid down the exceptions when a suit for the specific performance of contract will not be entertained. Like in the case of Bank of Baroda Ltd. v. Jeewan Lal Mehrotra[8],

It declared that "no declaration to enforce a contract of personal service" will be normally granted. The Court in this case was following the Common Law precedent of not entertaining please regarding the enforcement of contracts of personal service.It went on to elaborate the 'the well-recognised exceptions to this rule' like where a public servant has been dismissed from service against Art. 311 of the constitution of India, or where reinstatement of a dismissed worker is sought under the industrial law by Labour or Industrial Tribunals, further,where a statutory body has breached a mandatory obligation imposed upon it by a statute.

In the case of State Bank of Saurashtra V PNB,[9] it held that in case of non-delivery of goods, where there alternative plea for damages has been moved, the court may not direct specific performance through delivery of goods 'after their purchase from open market along with benefit of rights issue' Instead it can just compensate the plaintiff with the refund along with the interest and award reasonable damages.

In the case of Indian Financial Assn. of Seventh Day Adventists v. M.A. Unneerikutty[10] Where the agreement was for sale of property for a Rs 8 lakhs and the substantial portion of the amount had been paid (as advance). And the evidence on record clearly established that the plaintiff was always ready and willing to pay the balance. The suit for specific performance of contract was decreed and the appeal against it was dismissed by the Supreme Court.

In National Insurance Spl. Vol. Retired/Retired Emp. Assn. v. United India Insurance Co. Ltd.,[11] the court held that a contract of employment is also under the ambit of a subject-matter of contract. It held that subject to certain just exceptions, specific performance of the contract can be a way for reinstatement of a dismissed employee and is permissible in law.

The Sales of Goods Act, 1930, is a crucial legislation governing the sale of goods in India. The Act outlines the legal provisions that sellers and buyers must comply with when trading goods. One of the essential provisions of the Act is the specific performance of contracts as a remedy in case of breach of contract.

This provision offers a legal recourse to the aggrieved party to seek court-mandated fulfilment of the contractual obligations. Specific performance is unique as it mandates the party in default to fulfil their contractual obligations. This remedy is usually preferred over damages as it provides a more effective and satisfactory outcome for the aggrieved party.

One of the significant advantages of specific performance is that it ensures that the aggrieved party receives exactly what they bargained for. In a sale of goods transaction, the buyer may not be able to find an alternative product that meets their exact requirements. In such a scenario, damages may not be an adequate remedy. On the other hand, specific performance ensures that the buyer receives the exact goods that were agreed upon, thereby providing a more satisfactory remedy.

  1. Falguni Agrawal, 'The Sales of Goods Act, 1930', 12, Supremo Amicus (2019)
  2. Joseph Chitty, Treatise on the Law of Contracts 806 (Sweet and Maxwell, 15th edn., 1909)
  3. L. Simpson, Handbook Of The Law Of Contracts 405 (2nd edn. 1965)
  4. 42 N.C. 190 (1851)
  5. Pusey V Pusey, 23 Eng. Rep. 465 (1684)
  6. The Sales of Goods Act, 1930 (Act 03 of 1930), s. 58
  7. 88 LJKB 585 (1918)
  8. (1970) 3 SCC 677
  9. AIR 2001 SC 2412
  10. (2006) 6 SCC 351
  11. (2018) 18 SCC 186

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