Specific Performance of Commercial Contract: Refusal Grounds

Introduction

The usual remedy for breach of a commercial contract is damages. Money, however, does not always put the injured party back where it started. A specific property, a business relationship, a supply commitment or a commercial opportunity may be worth more than money can compensate.

In such cases, a party can ask for specific performance. This is a court order compelling the other party to do what it promised.

The remedy gained importance after the Specific Relief Act was amended in 2018. Specific performance is now governed by Section 10 of the Specific Relief Act, 1963. Section 10 says specific performance “shall be enforced”, subject to Sections 11(2), 14 and 16. The earlier position was more discretionary, and the amendment aimed to strengthen enforcement, especially of commercial contracts.

Proving a breach does not automatically produce a decree, however. The Act limits when a decree can be granted. The questions are whether the contract is of a kind that can be specifically enforced, and whether the claimant’s own conduct falls within those limits.

How the 2018 Amendment Changed Specific Performance

The change starts with Section 10. In B. Santoshamma v D. Sarala, the Supreme Court considered the 2018 amendment. It held that specific performance is no longer discretionary as it was under the earlier law. The Court also pointed to the limits in Sections 11, 14 and 16.

The amendment did not change the conditions a claimant must meet before a court grants the remedy. It strengthened the position of the party seeking enforcement, but a breach by the other side is not enough for a decree. The terms of the contract still matter, and so does the claimant’s conduct.

Which Contracts Cannot Be Specifically Enforced?

Section 14 answers this question directly. Specific performance cannot be granted in the following situations:

• Substituted performance has been obtained under Section 20.

• The contract involves a continuous duty that a court cannot supervise.

• The contract depends on personal qualifications.

• The contract is, by its nature, determinable.

The last point matters for business contracts. Commercial agreements often include termination clauses because the parties want an exit if circumstances change. If a contract is determinable, specific performance cannot enforce it.

In these situations, refusal does not mean the court is disregarding the contract. The remedy may simply not suit the nature of the contract.

The Claimant Must Prove Its Own Readiness and Willingness

A person seeking specific performance must show that they have performed, or have always been ready and willing to perform, the essential terms of the contract. This requirement comes from Section 16.

A description of these words in the plaint is not enough. In R. Shama Naik v G. Srinivasiah, the Supreme Court distinguished readiness from willingness:

Concept What it means Readiness The ability to perform. Where payment is involved, this includes financial capacity.Willingness: The claimant’s intention, shown through conduct.

The Court noted that the evidence must demonstrate the financial capacity needed to complete the transaction.

This matters most where a commercial contract involves a large sum of money. A court should not be expected to compel the other party to complete a transaction when the claimant is not itself trying to see it through.

Conduct During Litigation Can Also Matter

In Sangita Sinha v Bhawana Bhardwaj, the purchaser accepted and encashed a large sum as compensation while the proceedings were pending. The Supreme Court set aside the decision in that case. The Court treated this conduct as relevant to the purchaser’s continued claim for specific performance.

What Happens When Too Much Time Has Passed?

A commercial dispute can be litigated for years. A transaction that looked sensible at signing may look very different when a final decree is being considered.

Delay is not, by itself, fatal to a claim for specific performance. But when a long time has passed since the original contract, the court may consider what has happened in between. It may ask whether enforcing the original bargain would still be fair.

Subhash Aggarwal v Mahender Pal Chhabra is a recent example. The agreement to sell was drawn up in 2008 and reached the Supreme Court in 2026. The Court considered the claimant’s financial ability, the non-performance by the parties, and what had happened over the years before it denied specific performance.

The court is not simply choosing between “contract” and “no contract”. It is weighing the rights of the parties it has to recognise. It is also looking for a sensible way to make the remedy effective without compromising the bargain.

Why This Matters for Commercial Contract Drafting

Businesses should draft carefully. A termination clause, a payment obligation, or a provision for payment on substituted performance can each affect whether specific performance is available.

The contract creates the obligation. Whether it can be enforced through specific performance depends on whether the conditions of the Specific Relief Act are met.

Conclusion

The 2018 amendment strengthened specific performance as a remedy, but it did not make it automatic. The circumstances and conduct around the dispute can lead a court to refuse relief, even where the claimant argues that it meets Section 16.

Commercial parties should note that a breach can create a strong claim, but more is needed to succeed. A claimant must show:

1. The contract is one that can be specifically enforced.

2. The claimant has performed consistently with its own obligations.

3. The relief sought is not unworkable in the circumstances.

The amendment has toughened enforcement while the remedy’s inherent limits remain. Specific performance can safeguard a commercial bargain, but the court will decide whether, in the specific case, the bargain can and should be protected.

KEY TAKEAWAYS

• The 2018 amendment made specific performance enforceable under Section 10, subject to Sections 11(2), 14 and 16.

• Proving a breach is not enough for a decree.

• Section 14 bars specific performance of certain contracts, including determinable contracts and those involving a continuous duty the court cannot supervise.

• Specific performance cannot be granted where substituted performance has been obtained under Section 20.

• The claimant must prove readiness (ability, including financial capacity) and willingness (conduct).

• Conduct during litigation, such as accepting compensation, can affect the claim.

• Delay is not automatically fatal, but long delay lets the court reconsider whether enforcement is still fair.

• Termination, payment and substituted-performance clauses can influence whether specific performance is available.

FAQ SECTION

1. What is specific performance of a contract?
It is a court order requiring a party to carry out what it promised under the contract, instead of paying damages.

2. Why would a commercial party seek specific performance instead of damages?
Money may not adequately compensate for a specific property, business relationship, supply commitment or commercial opportunity.

3. What does Section 10 of the Specific Relief Act say after the 2018 amendment?
It provides that specific performance “shall be enforced”, subject to Sections 11(2), 14 and 16.

4. Is specific performance still discretionary in India?
In B. Santoshamma v D. Sarala, the Supreme Court held that after the 2018 amendment it is no longer discretionary as under the earlier law. It remains subject to Sections 11, 14 and 16.

5. Does proving breach guarantee a decree?
No. The contract and the claimant’s conduct remain relevant.

6. Which contracts cannot be specifically enforced?
Under Section 14, these include contracts where substituted performance has been obtained under Section 20, contracts involving a continuous duty the court cannot supervise, contracts dependent on personal qualifications, and contracts that are determinable in nature.

7. Why do termination clauses matter?
If a contract is determinable by its nature, it cannot be enforced through specific performance. Termination clauses can therefore affect enforceability.

8. What is substituted performance?
It is a mechanism under Section 20 of the Act. Where a party has obtained substituted performance under that section, specific performance cannot be granted.

9. What are “readiness” and “willingness”?
Readiness is the ability to perform, including financial capacity where payment is involved. Willingness is shown through conduct.

10. Is it enough to claim readiness in the plaint?
No. In R. Shama Naik v G. Srinivasiah, the Supreme Court noted that evidence must demonstrate the financial capacity needed to complete the transaction.

11. Can a claimant’s conduct during the case affect the outcome?
Yes. In Sangita Sinha v Bhawana Bhardwaj, the purchaser’s acceptance and encashment of a large sum during the proceedings was treated as relevant to the specific performance claim.

12. Does delay automatically defeat a specific performance claim?
No. Delay is not fatal by itself, but a court may consider what has happened since the contract and whether enforcement would still be fair.

13. Can a court refuse specific performance after many years of litigation?
Yes. In Subhash Aggarwal v Mahender Pal Chhabra, the Supreme Court denied specific performance of a 2008 agreement to sell after considering factors including financial ability and non-performance.

14. What must a claimant show to succeed?
That the contract is specifically enforceable, that the claimant performed consistently with its obligations, and that the relief sought is workable in the circumstances.

15. How can businesses protect their position when drafting contracts?
By drafting termination, payment, and substituted-performance provisions carefully, since each can affect whether specific performance is available.

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