Anticipatory Breach of Contract
Anticipatory Breach of Contract
2018 : An Overview
Submitted by
Pratyush Kumar
Batch 2018-2023
Division B
PRN 18010224207
In January’2019
ASSISTANT PROFESSOR
C E R T IF IC AT E
The material borrowed from other sources and incorporated in the research report
has been duly acknowledged. We understand that we would be held responsible
and accountable for plagiarism, if any, detected later on.
Date:
INTRODUCTION
The Specific Relief (Amendment) Act, 2018 (Amendment Act)1 was published
in the official gazette on 1 August 2018. The Amendment Act has been introduced
with the primary intent of introducing greater certainty in enforcement of contracts
and enabling faster and easier enforcement of contracts and resolution of contractual
disputes. The Amendment Act was introduced pursuant to the recommendations of
the Expert Committee’s Report on the Specific Relief Act, 19632(SRA), which was
constituted to suggest measures to ensure that the law relating to specific relief is
made more business friendly and enhance the ease of doing business. Provisions of
the Amendment Act will come into force on such dates as may be notified by the
Central Government.
(i) The actual damage caused due to the non-performance of the action
could not be ascertained;
(ii) When monetary compensation would not be adequate relief for the
non-performance of contract. However, the Amendment Act now
makes it mandatory for a court to grant specific performance of a
contract (including those relating to performance of an action agreed
to be done in performance of a trust), unless: (i) a contract was made
by a trustee in excess of his powers or in breach of trust; (ii) the
contract for which specific performance is sought, falls with the
categories of contracts specified in Section 14 of the SRA (discussed
1 The Amendment is published in the Gazette of India, Extraordinary Part II, S 1, dated August 1, 2018
2 The Act received the assent of the President on December 13 , 1963 and published in the gazette of India,
Extra.,Part II,
S. 1 , dated December 16, 1963
below); or (iii) specific performance is to be enforced in favour of a
person who falls within the category of persons listed in Section 16 of
the SRA (discussed below). Section 21 of the SRA has further been
amended to clarify that specific relief can be sought in addition to
compensation and does not have to been in substitution of specific
performance. Even so the act does not cover all specific reliefs
conceivable.3
Contracts which cannot be specifically enforced: Section 14 of the SRA has now
been amended to state that the following categories of contracts cannot be
specifically enforced:
(i) who has obtained substituted performance of the contract (as discussed
below);
(ii) who himself (a) has become incapable of performing the contract; (b) has
violated essential terms of the contract; (c) has not performed his part of the
contract; (d) acts in fraud, wilful variance and in subversion of the contract; or
(iii) who fails to prove that he has performed or has been ready and willing to
perform the essential terms of the contract, other than those terms which were
waived / prevented by the defendant.
The Amendment Act has also amended Section 16 of the SRA to suggest that a
party seeking specific performance, only has to “prove” that such party has
3
Ashok Kumar Srivastav v National Insurance Co.Ltd(1998) 4SSC 361: AIR 1998 SC 2046
performed or has been ready and willing to perform the essential terms of the
contract and an averment to such effect in the pleadings is no longer mandatory
when seeking specific performance. Therefore, in case the courts can infer that a
party seeking relief has performed or has been ready and willing to perform the
essential terms of the contract, courts can still grant specific relief, even if the
pleadings do not contain an averment to such effect.
Expert opinion: The Amendment Act permits courts to engage experts on specific
issues as determined by it, and the court inter alia has the power to direct persons
to give documents, information and access for inspection, to the expert and also
has the power to examine the expert or the expert’s report in open court. Also,
courts can direct disputing parties to bear the fee payable to such expert, as it
may appoint in relation to such proceedings.
LITERATURE REVIEW
Review 1-
“Notification of the coming into force of the different provisions introduced by the
Amendment Act is presently awaited. The Specific Relief Act, 1963 codifies the law in
relation to grant of the relief of specific performance including injunctions. Under the
Act,the remedy of specific performance was not available to a party as a matter of
right, but its grant was based on the discretion of the court. The Amendment Act has
brought about a substantive change in the substratum and ethos of the Act.”
“The Specific Relief Act, 1963 (Act) codifies the law in relation to grant of the
relief of specific performance 4 including injunctions.”As per the Amendment Act, the
courts are bound to enforce the specific performance of a contract as a rule, subject to
limited exceptions.”
“A new Section 20A to the principal Act provides that for infrastructure project
contracts,the court shall not grant an injunction in any suit, where it would cause
hindrance or delay in the continuance or completion of the infrastructure project. The
Amendment Act itself does not provide any guidance on whether the amendments would
operate prospectively or retrospectively. A similar controversy in the context of the 2015
amendments to the Arbitration and Conciliation Act, 1996 is still unsettled, in so far as the
Arbitration and Conciliation Bill, 2018 is pending approval with the Parliament . Let’s
examine the extent and magnitude of the controversy on the basis of some well settled
legal principles.”
4 ‘Specific Performance’ is a remedy ordered by courts, that requires precise fulfillment of the contractual or
legal obligation. See Specific Performance, Black’s Law Dictionary (10th ed., 2014).
Background and Nature of Amendments
Therefore, from this perspective, the Amendment Act would need to be construed as not
having retrospective effect.
As per the Amendment Act, the courts are bound to enforce the specific performance of a
contract as a rule, subject to limited exceptions.
“A new Section 20A to the principal Act provides that for infrastructure project
contracts,the court shall not grant an injunction in any suit, where it would cause
hindrance or delay in the continuance or completion of the infrastructure project. The
Amendment Act itself does not provide any guidance on whether the amendments would
operate prospectively or retrospectively.” A similar controversy in the context of the 2015
amendments to the Arbitration and Conciliation Act, 1996 is still unsettled, in so far as the
Arbitration and Conciliation Bill, 2018 is pending approval with the Parliament 6. Let’s
examine the extent and magnitude of the controversy on the basis of some well settled
legal principles.
5
Expert Committee’s Report on Specific Relief Act, 1963 submitted on 26 th May 2016
6
The Arbitration and Conciliation (Amendment) Bill, 2018 seeks to introduce Section 87 to the principal Act to clarify that
the provisions of the Arbitration and Conciliation (Amendment) Act, 2015 are applicable to fresh arbitrations and court
proceedings relating thereto viz. arbitration and court proceedings relating to the arbitrations invoked on or after
23.10.2015. In any case, whether the provisions of the Arbitration and Conciliation (Amendment) Act, 2015 would apply to
Section 34 application which were pending as on 23.10.2015 is still res integra.
Background and Nature of Amendments
“Therefore, from this perspective, the Amendment Act would need to be construed as not
having retrospective effect.”
“Under the Act , there was an obligation cast on the plaintiff seeking specific performance
to prove that compensation as a remedy is either inadequate or unascertainable. Section
6 inter alia states that a repeal shall not affect any right, privilege, obligation or
liability acquired, accrued or incurred under any enactment so repealed.” It also
saves the previous operation of any enactment so repealed or anything duly done
or suffered thereunder7.”This obligation of the plaintiff can be viewed as a
corresponding right or privilege enjoyed by a defendant. By virtue of Section 6, the
aforementioned right and obligation that accrued when the Act was in force, would stand
preserved even after the introduction of the Amendment Act. This is particularly so
because the plain language of the Amendment Act does not in any way indicate an
intendment to take away accrued and vested rights.”
“In the absence of a breach or a dispute, no right under the Act can be said to have
accrued. It does not matter that the contract was entered into prior to the Amendment
Act coming into force – i.e. at a time when the Act was in force. One of the main
objectives of the Amendment Act is to reduce the intervention of the courts to ensure that
public works contracts can function smoothly. The consequent ambiguity is likely to result
in a lot of judicial time being spent to quell the controversy.”
Let us hope that some remedial measures are taken by the legislature to prevent this
oversight from blowing up into extensive litigation at the cost of hapless litigants.
7
The Gujarat Electricity Board v. Shantilal R. Desai AIR 1969 SC 239
Review 2- By S.S. Rana & Co. Advocates
“In order to ensure the specific relief to the individuals or entities in furtherance to
the enforcement of their civil rights, the Specific Relief Act, 1968 (hereinafter
referred to as the "Act") was introduced. In certain cases where no amount of
compensation or any other legal remedy can mitigate losses of the suffering party,
such party may seek relief requiring performance of the specific obligations
undertaken in the original agreement between the parties.”
“Section 14A of the Act - Where the court considers it necessary to get
expert opinion to assist it on any specific issue involved in the suit, it may
engage one or more experts for providing evidence, including production of
documents on the issue which shall be based on relevant information and
form a part of the record.”
“Section 15(fa), Section 19(ca) of the Act - Specific performance of a
contract may also be obtained 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.”
“Section 20 of the Act - Substituted performance of contract may be allowed
without prejudice to the generality of the provisions contained in the Indian
Contract Act, 1872, and, except as otherwise agreed upon by the parties,
where the contract is broken due to non-performance of promise by any
party, the party who suffers by such breach shall have the option of
substituted performance through a third party or by his own agency, and,
recover the expenses and other costs actually incurred, spent or suffered by
him, from the party committing such breach after the party who suffers such
breach has given a notice in writing, of not less than thirty days.”
“Section 20A of the Act - Special provisions for contract relating to
infrastructure project stating that no injunction shall be granted by a court in
a suit in this regard which would cause impediment or delay in the progress
or completion of such infrastructure project.”
“Section 41(ha) of the Act - An injunction cannot be granted if it would
impede or delay the progress or completion of any infrastructure project or
interfere with the continued provision of relevant facility related thereto or
services being the subject matter of such project.”
CONCLUSION
Although several of the provisions introduced by the Amendment Act, such as the
appointment of experts and substituted performance are common contractual
terms, they are nevertheless, a welcome statutory addition.
The Bibliography should contain a list of all the books, journals, articles and
pamphlets that the researcher has consulted during the course of the study. It
should be arranged alphabetically.
https://blog.ipleaders.in/specific-relief-amendment-act-2018/
https://corporate.cyrilamarchandblogs.com/2018/09/specific-relief-amendment-
act-2018-prospective-retrospective/
http://www.egazette.nic.in/writereaddata/2018/187919.pdf
http://www.mondaq.com/india/x/760920/Contract+Law/The+Specific+Relief+Am
endment+Act+2018
http://www.mondaq.com/india/x/736966/Contract+Law/The+Specific+Relief+Am
endment+Act+2018+Overview+Implications