specific performance of contracts and force majeure

Legal provision

Which contracts are enforced:

• Section 10: specific performance shall be enforced, subject to section 11(2), section 14 and section 16.
• Section 11: a contract connected with a trust is enforced (11(1)). A trustee's contract in excess of his powers or in breach of trust is not (11(2)).
• Section 12: part of a contract is enforced only in the cases listed.
• Section 14: not enforceable: (a) substituted performance obtained; (b) a continuous duty the court cannot supervise; (c) so dependent on personal qualifications that the court cannot enforce its material terms; (d) a contract determinable in nature.
• Section 17: a vendor or lessor with no title cannot enforce a contract to sell or let.

Force majeure:

• Section 32: contingent contracts to do or not to do anything if an uncertain future event happens cannot be enforced by law until the event has happened. If the event becomes impossible, such contracts become void.
• Section 56, second paragraph: a contract to do an act which, after the contract is made, becomes impossible or, by reason of some event the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.
• Section 65: a person who has received an advantage under a contract that becomes void must restore it or make compensation.

Meaning and definition

A contract is specifically enforceable if no provision bars it and the plaintiff is not barred personally. The court therefore asks first about the kind of contract. The decision tree puts the questions in the order of the sections.

Force majeure is a French term meaning "superior force". In a contract, it is a clause that excuses or suspends performance when an extraordinary event, outside the parties' control, prevents it. The clause usually lists events, such as natural disasters, war, riots, strikes, epidemics and government orders, followed by general words such as "any other event beyond the reasonable control of the party".

The Supreme Court in Dhanrajamal Gobindram v. Shamji Kalidas and Co. (1961) said that force majeure is wider than vis major (an act of God), which covers only natural forces. It includes human events such as strikes. The flowchart shows the questions a court asks.

Detailed explanation

1. Contracts to sell or let land

These are the standard case. Land is treated as unique. The buyer may also ask for possession in the same suit (section 22). In Adcon Electronics Pvt. Ltd. v. Daulat (2001), the Supreme Court held that a suit only for specific performance of a sale agreement is not a suit for land, unless possession is also claimed.

2. Contracts for goods and shares

Before 2018, the court enforced such a contract only where money was not adequate relief, for example for unique goods. The amended Act no longer has that bar. In principle, a contract for goods can also be enforced. In practice, a buyer of ordinary goods can buy in the market or use substituted performance under section 20.

3. Contracts connected with trusts (section 11)

If the act agreed to be done is in performance, wholly or partly, of a trust, the court shall enforce it. If a trustee made the contract beyond his powers or in breach of trust, the court will not enforce it.

4. Part of a contract (section 12)

The court enforces part of a contract only in three cases. First, the missing part is small and money can make it up (section 12(2)). Second, the innocent party asks for what can be performed, pays the price (reduced where money can compensate), and gives up all claim to the rest (section 12(3)). Third, a separate part can stand alone (section 12(4)).

5. Personal service and skill (section 14(c))

A contract of personal service cannot be enforced. A court cannot force a singer to sing or a surgeon to operate. In Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan (2006), the Supreme Court held that an injunction to enforce a post-term right of first refusal would amount to specific performance of a personal service contract, which is barred.

6. Determinable contracts (section 14(d))

A contract that either side can end at will is not enforced, because the defendant could end it as soon as the decree is passed. In Indian Oil Corporation v. Amritsar Gas Service (1991), the Supreme Court refused to enforce a distributorship agreement that could be ended by 30 days' notice without reason. A contract that can be ended only for stated causes is not determinable in this sense.

7. Continuous duty (section 14(b))

A contract that needs the court to watch performance day by day is not enforced. A 20-year contract to run and maintain a plant is an example. The court would have to supervise it for years.

8. Contracts by a vendor without title (section 17)

A vendor who knew he had no title, or who cannot give a title free from reasonable doubt at the fixed time, cannot enforce a contract to sell or let against the buyer.

9. Two routes: the clause and the law

In Energy Watchdog v. Central Electricity Regulatory Commission (2017), the Supreme Court explained the position. Force majeure is governed by the Indian Contract Act. Where it comes from an express or implied clause, it is governed by Chapter III on contingent contracts and particularly section 32. Where the event happens outside the contract, it is dealt with by section 56 (para 32).

• Inside the contract. The clause decides which events count and what follows.
• Outside the contract. There is no clause. Section 56 applies if the act becomes impossible or unlawful. The Supreme Court read "impossible" in a practical and not a literal sense in Satyabrata Ghose v. Mugneeram Bangur and Co. (1954). The doctrine comes from Taylor v. Caldwell (1863).

10. What must be shown

1. The event fits the clause. It is a listed event, or it falls in the general words. General words are usually read in the light of the listed events.
2. It was beyond reasonable control. The party could not have prevented or avoided it.
3. A causal link. The event actually prevented performance. Making it harder or costlier is not enough.
4. Notice and mitigation. The party gave any notice the clause requires and took reasonable steps to reduce the effect.

11. Hardship is not force majeure

In Energy Watchdog, generators won bids to supply electricity at fixed tariffs. Imported coal prices rose and they sought relief. The Court held that a rise in the price of coal is neither frustration nor force majeure (paras 40 and 45). A contract is not discharged merely because it has become more expensive to perform.

12. Effects of a force majeure event

The effect depends on the clause. Common effects are these.

• Performance is suspended for the time of the event.
• The time for performance is extended.
• If the event lasts long, either party may terminate.
• The affected party is not liable for damages for the delay.

Payment obligations that the event does not affect usually continue.

13. Covid-19 and force majeure

The pandemic was not an automatic excuse. Courts looked at the contract and at whether the lockdown really caused the non-performance.

• Government contracts. The Department of Expenditure, Ministry of Finance, issued an office memorandum on 19 February 2020. It said that disruption of supply chains because of the coronavirus is to be treated as a natural calamity. It is covered by force majeure in public procurement, where the clause allows. Each clause is still read on its own words.
• Standard Retail Pvt. Ltd. v. G.S. Global Corp. (Bombay High Court, 8 April 2020). Steel importers asked the court to stop the encashment of letters of credit, citing the lockdown. The Court refused. A letter of credit is an independent transaction with the bank. The force majeure clause applied only to the seller. The exporter had already shipped the goods.
• Halliburton Offshore Services v. Vedanta Ltd. (Delhi High Court, 2020). On 20 April 2020, C. Hari Shankar J. treated the lockdown as prima facie force majeure and restrained encashment of bank guarantees. On 29 May 2020, Prathiba M. Singh J. vacated the order. The contractor had been in breach before the pandemic began, and a bank guarantee is independent of the contract.

14. Force majeure and specific performance

A defendant sued for specific performance may plead force majeure or frustration. He must show that the lockdown or other event actually prevented performance, and not merely that it was a hard time. The plaintiff, for his part, must prove readiness and willingness under section 16(c) of the Specific Relief Act. In its order In re: Cognizance for Extension of Limitation, the Supreme Court excluded the period from 15 March 2020 to 28 February 2022 when it counted limitation. Where limitation would have ended in that period, it gave a minimum of 90 days from 1 March 2022. A court will not treat the pandemic as an excuse for a delay that began before it or that had another cause.

Kinds of contract at a glance, and force majeure compared with frustration

The first table lists the kinds of contract. The second compares force majeure with frustration.

Don't confuse: can be enforced and will be enforced; force majeure and hardship

A kind of contract that can be enforced is not always enforced in a given case. The plaintiff must still clear section 16.

Students often say that anything unexpected is force majeure. The test is prevention, not difficulty.

Common mistakes

• Writing that only land contracts can be enforced. After 2018 almost all kinds can, except those barred.
• Listing "compensation is an adequate relief" as a bar. It was removed in 2018.
• Confusing the kind of contract (section 14) with the plaintiff's own bar (section 16).
• Treating force majeure and frustration as the same. The first depends on the contract, the second on section 56.
• Claiming that a rise in cost or price is force majeure (Energy Watchdog).
• Forgetting that the party must show a causal link, notice and mitigation.
• Treating Covid-19 as an automatic excuse.
• Saying that force majeure is the same as vis major. It is wider.

Apply it

Leading case laws

• Adcon Electronics Pvt. Ltd. v. Daulat (2001)

  Facts. Buyers of Vithal Bhavan, Indore, under an agreement of 12 July 1986 for Rs 53,75,000 sued in the Bombay High Court. AIR 2001 SC 3712.

  Principle. A suit only for specific performance of a sale agreement is not a suit for land. Section 22 bars a decree for possession unless it is specifically claimed.

  Why it matters. It shows how section 22 shapes a suit on a land contract.

• Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan (2006)

  Facts. A sports agency's agreement with a cricketer gave it a right to match third-party offers after the term. AIR 2006 SC 3426.

  Principle. An injunction would be specific performance of a personal service contract, which is barred.

  Why it matters. It is the leading case for the personal-service bar.

• Indian Oil Corporation v. Amritsar Gas Service (1991)

  Facts. A distributorship agreement allowed either side to end it by 30 days' notice. (1991) 1 SCC 533.

  Principle. It is determinable in nature and cannot be specifically enforced.

  Why it matters. It is the standard authority for section 14(d).

• Energy Watchdog v. Central Electricity Regulatory Commission (2017)

  Facts. Adani Power won bids in 2007 and 2008 to supply power at non-escalable tariffs. Indonesian coal prices rose in 2010 and 2011. (2017) 14 SCC 80.

  Principle. Force majeure is governed by the Contract Act: section 32 where there is a clause, section 56 outside the contract. A rise in the price of coal is neither frustration nor force majeure.

  Why it matters. It is the Supreme Court's latest statement of the law.

• Satyabrata Ghose v. Mugneeram Bangur & Co. (1954)

  Facts. A land-development company agreed to sell plots after building roads and drains. War came and the Government requisitioned part of the land. The company said the contract was frustrated. AIR 1954 SC 44.

  Principle. The Supreme Court held that section 56 is a self-contained Indian rule, and "impossible" there is read in a practical sense. Where the contract has its own term for discharge, the case falls under section 32. On the facts, the contract was not frustrated.

  Why it matters. It settles the meaning of impossibility in India.

• Taylor v. Caldwell (1863)

  Facts. A music hall burned down before concerts that had been booked in it. (1863) 3 B & S 826.

  Principle. The contract was discharged because the thing on which it depended was destroyed without fault.

  Why it matters. It is the origin of the doctrine in section 56.

• Dhanrajamal Gobindram v. Shamji Kalidas and Co. (1961)

  Facts. The Supreme Court examined the meaning of "force majeure" in a contract for the sale of goods. AIR 1961 SC 1285.

  Principle. Force majeure is not a mere French version of vis major. It is of wider import and includes events such as strikes.

  Why it matters. It supports a wide reading of listed events.

• Halliburton Offshore Services Inc. v. Vedanta Ltd. (2020)

  Facts. A contractor relied on the lockdown to stop encashment of bank guarantees. The Delhi High Court granted an interim order on 20 April 2020 and vacated it on 29 May 2020.

  Principle. The pandemic cannot excuse deadlines that ended before it began. A bank guarantee is independent of the contract.

  Why it matters. It shows that Covid-19 is not an automatic excuse.

How to write this answer in the exam

Key points to remember

• After 2018, all contracts are enforceable except those barred by section 11(2) or section 14.
• Land contracts are the standard case. Personal service, determinable and continuing contracts are barred.
• Check the kind of contract first, then the plaintiff (section 16).
• Force majeure is a clause. The Contract Act does not define it.
• Clause: section 32. No clause: section 56 (Energy Watchdog).
• Show: fit with the clause, beyond control, causal link, notice and mitigation.
• A rise in cost is hardship, not force majeure.
• Covid-19 was not an automatic excuse (Standard Retail; Halliburton).
• It is wider than vis major (Dhanrajamal Gobindram).

Quick self-test

Related topics

• Specific performance of the contract – As a rule enforced by court
• Injunctions to perform negative agreement
• Discharge by impossibility of performance (Doctrine of Frustration)
• Construction contracts
• Contingent contracts