K.S. Manjunath v. Moorasavirappa 2025 INSC 1298 - Specific Relief Act - Unilateral Termination Sale Agreement

Specific Relief Act 1963 - Section 14,16- (i). Unilateral termination of the agreement to sell by one party is impermissible in law except in cases where the agreement itself is determinable in nature in terms of Section 14 of the Act of 1963; (ii). If such unilateral termination of a non-determinable agreement to sell is permitted as a defence, then virtually every suit for specific performance can be frustrated by the defendant by placing an unfair burden on the plaintiff, who despite performing his part of the obligations and having showcased readiness and willingness, would require to also seek a separate declaration that the termination was bad in law. In such cases, the burden cannot be casted upon the plaintiff to challenge the alleged termination of agreement; iii). Where a party claims to have valid reasons to terminate or rescind a non-determinable agreement to sell, with a view to err on the side of caution, it should be such terminating party, if at all, who ideally should approach the court and obtain a declaration as to the validity of such termination or rescission, and not the non-terminating party. However, this must not mean that the defendant (the terminating party) in such cases would mandatorily be required to seek a declaration because Sections 27 and 31 of the Act of 1963 respectively, while using the phrase “may sue” merely give an option to any person to have the contract rescinded or adjudged as void or voidable; (iv). Once the alleged termination of a non-determinable agreement in question is found to be not for bona fide reasons and being done in a unilateral manner on part of the defendant, it cannot be said that any declaration challenging the alleged termination was required on part of plaintiff; (v). If a contract itself gives no right to unilaterally terminate the contract, or such right has been waived, and a party still terminates the contract unilaterally then that termination would amount to a breach by repudiation, and the nonterminating party can directly seek specific performance without first seeking a declaration; and (vi). In the event it is found that the termination of agreement to sell by the defendant was not valid, then such an agreement to sell will remain subsisting and executable. (Para 43)

Contract Law - Determinable contracts- determinable contracts derive their existence from the determination clause envisaged in the contract and there are essentially three types of determination clauses, viz. (i) termination for cause that allows a party to terminate the contract if the other party breaches a specific term or if a specified event occurs, (ii) termination for convenience that allows a party to end the contract without having to give a reason and (iii) termination upon expiry of the term of the contract. the question whether a contract is in its nature determinable lies in ascertaining whether the party against whom specific performance is sought has the right to terminate the contract even when the other party is ready and willing to perform. This means if the contract cannot be terminated so long as the other party stands willing to perform, it is not determinable in its nature and would, in equity, be specifically enforceable- a contract terminable for breach cannot merely for that reason be regarded as determinable, otherwise, no contract could ever be specifically enforced.(Para 65) (i) contracts inherently revocable such as licences and partnerships at will, and (ii) contracts terminable unilaterally on a “without-cause” basis, were held to be determinable in nature. The remaining classes, namely, (iii) contracts terminable for cause without provision for cure, (iv) contracts terminable for cause with notice and opportunity to cure, and (v) contracts without a termination clause but terminable only for breach of a condition, were all held not determinable in nature. (Para 64)

Specific Relief Act 1963 - Section 19- To claim protection under Section 19(b) of the Act of 1963, the purchaser must show three things: (a) purchase for value, (b) payment in good faith, and (c) absence of notice of the earlier contract. “Notice” includes not merely actual knowledge but also constructive and imputed knowledge - Bona fide purchase depends inter alia on the purchaser’s knowledge of the prior agreement -Where subsequent purchasers were aware of the existence of a prior agreement, their failure to make inquiries from the prior vendees negated both honesty and good faith. (Para 80) A subsequent purchaser who relies merely on the assertions of the vendor or who chooses to remain content with his own limited knowledge while consciously abstaining from making further inquiry into the subsisting interests in the property cannot escape the consequences of deemed notice. Equity ought not assist a transferee who deliberately avoids the truth that lies open to discovery. Thus, a purchaser who has before him a document which on its very face shows the termination to be unilateral and rooted in the vendors’ inconvenience cannot by shutting his eyes claim the benefit of “good faith”.

Specific Relief Act 1963 - Section 16(3) -A party seeking enforcement of a contract must establish that all conditions precedent have been satisfied, and that he has either discharged or stood prepared and willing to discharge his obligations under the contract- “readiness” relates to the plaintiff’s capacity to perform the contract, including his financial ability to pay the consideration, whereas “willingness” is demonstrated through the plaintiff’s conduct, evidencing his genuine intent to perform the contract. (Para 82) the test of readiness and willingness would depend on the overall conduct of the plaintiff both prior to and subsequent to the filing of the suit for specific performance and such conduct of the plaintiff has to be viewed in light of the conduct of the defendant. (Para 83)

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K.S. Manjunath v. Moorasavirappa 2025 INSC 1298 - Specific Relief Act - Unilateral Termination Sale Agreement

Specific Relief Act 1963 - Section 14,16 - (i). Unilateral termination of the agreement to sell by one party is impermissible in law except in cases where the agreement itself is determinable in nature in terms of Section 14 of the Act of 1963; (ii). If such unilateral termination

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