[Rahul Sibal is an advocate who graduated from
NALSAR Hyderabad. The author thanks Purvi Khanna, Nishtha Gupta and Anirudh
Ramakrishnan for their comments on the draft version. However, the views
expressed are the author’s alone. The author can be contacted at [email protected].]
[The first and second posts in the series can be accessed here and here]
In the previous post, the author analysed and responded to two arguments made by practitioners in favour of the retrospective operation of the Specific Relief (Amendment) Act 2018, namely: (a) that the Specific Relief Act, 1963 is a procedural enactment, (b) that the rule against retrospectivity is inapplicable where the entire provision is repealed and substituted.
In this post, the author analyses and responds to the remaining two arguments made in favour of retrospective operation, namely: (c) that the amendment is intended to have retrospective application, and (d) that the duty of the defendant to perform his contractual obligations is created at the time of the contract itself, and therefore the removal of defenses to specific performance that were previously available to the defendant under sections 10 and 14 does not result in the imposition of new duties.
Argument (c): That the amendment is intended to have retrospective application
It has been argued that the retrospective application of the Specific Relief (Amendment) 2018 would be in consonance with its legislative intent. No doubt the Parliament has the power to pass laws that operate retrospectively even if such operation affects substantive or vested rights, such as the retrospective amendments introduced after the Supreme Court’s ruling in Supreme Court in Vodafone International Holdings BV v. Union of India (2012).
However, the author submits that this argument is unsustainable since the intention for retrospective application requires to be manifested by express words or necessary implication. No such intention can be derived from Specific Relief (Amendment) Act, 2018, the Rajya Sabha debates, the Statement of Objects and Reasons, or the Gazette Notification of the Amendment.
Argument (d): That omission of defences to specific performance does not result in the imposition of new duties.
For convenience, this argument has been referred to as the ‘Fourth Argument’. As readers would recall, the author argued in the first post that provisions such as sections 10 and 14 stipulate conditions that require to be fulfilled for the decree of specific performance to be granted. On this basis, it was contended that the omission of these conditions by the amendment to the Specific Relief Act results in the creation of liability to specifically perform in scenarios where previously the defense of non-fulfilment of such conditions could have allowed defendants to escape the obligation of performance. On this basis, it was argued, by placing reliance on Plewa v. Chief Adjudication Officer [1995] 1 AC 249 that the amendments to the Specific Relief Act alter ‘substantive’ rights and should therefore be construed to be prospective in application. A more detailed exposition of the argument can be accessed in the first post.
The Fourth Argument counters the above line of reasoning on the premise that the defendant-promisee is already under a contractual obligation to specifically perform her promised tasks. It follows that, after breach, such court orders that require the defendant to specifically perform such tasks do not create new obligations for the defendant, but merely enforce the already existing duty of the defendant to perform her contractual obligations. Hence, the conditions stipulated in sections 10 and 14[1] constitute mere ‘disabilities’ of the plaintiff in enforcing her already existing rights and cannot be understood as ‘defenses’ available to the defendant. It follows that that the removal of such disabilities by the amendment to the Specific Relief Act should operate retrospectively, since no ‘vested rights’ of the defendant have been altered.
To better understand the Fourth Argument, it is imperative to draw attention to two distinct concepts of contract law: (a) the contractual obligation to perform, and (b) the court ordered obligation of specific performance. The former refers to the plaintiff’s right arising from the contract, to demand performance of contractual obligations. In contrast, the latter refers to the plaintiff’s right arising from order of the court to grant specific performance.
To recount, the Fourth Argument states that the obligation of the defendant to specifically perform is an already existing contractual obligation, and that the conditions stipulated in sections 10 and 14 constitute mere ‘disabilities’ of the plaintiff in enforcing her already existing rights. Based on this, it is contended that the removal of such disabilities cannot be understood as an alteration of substantive rights.
Relying on the distinction between contractual and court ordered obligations drawn above, it becomes clear that the Fourth Argument postulates that the defendant’s obligation to specifically perform is a contractual obligation. In other words, the Fourth Argument is based on the premise that the defendant’s obligation to specifically perform does not arise as a consequence of the breach of contractual obligations, but rather is a contractual obligation itself.
The author submits that the above premise, on which the Fourth Argument is based, conflates contractual obligations with court ordered obligations. It is submitted that the obligation to specifically perform cannot be understood as a contractual obligation for the following reasons.
First, unlike the right to contractual performance, the grant of specific performance in common law jurisdictions (and in India before the amendment to the Specific Relief Act), is at the discretion of the court,[2] and the plaintiff, at most, has the right to have the court consider granting specific performance.[3] Further, such right to consider lies against the court, and not the defendant. Correlatively, viewed from the lens of Hohfeldian jurisprudence,[4] after the breach, but before the decree of specific performance, the defendant has no duty to specifically perform. For this reason, it is difficult to sustain the proposition that the defendant bears an already existing obligation to specifically perform before the order of specific performance is granted.
Second, even if parties were to include an express clause in the contract mandating specific performance as the sole and necessary remedy in the event of breach, with the intent to fetter the discretion of the court, the plaintiff would yet not acquire any right to specific performance since the discretion of courts to grant (or not grant) specific performance cannot be contractually fettered (Quadrant Visual Communications v Hutchison Telephone, UK [1993] B.C.L.C. 442). It follows that even if contracting parties intend to accord specific performance the status of a contractual obligation, such intention cannot be enforced by law.
Third, asserting an equivalence between the right to demand contractual performance, and the right to specific performance would conflict with historical policy considerations that underlie specific performance. For instance, it is settled law that employers[5] in cases concerning personal service contracts cannot be granted specific performance since doing do would tantamount to servitude. However, even in personal service contracts, the promisee-defendant still possesses the right to demand contractual performance before breach. Evidently, in such contracts, the right to demand contractual exists despite the absence of right to demand specific performance. It follows, therefore that right to contractual performance does not necessarily encompass the right to specific performance.
Fourth, in common law jurisdictions, the right to contractual performance, and right to specific performance emanate from distinct sources.[6] Once a decree of specific performance is granted, the defendant’s obligation to perform stems from the order of the judiciary, and not the contract. It is precisely for this reason that the basis of both contempt and execution proceedings is not the breach of contractual duties but the existence of a court order.[7] For instance, the plaintiff in an execution or a contempt of court proceeding is not required to prove breach, but merely needs to prove the existence of the decree of specific performance. In fact, the view that the right to specific performance is a contractual right finds academic support only in some civil jurisdictions where specific performance has historically been treated as the primary remedy.[8]
In view of the above, it becomes clear that the defendant’s obligation to specifically perform under the Act arises only on the order of the court. However, until the amendment of the Specific Relief Act, courts could not grant such orders unless the conditions stipulated in provisions such as sections 10, 14 and 20(2) were not fulfilled. It follows, that such conditions were not mere procedural disabilities of the plaintiff, but substantive conditions required to be fulfilled for the defendant’s obligations to arise. Therefore, the omission of such conditions needs to be understood as alteration of ‘substantive rights’ and accordingly attracts the rule against retrospective operation.
In view of the analysis in the previous post, and this post it is submitted that the amendment should not apply to pending proceedings. Recently, some courts have decided on the issue of retrospectivity of the Specific Relief (Amendment) Act 2018. These decisions will be analysed in the next post.
– Rahul Sibal
[1] The amendments to these provisions were discussed in the table provided in the first post.
[2] See unamended Section 20 of the Specific Relief Act, 1963. Also See Smith, S.A., 2019. Rights, Wrongs, and Injustices: The Structure of Remedial Law. Oxford University Press, at p.319; Jukier, Rosalie, Taking Specific Performance Seriously: Trumping Damages as the Presumptive Remedy for Breach of Contract (2010). Taking Remedies Seriously/Les Recours Et Les Mesures De Redressement: Une Affaire Sérieuse, p. 85, Robert J. Sharpe & Kent Roach, eds., Canadian Institute for the Administration of Justice, 2010. Available at SSRN: https://ssrn.com/abstract=2002230, p. 104.
[3] See Smith, S.A., 2019. Rights, Wrongs, and Injustices: The Structure of Remedial Law. Oxford University Press, p.42. See also O’Gorman, D.P., 2014. Contract law and fundamental legal conceptions: An application of Hohfeldian terminology to contract doctrine. Miss. CL Rev., p. 373.
[4] The legal scholar Wesley Newcomb Hohfeld argued that every duty is created against a correlative right. In the present context, since the plaintiff does not possess any right of specific performance against the defendant, no duty can be said to exist with the defendant. See Hohfeld, W.N., 1913. Some fundamental legal conceptions as applied in judicial reasoning. Yale LJ, 23, p.16.
[5] For ease of explanation, promisees in personal service contracts have been referred to as ‘employers’ and vice versa for promisors.
[6] Smith, Stephen, The Law of Damages: Rules for Citizens or Rules for Courts? (April 17, 2009). Contract Damages: Domestic And International Perspectives, D. Saidov, R. Cunnington, eds., Hart Publishing, 2008. Available at SSRN: https://ssrn.com/abstract=1390582, p.4.
[7] Smith, Stephen, Rights, Wrongs, and Injustices: The Structure of Remedial Law – Introductory Text (December 17, 2019). Stephen A. Smith – Rights, Wrongs, and Injustices: The Structure of Remedial Law (Oxford University Press, 2019). Available at SSRN: https://ssrn.com/abstract=3505672, p.42.
[8] “Is the System of Contract Remedies in the Netherlands Efficient From a Law and Economics Perspective?” in Jan Smits, Daniel Haas and Geerte Hesen, eds., Specific Performance in Contract Law: National and Other Perspectives (Antwerp: Intersentia, 2008), p.315.
