Saradamani Kandappan v. S. Rajalakshmi & Ors.

Saradamani Kandappan v. S. Rajalakshmi & Ors.

(Performance of Reciprocal promises, S.51 to 55)

FACTS:

Plaintiff entered into contract for purchase of certain mortgaged properties with defendant on following terms: first, that the execution of sale deed shall be at the convenience and desire of plaintiff; subject to her satisfaction of title to the land and nil encumbrance; second, absolute obligation to pay sale price on specific dates, expressly and unequivocally mentioned to be the essence of the contract, by plaintiff failing which defendants could cancel the deed; third, if plaintiff finds title to be unsatisfactory or unacceptable then defendant will be obliged to pay back the entire money received.

Plaintiff didn’t pay the entire sale consideration within stipulated time and defendant cancelled the deed alleging that plaintiff had satisfied herself of title to property at the time of entering into agreement and till execution of deed they were not obliged to give her original papers of title of property, upon which plaintiff denied any satisfaction of title to the property and alleged the repudiation as breach while demanding specific performance in Court.

ISSUES:

1) Whether the time stipulated for payment of balance consideration essence of the contract and whether defendants justified in cancelling the sale deed on its not being adhered to?

2) Whether the parties had agreed upon sequence of performance, which required payment of balance consideration only after defendants satisfied plaintiff regarding their title to the lands?

HELD:

Normally in regard to contract for sale of immovable properties, it is presumed that time is not the essence of contract, but such a presumption is rebutted either if the terms of the contract unequivocally state that time is the essence or if implied intention of parties, determined by express terms or surrounding circumstances, is so. Even when a reason is stated as to whether time should be the essence of the contract, say, need to repay a particular loan before a particular date to obtain clear title of the property at sale, time will be considered the essence of contract.

If time isn’t the essence, then contract needs to be performed within a reasonable time determined from i) express terms of the contract, ii) nature of the contract, iii) from the surrounding circumstances, as for e.g.: object of making the contract

Time need not be essence for whole of the contract: if it is clear intention of the parties to ‘delink’ the parts for which time is to be essence from those for which there is no such stipulation, then only for former parts shall the parties be time bound, albeit such delinking must be defined and possible in eyes of law.

Courts are reluctant in present times to apply the same assumption that time is not to be essence of contract for sale/purchase of immovable properties. Assumption took grounds in time when the prices of properties were stable with very little inflation; hence, need for buyer to be satisfied about the deal, and need for seller to buy any alternative home, over weighed any loss to seller in form of any minor price-rise, albeit with the underlying assumption that such contracts were only for consumption purposes and not for generating any income by investments. However, in present times, when there is galloping inflation and price of properties have been steadily increasing, relying on this assumption and granting specific relief where there was delay on part of purchaser but valid tender on part of seller, it will be inequitable for the seller for the prices of properties get radically increased even in small interval. Further, no more properties are sold or purchased only for consumption purposes rather due to such increase in their prices, constitute a major way of safe investments.

1)    The court observes that the clear intention of the parties was to make time the essence for payment of balance consideration: first of all, time was unequivocally stated to be the essence for such payment, secondly, even a day’s delay was impermissible lest that day should be a holiday, thirdly, it was intended to be unconditional as could be deduced from express terms of contract. Further, there was a conscientious effort to delink the payment of balance consideration and execution of sale deed, latter being at the option of purchaser and upon her satisfaction of clear title. Hence, time was essence only for payment of consideration and not for execution of sale deed.

2)    There is no such express fixation of order in which reciprocal promises were to be performed. Though it was expressly stated that execution of deed shall depend on satisfaction of clear title but nothing of that sort was stated for payment of balance consideration. Instead it was stated as unequivocally unconditional obligation on part of buyer. In fact if the intention of the parties was that only after vendors’ satisfying the vendee of his clear title to the property shall the balance consideration be payable by latter, the situation stipulated in contract, as to obligation of defendant to return all monies paid to her, if plaintiff did not find the title acceptable, would not arise.

Rather, it was expressly intended by parties that upon unconditional payment of sale consideration within stipulated time by vendee shall vendor be obliged to execute the sale deed, at the option of vendee. In these circumstances, S.52 is of avail instead to the defendants.

 

Author: Vishrut Kansal (National University of Juridical Sciences, Kolkata)