Substituted Performance of Contract

In one line

A remedy that did not exist before 2018: get the job done by somebody else and send the bill to the party who broke the contract.

In the words a student can write in an exam: section 20 of the Specific Relief Act 1963, substituted by section 10 of the Specific Relief (Amendment) Act 2018 with effect from 1 October 2018, provides that where a contract is broken by non performance, the party who suffers "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." It may be exercised only after written notice of not less than thirty days; the expenses are recoverable only if the contract has in fact been performed by the third party or his own agency; having taken this route he cannot claim specific performance; and nothing prevents him claiming compensation.

This is MU's topic 4.2.4 by name, and it is the clearest proof that the syllabus is built on the amended Act. Before 2018 section 20 was headed "Discretion as to decreeing specific performance"; it is now a wholly different remedy. The heading above the group of sections was changed too, from "Discretion and powers of Court" to "Substituted performance of contracts, etc.", by section 9 of the amending Act.

Why the remedy was created

Consider the ordinary commercial case. A contractor abandons a half built factory. The owner's remedies before 2018 were two, and neither was satisfactory.

Damages under section 73 of the Contract Act. He must finish the work himself, fund it, and then sue, proving his loss and meeting arguments about remoteness and mitigation. He carries the cost and the risk of the litigation.

Specific performance. Very likely barred by the old section 14, because performance involved a continuous duty the court could not supervise, and in any event discretionary and slow.

Section 20 gives a third route that matches what a commercial party actually does: finish the work, then recover what it cost. It converts a self help step that businesses take anyway into a statutory right with a defined procedure, which is what makes the expenses recoverable as such rather than as damages to be proved from scratch.

The provision itself

"(1) 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.

(2) No substituted performance of contract under sub-section (1) shall be undertaken unless the party who suffers such breach has given a notice in writing, of not less than thirty days, to the party in breach calling upon him to perform the contract within such time as specified in the notice, and on his refusal or failure to do so, he may get the same performed by a third party or by his own agency:

Provided that the party who suffers such breach shall not be entitled to recover the expenses and costs under sub-section (1) unless he has got the contract performed through a third party or by his own agency.

(3) Where the party suffering breach of contract has got the contract performed through a third party or by his own agency after giving notice under sub-section (1), he shall not be entitled to claim relief of specific performance against the party in breach.

(4) Nothing in this section shall prevent the party who has suffered breach of contract from claiming compensation from the party in breach."