Contracts Connected with Trusts, and Specific Performance of Part

In one line

Section 11 deals with contracts that carry out a trust, and with the trustee who exceeds his powers; section 12 answers the harder practical question of what a court does when only part of a contract can be performed.

In the words a student can write in an exam: section 11(1) of the Specific Relief Act 1963 provides that, except as otherwise provided in the Act, specific performance of a contract shall be enforced when the act agreed to be done is in the performance wholly or partly of a trust; and section 11(2) provides that "A contract made by a trustee in excess of his powers or in breach of trust cannot be specifically enforced." Section 12(1) lays down that the court shall not direct specific performance of a part of a contract, and sub-sections (2), (3) and (4) supply the exceptions.

Note the 2018 change in section 11(1). The words "contract shall" were substituted by section 4 of the Specific Relief (Amendment) Act 2018, with effect from 1 October 2018, for "contract may, in the discretion of the court". The same removal of discretion that section 10 underwent happened here.

Section 11: trusts

Sub-section (1): performance of a trust

Where the act agreed to be done is in performance, wholly or partly, of a trust, specific performance shall be enforced.

The reason is that a trust obligation is one the law particularly wants performed in kind. A beneficiary's interest is in the specific property, and money is a poor substitute.

This sub-section used to do more work than it now does. Under the old section 10, one of the two cases in which the court was to presume that damages were inadequate was where the act agreed to be done was in performance of a trust. Since section 10 no longer requires inadequacy at all, the presumption has gone, and section 11(1) now simply confirms that such contracts are enforceable.

"Trust" here has the meaning in section 3 of the Indian Trusts Act 1882 and, by section 2(c) of this Act, includes an obligation in the nature of a trust within Chapter IX of that Act, that is a constructive trust.

Sub-section (2): the trustee who exceeds his powers

"A contract made by a trustee in excess of his powers or in breach of trust cannot be specifically enforced."

This is one of the three limits section 10 preserves, and it is an absolute bar. The reason is protective: a trustee holds for others, and the court will not lend its process to complete a transaction that injures the beneficiaries.

Two situations: the trustee acted beyond the powers his instrument or the law gives him; or he acted within his powers but in breach of trust, for instance by selling at an undervalue to a connected person.