Indian Contract Act | Unless Contingency Is Fulfilled, Contingent Agreement To Sale Cannot Be Enforced: Patna High Court

While rejecting an appeal that sought specific performance of a sale agreement, the Patna High Court has observed that a sale agreement with a contingency clause cannot be enforced unless that contingency is fulfilled.

Justice Khatim Reza observed, “Unless that contingency was fulfilled, the contract was not capable of enforcement as stated in Section 31 of the Indian Contract Act. The parties entering into an agreement to sale is clearly dependant on appropriate decisions being taken by the civil court in probate case (Title Suit No. 7 of 1990).”

“The agreement to sale was not a conclusive contract. The performance of it was certainly contingent upon such decision being available in favour of the defendants. Therefore, plaintiffs have no cause of action for the suit before any judgment in Probate case is passed in favour of the defendants.”Justice Reza added.

The above ruling came in an appeal filed challenging the judgment and decree of the Trial Court rejecting a Title Suit under Order 7 Rule 11.

The plaintiff-appellants filed the Title Suit for a decree of specific performance of contract on the basis of an agreement for sale executed by 3 defendants in favour of plaintiffs.

The plaintiff-appellants sought relief for a decree of a specific performance of contract in respect of the suit property in favour of the plaintiff and against the defendants, directing the defendants to jointly perform the part of their statutory obligation after receiving the remaining amount of consideration from the plaintiffs and to execute the sale deed in favour of the plaintiffs, failing which the sale deed be executed in favour of the plaintiffs through the process of court.

The Appellants contended that the property originally owned by Shambhu Ram was later transferred to the Respondents through a registered Will after his demise. In the course of a probate case, the Respondents engaged in an agreement for sale, contingent upon the resolution of the probate matter.

Claiming part performance, the Appellants declared possession of a shop and sought the remaining sum of Rs. 14,49,000 for the property's sale. Subsequently, upon serving a notice for the execution of the sale deed, a lawsuit was initiated. The Respondents countered by citing an unregistered agreement to sell, which was connected to the conditions of the probate case and was subsequently dismissed.

On the basis of rival contentions of the parties, the Court framed the following issues:

(i) Whether the agreement in question is contingent?

(ii) Whether enforcement of contracts contingent on an event did not happen?

(iii) Whether the plaintiffs have a valid cause of action for the suit?

On perusal of the contents of the agreement to sale, the Court noted that it was apparent that there was clear assertion that final sale deed will be executed only after disposal of probate case.

The Court further noted that it was admitted in the case of the parties that the said restoration of probate case was still pending before the lower court and the suit was filed before disposal or grant of probate in favour of defendant nos. 1 to 3.

And therefore, the Court opined that the cause of action would not arise for filing of the suit.

The Court held, “In these circumstances, I do not find as to how the agreement to sale would become enforceable in law as Section 32 of the Indian Contract Act clearly provides that contingent contract to do or not to do anything, if an uncertain future happens, can be enforced by law only when that the event has happened.”

“I do not find that there is any perversity in such finding as recorded by the learned trial court. Assailing of the findings of the learned trial court, the plaint being hit by provisions of Section 31 and 32 of the Contract Act, would not carry forward the case of the appellants as, in any case, the plaint deserved to be outrightly rejected,” the Court added while dismissing the Appeal.

Case Title: Urmila Devi Jain & Ors vs. Ashok Kumar & Ors

LL Citation: 2024 LiveLaw (Pat) 5

Case No.: First Appeal 20 of 2011

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