Agreements are instruments wherein two or more parties agree over something or to do some work or to sell or purchase a property. The essential requirement of an agreement is the presence of valid consideration and objects.
Indian contract Act, 1872 deals with agreements. Void Agreements are those which cannot be enforced in any court of law. If the consideration or even a part of consideration or object is unlawful such agreements are deemed to be void agreements. Neither of the party to the agreement can seek any remedy for violation of such agreements in any court of law. The court declares such agreements as void.
In general, any agreement without consideration is void. But, Section 25 of Indian Contract Act, 1872 has certain exceptions to this general rule.
According to the section the following agreements without considerations are not declared void:
(a) An agreement which is made in writing and is registered and made out of natural love and affection by a person standing in near relationship.
(b) An agreement which is a promise made to compensate for something done for the promisor by a person voluntarily. The compensation may be in whole or part.
(c) An agreement which is a promise to pay a debt which is barred by limitation. Such promises must be in writing and signed by concerned person or his authorized agents. The promise to repay the time barred debt may be in whole or in part.
Sale of an immovable property is an act of contract between the parties. Each party to the contract has definite duties to perform; the vendor has to establish his title to the property, handover the title deeds and vacant possession of the property at the time of registration. The purchaser has to pay the consideration as agreed, attend the registration office and help in completion of registration formalities. The vacant possession of the property is handed over to the purchaser at the time of registration. But in certain cases, the vendor hands over the vacant possession of the property to the purchaser, pending registration of sale deed. This is called part performance.
Whether part performance is recognised and what are the rights of the purchaser?
Section 53 A of Transfer of Property Act recognises part performance. The purchaser who gets possession of the property under terms of contracts gets equitable rights. The seller who puts the purchaser in possession and anybody claiming under is debarred from enforcing against the purchaser or anybody claiming under purchaser. The seller cannot enforce eviction against the purchaser, once he has put him in possession of the property. The purchaser can continue and enjoy the possession of the property even though the sale deed is not executed and registered. Section 29 of Registration Act, recognizes the part performance.
If the full sale consideration is not paid, how the seller can proceed against purchaser who is in possession of the property?
The only remedy available to the seller is to file a suit for recovery of balance amount of sale consideration or other rights as provided in the contract of sale.
Section 53 A of Transfer of Property Act stipulates certain conditions;
1. It must be contract for transfer of immovable property for consideration.
2. It must be in writing.
3. It must have been signed by the seller or his authorised agents.
4. The terms of contract shall be clear, should be ascertainable with reasonable care with certainty, the act of part performance should also be part of the contract.
5. The vendor in pursuance of the contract should have put the purchaser in possession of the property. The purchaser should have taken the possession and if already in possession shall continue to be in possession.
6. The purchaser has done some act like payment of consideration in pursuance of the contract or willing to perform his part of contract.
Whether the equitable right of the purchaser is enforceable against third party?
The equitable right is available only against the seller or anybody claiming under him. It is not enforceable against party who has purchased the property for consideration and who has no knowledge of contract or act of part performance.
Whether the act of part performance applies to gifts?
The applicability of part performance has two important ingredients, the existence of written contract and payment of consideration. The transfer should be a transfer for consideration.
In case of gifts there is neither sale contract nor consideration. The essence of the gift is transfer of property without consideration. As such the doctrine of part performance is not applicable to gifts.
What are the joint liabilities?
When two or more persons promise jointly to perform or to do something for a consideration, it is liability of all such persons who promised to perform or to do something. Such contractual obligations of the promises are joint liabilities, which are governed by ‘Indian Contract Act, 1872’. We come across many such contracts in purchase, sale of the immovable properties and construction sector and also in administration of partnership assets. The person who makes promise is promisor and to whom the promise made is promisee.
How joint liabilities devolve on the death of any one of the joint promisor?
The Section 42 of ‘the Indian Contract Act’ deals with this situation. It does not make any distinction between joint promises and several promises. According to the said section in the absence of any contrary in the contract, all the persons who made promise during their joint lives; after the death of any of the promisor, legal heirs / representative of deceased promisor along with surviving promisors; after the death of the last surviving promisor, the legal heirs, representatives of all the promisors, are bound to fulfill the promise.
But if the contract provides for any contrary intension the liability devolves according to the contract.
Can a promisee enforce the contract on any one of the promisor?
The promisee may enforce the contract against any of promisor in case of joint promise made by two or more persons, if the terms of contract do not provide any contrary intention.
However, each of the joint promisors has a right against other promisors. They may compel the other promisors to contribute equally or as provided in the contract for performance of contract.
In case of any of the joint promisors defaults in contributing towards performance, the remaining joint promisors must bear the loss arising from such default in equal shares.
The section 43 of Indian Contract Act makes it very clear; In case the surety makes payment on behalf of the principal, the surety is entitled to recover the same from the principal.
The provision of section 43 applies where two or more persons have made a joint promise. But it does not apply in case where two or more persons have become jointly interested by inheritance in a contract made by a single person. When a mortgage was executed by a single mortgagor, the mortgagee suing four out of five heirs is entitled to recover only four-fifth of the mortgaged amount from them. But if the mortgage is executed by several mortgagors then the mortgagee can enforce the entire liability against a part of mortgaged property. In case of joint family debts contracted by the managing member, are the debts due for all the members of joint family and all other joint family members are bound to repay the same but their liability is not personal but only to the extent of joint family assets.
What is situation in case the promisee releases one of the joint promisor?
In case of a joint promise made by two or more persons, the promisee may release any of joint promisors from performing the contract. But such release does release the other promisor from performing the contract and does not discharge the released the promisor of his liability, responsibility to other joint promisors.
How joint rights devolve?
This is quite a different situation from what we discussed earlier. Here a single person makes a promise to two or more persons jointly. The promisor is single person and promisees are more than one. All the joint promisees during their lifetime, on death of any of them, the legal heirs/representative of the deceased promisee become promisee with other surviving promisees and on death of the last surviving promisee the representatives of all promisees jointly acquire rights to enforce the contract.
Suppose in an agreement to sell, there is a clause that the vendor shall complete the sale transaction within three months of the date of agreement to sell, but fails to comply with this requirement. Whether the agreement would become void and unenforceable?
Non-compliance of a clause in the agreement to sell would not make the agreement void. The vendor has legal remedy to open him upto three years from the date of such a lapse.
What are the stamp duty payable in Karnataka for registration of an agreement to sell and the construction agreement?
The stamp duty payable for agreement to sell is Rs. 200/- when no possession of the property is handed over to the purchaser. Similarly, the stamp duty payable for construction agreement is Rs. 50/-.
When the doctrine of part performance is not available?
When the person who desires to invoke the doctrine of part performance is not the signatory to the agreement or the consent party nor the recitals show that the agreement was entered into with the consent of such person, he cannot seek protection under the doctrine of part performance since there is no privity of contract between the parties.
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