An article about " Part Performance of contract "

Part Performance of contract

Sale of immovable property is an act of contract between the parties, wherein each party to the contract has got definite duties to be performed, such as, the vendor has to establish the clear and marketable title to the property and at the time of registration, has to handover the title deeds along with vacant possession of the property. On the other hand, the purchaser has to pay the sale consideration as agreed and co-operate in completing the registration formalities.

It is very important for the seller and the buyer to enter into an Agreement to sell before executing the Sale Deed. The reason is that such agreement will bind both the parties to the agreement and make it obligatory to perform their duties as envisaged in the agreement.

The seller and the buyer will be on the disadvantageous position if the agreement is not executed because the purchaser may not co-operate in paying consideration as agreed by both of them and on the other hand, the seller may avoid or delay from proceeding to convey the property at the time of registration, leading to misunderstanding and disputes between the parties. So it is advisable to execute agreement to sell prior to executing the sale deed.

Generally, vacant possession of the property is handed over to the purchaser at the time of registration, but in certain cases, the vendor will handover vacant possession of the property to the purchaser before the registration of the sale deed. This act of the parties to the contract is called part performance.

Rights of the Purchaser: 

Section 53-A of Transfer of Property Act recognizes part performance. The purchaser, who gets possession of the property under terms of contracts, pending registration of sale deed, gets equitable rights.

The seller cannot enforce eviction against the purchaser once he has parted with possession of the property as per the agreed terms of contract. The purchaser can enjoy peaceful possession of the property even before the sale deed is executed and registered. Section 29 of Registration Act also recognizes the part performance.

Mandatory Conditions: Section 53-A of Transfer of property Act stipulates certain mandatory conditions to establish part performance of the contract, as discussed below:

1. The transaction must be a contract for transfer of immovable property for consideration.

2. The contract must be III writing.

3. It must have been signed by the seller or his authorized agent.

4. The terms of contract should be clear, unambiguous and certain, wherein the act of part performance should also be part of the contract. 

5. The vendor, in pursuance of the contract should put the purchaser in vacant possession of the property. The purchaser should take the possession and if already in possession shall continue to be in possession.

6. The purchaser must have made part payment of the sale consideration and should be willing to perform his part of terms and conditions agreed upon.

The equitable right bestowed on the purchaser can be enforced by the purchaser against the seller or anybody claiming under him. It cannot be enforced against party who has purchased the property for consideration without the knowledge of contract of part performance. As regards the right of the seller is concerned, the only remedy available for the seller is to initiate civil suit against the purchaser, seeking recovery of the balance of sale consideration.

Non-applicability:

The applicability of part performance has two important ingredients, firstly, the existence of written contract and secondly payment of consideration. The transfer should involve the element of consideration to be paid by the transferee.

Gifts:

The concept of Part Performance is not applicable in the case of gifts since the essence of the gift is transfer of property without consideration and existence of consideration is mandatory to  ascertain as to v. hether the contract involves part performance or not.

Co-Owners: 

The doctrine of Part Performance will not be available against other Co-Owners who are neither the signatories nor have signed such an agreement as consenting witnesses. Thus, even the agreement is valid to the extent of the seller's share, the same cannot be enforced against the other co-owners since there is not privity of contract between the purchaser and the other Co-owners.

Minors:

The doctrine of Part Performance cannot be invoked in case of property involving minor's share and though the Guardian of the minor enters into the contract on behalf of the minor, the same is not valid since minor is not competent to enter into contract and enforcement of the contract by the minor is not valid.

Thus, it may be said that the doctrine of Part Performance, as envisaged under the TP Act, confers only an equitable right over the purchaser in order to defend his possession, but cannot be enforced against those to whom the property is conveyed legally and as required under law. Thus, Part performance is only a weapon to defend possession having acquired under a legally valid agreement and it does not validate the agreement or contract which is, prima-facie, illegal.

At the time of entering into the agreement, both the seller and the purchaser should incorporate a clause which would clearly depict the concept of part performance, by virtue of which the purchaser will be handed over possession of the property.

However, if possession of the same is agreed to be parted by the seller to the purchaser, then the stamp duty will have to be paid on such agreement, which will be equivalent to the stamp duty required to be paid on conveyance deed or sale deed.