Determinability of Contracts in India: Pre and Post 2018 Amendment

The Specific Relief Act, 1963, says determinable contracts can’t be specifically enforced.

In contract law, determinability refers to whether a contract can be terminated by one or both parties, either at will or under certain conditions. This concept matters because it affects the remedies available after a breach, especially specific performance.

Specific performance is an equitable remedy. In it, a court orders the breaching party to fulfill their contractual obligations as agreed. But if a contract is determinable—meaning it can be ended easily—specific performance is usually unavailable. Enforcing such a contract would be pointless, since it could be lawfully terminated soon after the order.

In India, the Specific Relief Act, 1963 (SRA) governs specific performance and other equitable remedies. Section 14 of the SRA lists contracts that cannot be specifically enforced, including those “in their nature determinable.”

The Specific Relief (Amendment) Act, 2018 reformed several parts of the SRA to strengthen contract enforcement and improve India’s ease-of-doing-business rankings. However, it kept the rule excluding determinable contracts.

This article reviews the law on determinable contracts in India, both before and after 2018. It also explores judicial interpretations to clarify the scope of this concept.

Legal Framework Pre-2018

Before the 2018 amendment, Section 14(1)(c) of the SRA stated that a contract “in its nature determinable” could not be specifically enforced. The reasoning is simple: if a contract can be terminated at will, compelling performance serves no purpose. The party can lawfully end it, making a court order ineffective.

Indian courts have applied this principle consistently.

Key Cases

  • Indian Oil Corporation Ltd. v. Amritsar Gas Service (1991)
    The Supreme Court considered an LPG distributorship agreement. It contained two termination clauses: one for specific events and another allowing either party to terminate with 30 days’ notice. The Court held that the latter clause made the contract determinable. Therefore, specific performance was not available. The remedy was limited to damages.

  • Rajasthan Breweries Ltd. v. Stroh Brewery Co. (2000)
    The Delhi High Court examined agreements for technical know-how and assistance. The court held that even without a termination clause, private commercial contracts are inherently determinable with reasonable notice. Specific performance was again denied.

These cases established a clear stance: contracts with termination provisions, especially those without cause, are determinable. For such agreements, damages are the proper remedy.

The 2018 Amendment

The Specific Relief (Amendment) Act, 2018 took effect on August 1, 2018. It made specific performance more accessible, aiming to reduce enforcement delays and improve global rankings.

Key Changes

  • Section 10 Revision: Specific performance became a general rule, subject to Sections 11(2), 14, and 16.

  • Section 20 (Substituted Performance): Allowed an aggrieved party to hire a third party to perform the contract and recover costs.

  • Sections 20A and 20B: Restricted injunctions in infrastructure projects and created special courts for them.

  • Section 14 Substitution: Contracts that cannot be enforced include those:

    1. Where substituted performance has been obtained.

    2. Involving duties the court cannot supervise.

    3. Dependent on personal qualifications.

    4. In their nature determinable (Section 14(d)).

The exclusion of determinable contracts stayed intact. This shows the legislature wanted continuity in this area.

Implications

The 2018 amendment did not change the rule for determinable contracts. Courts continue to deny specific performance for such agreements. Pre-2018 precedents still guide interpretation.

Post-2018 Judicial Approach

Courts have upheld the principle after the amendment.

  • Royal Orchids v. Kulbir Singh Kohli (2022, Delhi High Court)
    An MOU was found determinable since either party could terminate it. The court ruled that specific performance was barred under Section 14(d). It also noted that granting an injunction would amount to indirect enforcement, which is prohibited under Section 41(e).

  • Jindal Steel and Power Ltd. v. SAP India Pvt. Ltd. (2020, Delhi High Court)
    The court held that contracts terminable at will are determinable. It cited earlier precedents, including Rajasthan Breweries.

Ongoing Debates

The exact scope of determinability remains debated.

  • Some courts, like in Royal Orchids, suggest that commercial MOUs are inherently determinable, even without a termination clause. Critics argue this undermines the 2018 amendment’s goal of stronger enforcement.

  • Neither the SRA nor the Indian Contract Act defines “determinable.” Dictionaries describe it as “liable to be terminated,” either at will or under conditions. This leaves room for judicial discretion.

The 2018 amendment modernized contract remedies, but determinable contracts remain excluded from specific performance. Substituted performance provides some relief, but it does not equate to enforcement of the original agreement.

Conclusion

Determinability is a critical factor in Indian contract law. The SRA, both before and after 2018, excludes such contracts from specific performance. Courts from Indian Oil Corporation (1991) to Royal Orchids (2022) consistently uphold this principle.

The law ensures that parties to determinable contracts must rely on damages or substituted performance. For businesses, recognizing determinability at the drafting stage is essential to avoid disputes.

While debates continue on the exact scope, the position remains stable. A future Supreme Court ruling or legislative clarification may refine the concept further.

Article by:
Aditya Kumar
5th year BBA LLB (Hons.),
Kirit P. Mehta School of Law,
Narsee Monjee Institute of Management Studies, Mumbai