Question

A contracts with B to construct a cold storage facility for 50 lakh within 6 months. After the expiry of the time period, B fails to perform the contract. A immediately hires C to complete the construction at 60 lakh and later files a suit against B claiming 10 lakh as the additional cost incurred. Which of the following statements is correct under the Specific Relief Act, 1963?

• A. A can recover only if the court first declares B guilty of breach.
• B. A must sue only for damages and not substituted performance.
• C. A can recover 10 lakh because B breached the contract.
• D. A cannot recover the cost because A did not give B prior notice.

Hint:

Remember the formula for substituted performance: \[ \text{Recoverable Amount} = \text{Cost of substitute performance} - \text{Original contract price} \] If the substitute costs more because of the promisor's breach, the difference can generally be recovered from the defaulting party.

Answer 1

The Correct Option is C

Concept: The Specific Relief (Amendment) Act, 2018 introduced the concept of

Substituted Performance under Section 20 of the Specific Relief Act, 1963. Prior to this amendment, courts often focused on granting specific performance as an equitable remedy. The amendment shifted the focus toward practical enforcement of contractual obligations and protection of the innocent party. Substituted performance allows a promisee, when faced with a breach by the promisor, to get the contractual obligation performed through a third party and recover the expenses incurred from the defaulting party.

Step 1: Understanding the nature of breach. In the present case:

• A entered into a valid contract with B for construction of a cold storage facility.

• The agreed contract price was Rs. 50 lakh.

• B failed to complete the work within the stipulated period.

• Such failure constitutes a breach of contractual obligations.
Once B committed the breach, A became entitled to seek remedies available under law.

Step 2: Application of substituted performance. Instead of waiting indefinitely for B to perform, A engaged C to complete the project. The expenditure incurred by A was: \[ \text{Amount agreed with B} = Rs. 50 \text{ lakh} \] \[ \text{Amount paid to C} = Rs. 60 \text{ lakh} \] \[ \text{Additional expenditure} = Rs. 10 \text{ lakh} \] This additional expenditure arose solely because of B's breach.

Step 3: Right to recover additional costs. The purpose of substituted performance is to place the innocent party in the same position in which he would have been had the contract been properly performed. Therefore:

• A is entitled to recover the extra amount spent due to B's default.

• The recoverable amount equals the difference between the original contract cost and the amount actually spent to complete the work.

• Hence A can claim Rs. 10 lakh from B.

Step 4: Why the other options are incorrect.

• Option (A) is incorrect because a separate judicial declaration of breach is not a prerequisite for claiming the additional cost.

• Option (B) is incorrect because substituted performance is specifically recognized under the amended Act.

• Option (D) is incorrect because the question assumes that the substituted performance has been validly undertaken and focuses on the consequence of breach.

Substituted Performance enables the innocent party to complete the contract through another person and recover the additional expenditure from the defaulting promisor.