The Supreme Court has held that a party cannot unilaterally terminate an Agreement to Sell unless the contract itself specifically provides for such termination. The ruling emphasizes that agreements to sell are ordinarily non-determinable and therefore cannot be ended by one party acting alone. The decision also clarifies that if such a termination is invalid, the aggrieved party does not need to first file a separate suit seeking a declaration that the termination is illegal before seeking specific performance.

 

A Bench of Justices JB Pardiwala and R. Mahadevan delivered the ruling while dealing with a dispute arising out of a 2000 Agreement to Sell involving 354 acres of agricultural land in Basavanakoppa village, Karnataka. The landowners had received an advance but later unilaterally terminated the agreement in 2003 and subsequently sold the land to third parties in 2007, despite an injunction prohibiting alienation.

 

The purchasers filed a suit for specific performance, asserting continuous readiness and willingness to complete the transaction. The High Court decreed in their favour, directing execution of the sale deed and delivery of possession, subject to payment of the remaining consideration.

 

Upholding the High Court, the Supreme Court held that:

• Unilateral termination is legally impermissible unless the contract is determinable by its terms.

• Allowing unilateral termination as a defence would make suits for specific performance vulnerable and unfair to the performing party.

• An invalid termination is merely a repudiation, and the innocent party may directly sue for specific performance.

• It is the terminating party who should approach the court to justify termination, not the non-terminating party who must challenge it.