Liquidated-damages clause does not automatically defeat specific performance in a property sale contract where money is only security.
In contracts for sale of immovable property, a liquidated-damages or penalty clause does not, by itself, make money compensation adequate or bar specific performance. The court must examine whether the stipulated sum was intended as an alternative to conveyance or only as security for performance; absent an express option to pay money in lieu of transfer, the clause is not conclusive against equitable relief. Specific performance may also be refused only on sound judicial grounds, and the evidence here did not show that the purchaser obtained any unfair advantage or acted through fraud, misrepresentation, or pressure. The decree for specific performance was therefore upheld.
Issues: (i) Whether a clause providing for liquidated damages or penalty for breach of a contract to sell immovable property, by itself, rebutted the statutory presumption against adequate compensation in money and barred specific performance. (ii) Whether the plaintiff had obtained any unfair advantage so as to justify refusal of specific performance in the exercise of discretion.
Issue (i): Whether a clause providing for liquidated damages or penalty for breach of a contract to sell immovable property, by itself, rebutted the statutory presumption against adequate compensation in money and barred specific performance.
Analysis: The statutory scheme under the Specific Relief Act treated the presence of a named sum for breach as only one relevant circumstance. A contract remains specifically enforceable if, on the facts, it is otherwise proper for such relief, and the mere naming of damages does not convert the contract into one where money is necessarily adequate relief. The decisive question is whether the sum was intended as an alternative to performance or merely as security for performance. The agreement here contained no option to pay money in lieu of conveyance, and the stipulated amount was therefore not conclusive against specific performance.
Conclusion: The clause for liquidated damages did not rebut the presumption or bar specific performance.
Issue (ii): Whether the plaintiff had obtained any unfair advantage so as to justify refusal of specific performance in the exercise of discretion.
Analysis: The evidence showed that the defendant entered into the later agreement knowingly and for better consideration, with immediate earnest money and a further protective stipulation, and not under fraud, misrepresentation, or pressure. The lower court's view that the plaintiff had secured an unfair advantage was unsupported. The discretion to refuse specific performance must rest on sound judicial principles, and the facts did not justify denial of relief. The presumption applicable to contracts for transfer of immovable property was not displaced by the defendants' evidence.
Conclusion: The plaintiff had not obtained any unfair advantage, and specific performance was rightly granted.
Final Conclusion: The decree for specific performance was upheld and the appeal failed.
Ratio Decidendi: In a contract for sale of immovable property, the mere inclusion of a liquidated-damages or penalty clause does not by itself make money compensation adequate or exclude specific performance; the Court must determine from the terms and surrounding circumstances whether the sum was an alternative to performance or only security for it.
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