1990 (7) TMI 373 - SC - Indian Laws

Supreme Court affirms no oral contract for property sale, emphasizes need for clear terms

Brij Mohan and Ors. Versus Sugra Begum and Ors.

Brij Mohan and Ors. Versus Sugra Begum and Ors. - (1990) 4 SCC 147 Issues Involved:1. Existence of a concluded oral contract for the sale of immovable property.2. Validity of the subsequent sale to defendants 3 and 4.3. Entitlement to specific performance of the alleged oral contract.4. Legal implications of the negotiations and draft agreements.Detailed Analysis:1. Existence of a Concluded Oral Contract for the Sale of Immovable Property:The central issue was whether a concluded oral contract existed between the plaintiffs and the first defendant on May 3, 1979. The plaintiffs contended that an oral agreement was reached on this date, with the sale price fixed at Rs. 10,00,000. However, the High Court found that there was no consensus ad idem on all essential terms. The court noted that the only agreed term was the sale price, while other vital terms such as the earnest money, mode of payment, and responsibility for obtaining necessary permissions were not settled. The High Court emphasized that the mere acceptance of the sale price did not constitute a concluded contract, especially in the absence of the defendant and without discussing other essential terms.2. Validity of the Subsequent Sale to Defendants 3 and 4:The plaintiffs argued that the subsequent sale of the property to defendants 3 and 4 was invalid as it was executed after the alleged oral contract with them. The High Court, however, held that since no concluded contract existed between the plaintiffs and the first defendant, the subsequent sale to defendants 3 and 4 was valid. The sale deed dated November 19, 1979, executed in favor of defendants 3 and 4, was deemed legitimate as the first defendant had not breached any concluded contract with the plaintiffs.3. Entitlement to Specific Performance of the Alleged Oral Contract:The plaintiffs sought specific performance of the alleged oral contract. The High Court ruled against this, stating that specific performance could not be granted in the absence of a concluded contract. The court noted that the plaintiffs failed to prove that all fundamental terms were agreed upon orally, and the negotiations on May 6, 1979, did not result in a final agreement. The High Court observed that the plaintiffs' claim was further weakened by their failure to provide evidence of the defendant's acceptance of all terms and the lack of any written or signed agreement.4. Legal Implications of the Negotiations and Draft Agreements:The plaintiffs presented draft agreements (Exhibits A-1 and A-2) prepared on May 6, 1979, as evidence of the concluded contract. The High Court found that these drafts did not reference any prior oral agreement from May 3, 1979, and were indicative of ongoing negotiations rather than a formalized contract. The court also noted that the defendant's refusal to sign these drafts and accept the earnest money further demonstrated that no final agreement was reached. The High Court concluded that the preparation of drafts and the purchase of stamp papers did not constitute a binding contract, especially when the negotiations on essential terms had failed.Conclusion:The Supreme Court upheld the High Court's findings, dismissing the appeals and confirming that no concluded oral contract existed between the parties. The subsequent sale to defendants 3 and 4 was valid, and the plaintiffs were not entitled to specific performance of the alleged oral contract. The court emphasized the necessity of clear consensus on all fundamental terms for a contract to be enforceable, especially in transactions involving immovable property.