The Supreme Court has held that a party cannot unilaterally terminate an agreement to sell when the contract itself does not provide for such a right of termination; any purported unilateral cancellation would be invalid and unenforceable. The Court observed that when the terms of a contract do not permit one party to terminate unilaterally, such a termination notice or act would not bind the other party and would not preclude the aggrieved party from enforcing the contract through remedies such as specific performance.
In the case before the Court, an Agreement to Sell dated January 25, 2008 was executed between a vendor and a purchaser, in which the purchaser paid an advance and agreed to pay balance consideration to obtain registration of the sale deed. The purchaser alleged that despite readiness to complete the transaction, the seller failed to register the deed, and thereafter purported to cancel the agreement by notice. The purchaser filed a suit for specific performance. The seller contended that upon the failure of the purchaser to pay the balance within time or possession being disrupted, she was justified in cancelling unilaterally.
The Supreme Court examined the agreement and found that no clause provided for termination by the vendor without cause or for cancellation notice; the contract did not treat time as the essence of the contract nor did it vest an unequivocal right of unilateral cancellation in the seller. The Court held that since the contract lacked a termination clause enabling the seller to rescind the agreement at will, the notice of cancellation issued by the seller was ineffectual and did not extinguish the purchaser’s rights. The Court reinforced the long‐standing principle that an agreement to sell can only be terminated by mutual consent, by exercising a contractual termination clause (if one exists), or by obtaining relief under applicable provisions such as rescission for breach— but not by unilateral self-help rescission outside the contract.
Further, the Court noted that the purchaser had maintained her offer to perform and had taken steps towards registration of the sale deed; the vendor’s cancellation had therefore deprived the purchaser of the benefit of the bargain and justice required entitling her to specific performance. The Court emphasised that a contract cannot be terminated at the whim of one party if the other is ready and willing to perform, especially when the contract remains alive and continues to bind both parties. The judgment reiterated that an agreement to sell which remains binding cannot be overridden by a unilateral cancellation without contractual basis.
In its conclusions, the Supreme Court directed the vendor to execute the registered sale deed in favour of the purchaser within a specified time, subject to payment of balance consideration and compliance with other formalities. The Court underscored that any subsequent relief available to the vendor arises from breach of contract by the purchaser or by invocation of a valid termination clause; a unilateral cancellation outside these parameters would be void.
This decision is significant for contract law in reaffirming the rule that self-help termination is not permissible where the contract does not authorise it. It confirms the necessity for parties to adhere strictly to the termination provisions in agreements and serves as a safeguard against arbitrary rescission of agreements to sell.
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