Contract Couldn’t Be Cancelled When Buyer Remained Ready to Perform: Supreme Court Enforces Sale Agreement Despite Later Sale

“If one party is ready and willing, and the contract doesn’t allow cancellation without cause – it cannot be terminated unilaterally” –  On 10th November 2025, the Supreme Court of India held that a contract for sale of land could not be unilaterally cancelled by the sellers when the buyers were continuously ready and willing to perform their obligations. The Court enforced specific performance of the contract, rejecting the sellers’ claim that they had validly terminated the agreement, and further held that the subsequent buyers were not entitled to protection, as they had constructive notice of the original agreement.

The judgment reaffirms key principles under the Specific Relief Act, 1963, especially with regard to when contracts can be specifically enforced, and under what conditions subsequent purchasers can be bound.

“Agreement Had No Termination Clause – Sellers Had No Right to Cancel”: Court Says Contract Was Not 'Determinable'

The case arose from an Agreement to Sell (ATS) entered into on 28 April 2000, under which the original sellers agreed to sell agricultural land in Maharashtra to the plaintiffs for ₹26,95,501/-. An initial amount of ₹2,00,000/- was paid at the time of execution, and later ₹8,12,500/- was also paid, totalling over ₹10 lakh. The contract required certain formalities like land conversion and subdivision, which were to be carried out by the sellers before the sale deed could be executed.

Instead of completing these conditions, the sellers issued a termination notice on 10 March 2003, citing a pending civil suit and the death of one of the sellers. The plaintiffs replied objecting to this termination and expressed their willingness to proceed. The sellers, however, took no further steps to return the money or complete the deal. In 2007, they sold the land to new purchasers, leading to the present litigation.

The Court noted that the contract did not allow either party to terminate it at will. There was no clause permitting cancellation, either on cause or without cause. The agreement was not “determinable” in nature, and therefore could not be cancelled unilaterally.

Referring to Indian Oil Corporation Ltd. v. Amritsar Gas Service, the Court reiterated that:

“A contract is determinable only if it explicitly allows for unilateral termination.”

The Court firmly held that:

“The ATS was not a contract conferring any right upon either party to bring it to an end at will. Its life and performance were tethered to the completion of certain obligations. None of the clauses envisaged termination on any cause or no-cause basis.”

Therefore, the termination notice was invalid, and the contract continued to subsist.

“Subsequent Buyer Had Notice – Can’t Claim to Be Innocent”: Court Finds Later Purchaser Not Entitled to Protection

The new buyers who purchased the land in 2007 argued that they were innocent purchasers for value without notice, and therefore not bound by the earlier agreement under Section 19(b) of the Specific Relief Act.

The Court rejected this argument, noting that the termination notice itself was in their possession, which clearly mentioned the existence of the Agreement to Sell and the names of the original buyers.

“Equity ought not assist a transferee who deliberately avoids the truth that lies open to discovery.”

The Court emphasized that under law, notice includes actual, constructive, or implied notice. Even if the buyers claimed not to have read the termination notice carefully, they were expected to make enquiries.

“Despite possessing the notice and full particulars of the vendees, the subsequent purchasers failed to make a single enquiry with the original vendees.”

As such, the subsequent purchasers could not be treated as bona fide or good faith buyers and were bound by the original agreement.

“Buyers Were Ready and Willing – Sellers Never Even Called Upon Them to Perform”: No Default Shown by Plaintiffs

The third key question before the Court was whether the buyers had shown continuous readiness and willingness, as required under Section 16(c) of the Specific Relief Act.

The Court answered in the affirmative. It found that the plaintiffs had made large payments, participated in formalities for land conversion, promptly objected to the termination notice, and even filed to intervene in related litigation. They also filed the suit for specific performance without delay.

The Court held:

“Readiness relates to financial capacity; willingness is evidenced by conduct. The original vendees satisfied both.”

It also observed that the sellers never called upon the buyers to pay the balance or to complete the transaction. Instead, the sellers themselves acted as if the agreement was over, without legal basis.

Supreme Court Orders Execution of Sale Deed – Adds Monetary Compensation for Delay

The Supreme Court upheld the decisions of the Trial Court and High Court, confirming that specific performance should be granted and the sale deed must be executed in favour of the original buyers.

To balance equities, however, the Court directed the original buyers to pay:

• The remaining balance amount of ₹18,83,001/- along with 16% annual interest from the date of the agreement.
• An additional sum of ₹5 crores to the subsequent purchasers, acknowledging the long passage of time since their purchase.

The Court said:

“The said payment is to be made within six months. Execution of the sale deed shall follow only upon such payment.”

“Sellers Cannot Walk Away From Agreement After Taking Money – Equity Will Not Permit That”: Supreme Court Enforces Contract Principles

Summing up, the Supreme Court sent a strong message that contracts once signed, and acted upon, cannot be abandoned unilaterally simply because the seller changes their mind or finds a new buyer. Where no right of termination is given, and the buyer is continuously willing, the agreement continues to bind the parties.

It also clarified that subsequent buyers must make reasonable enquiry, and cannot hide behind ignorance if documents in their possession point to earlier agreements.

“Equity does not favour those who ignore clear signs of existing rights.”

This judgment strengthens the protection for genuine buyers and ensures that contracts are enforced in both letter and spirit, even in real estate matters where multiple transactions may have occurred.

Date of Decision: 10 November 2025