In a recent decision of the Hon’ble Bombay High Court in First Appeal No.235 of 2008, decided on 1 April 2026, the Court revisited the principles governing specific performance in the context of an oral agreement for sale of immovable property. The case presents a classic fact pattern an informal arrangement between neighbours, partial payment of consideration, and a subsequent refusal to complete the transaction yet raises fundamental questions on readiness, willingness, and equitable relief.

The dispute arose from an oral agreement in 1978 for the sale of a residential flat in Mumbai for ₹50,000. The purchaser paid ₹30,000 in two instalments, evidenced by receipts, and repeatedly sought possession upon payment of the balance. However, the seller failed to deliver possession and ultimately attempted to resile from the arrangement by refunding the amount paid. The purchaser refused the refund and initiated a suit for specific performance.

The trial court, while holding that the agreement had not been validly terminated, denied specific performance on the ground that the purchaser had failed to establish readiness and willingness. Instead, it granted a refund with interest. This finding was overturned in appeal.

The Hon’ble High Court’s analysis is significant for its emphasis on substance over form. It reaffirmed that readiness and willingness under Section 16(c) of the Specific Relief Act must be assessed holistically. The Court relied heavily on contemporaneous correspondence, particularly a letter written by the purchaser demanding completion of the transaction. This was held sufficient to demonstrate both intent and preparedness, even in the absence of formal tender or deposit of the balance consideration.

Importantly, the Court rejected the trial court’s reasoning that non deposit of the balance amount during the pendency of the suit indicated lack of readiness. Citing settled law, it clarified that actual deposit is not a mandatory requirement unless specifically directed, and that financial capacity coupled with conduct is sufficient.

Another noteworthy aspect is the Court’s treatment of oral agreements. Despite the absence of a written contract, the Court found a concluded and binding agreement based on admissions in the written statement and documentary evidence of part performance. This underscores that enforceability does not hinge on formality, particularly where the essential terms are clear and partly performed.

On the question of equity, the Court took a balanced approach. Recognising the significant passage of time and the sharp escalation in property values, it held that granting specific performance at the original price would be inequitable. Accordingly, it conditioned the decree on payment of an additional ₹25 lakhs by the purchaser. This reflects the Court’s willingness to mould relief to achieve fairness, rather than mechanically enforce contractual terms.

The judgment also highlights the limited value of oral testimony in long pending disputes where original parties are no longer alive. In such cases, contemporaneous documents assume decisive importance in determining probabilities.

Overall, the ruling reinforces three key principles:

First, that readiness and willingness must be inferred from conduct and surrounding circumstances;
Second, that oral agreements, if proved, remain enforceable; and
Third, that specific performance is ultimately an equitable remedy, to be tailored in light of changing realities.

For practitioners, the decision serves as a reminder that even informal transactions can crystallise into binding obligations and that courts will not hesitate to enforce them, albeit with equitable adjustments where necessary.

Oral Agreements and Specific Performance: A Practical Reaffirmation by the Bombay High Court