Validity & Enforceability After the 2018 Specific Relief Amendment

In short: an agreement to advance a loan can be a valid contract if the contract formation requirements under the Indian Contract Act are met (offer, acceptance, consideration, capacity, free consent, lawful object, and certainty/possibility of performance).

Specific performance after the 2018 amendment: “shall be enforced,” but with statutory brakes

The Specific Relief (Amendment) Act, 2018 substantially reoriented relief from damages-tending to specific performance-leaning by substituting the pre‑amendment discretion with a mandate that “specific performance of a contract shall be enforced,” subject to express exceptions in Sections 11(2), 14, and 16 of the Specific Relief Act. Authoritative commentary and case-law discussions confirm the post‑amendment position: courts are to treat specific performance as the norm rather than the exception, though the relief remains conditioned by the statutory carve‑outs.

The Supreme Court has read the amended Section 10 as removing broad discretion while keeping enforcement subject to Sections 11(2), 14, and 16; readiness and willingness requirements under Section 16(c) continue to be pivotal.

Where do “agreements to lend money” fit?

Two distinct questions arise: (1) Is a lending agreement in principle specifically enforceable now that specific performance is a general rule? (2) Are there special statutory limits for lending‑type promises?

1. General rule vs exceptions

• The amended regime says courts “shall” enforce specific performance, but only if the contract is of a type that is specifically enforceable and the plaintiff meets statutory conditions (e.g., continuous readiness and willingness; absence of disqualifying factors).

• Section 14 enumerates contracts not specifically enforceable, including those involving a continuous duty that the court cannot supervise, those dependent on personal qualifications, determinable contracts, and where substituted performance has been obtained. If a lending promise falls within these prohibitions, specific enforcement will be refused notwithstanding the general “shall” language.

2. Express carve‑in for loan‑security cases

• The Specific Relief Act contains an express provision permitting specific performance in suits to compel execution of a mortgage or furnishing other security to secure repayment of a loan the borrower is unwilling to repay at once, provided the lender is willing to advance any remaining part in terms of the contract.

• This provision supports specific performance in certain loan‑security enforcement scenarios, but it is tailored: it does not broadly mandate specific performance of every promise to lend; it targets enforcement of collateral/security obligations tied to loans.

3. Traditional position on bare “agreements to lend”

• Pre‑amendment teaching materials and commentaries commonly noted that ordinary contracts to lend or advance money are generally not specifically enforceable where damages are an adequate remedy, reflecting the equity principle that specific performance is inappropriate when monetary compensation suffices.

• Post‑2018, while the baseline has shifted toward specific performance, courts still apply Sections 14 and 16, and evaluate adequacy of damages via the statutory scheme and case law; the mandate does not automatically convert every promise to lend into a decree for specific performance.

• Validity: A properly formed loan agreement (including an obligation to advance funds) is a valid contract if it satisfies the Indian Contract Act essentials.

• Enforceability via specific performance: After the 2018 amendment, courts are directed to enforce specific performance as a general rule but only within the guardrails of Sections 11(2), 14, and 16, and subject to plaintiff’s readiness and willingness.

• Limits for lending promises:

  • Courts may specifically enforce obligations to execute a mortgage or furnish security securing repayment of a loan in the circumstances specified by the Act.

  • A bare promise to advance money does not invariably yield a decree of specific performance; if the contract falls within Section 14 prohibitions or damages are otherwise the appropriate remedy within the statutory framework, specific performance can be declined despite the general “shall” language.

  • Conduct requirements remain strict: a plaintiff must plead and prove continuous readiness and willingness under Section 16(c).

Bottom line answers

• Is an agreement to advance a loan a valid contract? Yes, if it meets the Indian Contract Act’s essentials—offer, acceptance, consideration, capacity, free consent, lawful object, certainty, and possibility of performance—an agreement to advance a loan is a valid and enforceable contract in principle.

• Must the court enforce it specifically after the amendment? Not automatically. While specific performance “shall be enforced” post‑2018, courts remain bound by Sections 11(2), 14, and 16: certain categories (e.g., determinable contracts, contracts involving continuous duties not amenable to supervision) are not specifically enforceable; readiness and willingness must be proved; and specific statutory contexts like compelling security for loans are expressly provided for.

Counsel’s checklist

• Confirm contract formation and certainty of lending terms under the Indian Contract Act.

• Assess Section 14 ineligibilities and whether the promise is determinable or involves continuous duties.

• Establish readiness and willingness per Section 16(c) through pleadings and evidence.Consider the security‑enforcement route expressly contemplated by the Act for loan cases.

• Position damages as inadequate only where supportable within the post‑2018 framework and relevant precedents.

Note: The analysis reflects the statutory text and authoritative commentary/case-law discussions accessible in the public domain; specific outcomes turn on contract wording and facts, so party strategy should be tailored accordingly.