The Oral Variation and the Signed Deed
On 1 January 2024, Karim agreed in writing to sell his plot in Savar to Salam for BDT 80 lakh. The written agreement contained a clause: 'This agreement constitutes the entire understanding between the parties and may not be varied except in writing signed by both parties.' Salam paid BDT 8 lakh as earnest money. In March 2024, Karim and Salam met at a tea stall and orally agreed to reduce the price to BDT 75 lakh because Salam would pay the balance in cash within 30 days. Salam paid BDT 40 lakh in April. In May, Karim refused to complete the sale, asserting that the oral variation was ineffective and that the price remained BDT 80 lakh. Salam sues for specific performance, relying on the oral variation and on part performance. Karim raises the entire-agreement clause and the absence of a written variation. Salam also claims that Karim's refusal amounts to an anticipatory breach and claims damages in the alternative.
1. Can the oral variation of March 2024 be relied upon despite the entire-agreement clause and the writing requirement? Discuss the relevant principles of contract law.
Read the worked answer
The starting point is that a written contract containing an entire-agreement clause and a no-oral-modification clause is strong evidence that the parties intended the writing to be the exclusive record of their bargain. However, under Bangladeshi contract law (rooted in the Contract Act 1872, which does not contain a statutory parol evidence rule equivalent to some common-law jurisdictions), the court will consider whether the oral agreement was a genuine variation supported by consideration or a collateral contract.
Key principles:
Variation requires consideration. A promise to accept less than what is due (part-payment of a debt) is generally not good consideration. But here the variation is not merely accepting less; Salam agreed to pay the balance in cash within 30 days, which is a new obligation that can constitute consideration for the reduced price. Whether it does depends on whether the new mode of payment conferred a practical benefit on Karim.
No-oral-modification clauses. Such clauses are not automatically conclusive. Courts may enforce them where the parties are of equal bargaining power and the clause is clear, but they may decline to do so where enforcing the clause would be inequitable or where the subsequent conduct shows the parties intended to be bound by the oral variation. The oral agreement at the tea stall, followed by Salam's payment of BDT 40 lakh, is evidence of conduct consistent with the variation.
Entire-agreement clause. This bars reliance on pre-contractual representations, but does not necessarily bar a subsequent variation, because the clause speaks to the formation of the contract, not to later modifications.
The court is likely to hold that the oral variation is arguable and that the entire-agreement clause does not automatically defeat it, particularly given the part payment. However, Salam faces an evidential burden to prove the oral agreement on balance of probabilities.
2. If the oral variation fails, can Salam rely on the doctrine of part performance to obtain specific performance at the original price?
Read the worked answer
Yes, subject to conditions. The doctrine of part performance (embodied in section 53A of the Transfer of Property Act 1882) protects a transferee who, in reliance on a contract, has taken possession or paid consideration and is willing to perform his part. However, section 53A is a shield, not a sword: it bars the transferor from enforcing rights against the transferee inconsistently with the contract, but it does not itself confer a right to compel conveyance.
For specific performance, Salam must rely on the Specific Relief Act 1877. Section 12 permits specific performance where the act agreed to be done is such that compensation in money would not afford adequate relief; land is traditionally treated as unique, so damages are usually inadequate. Section 22 requires that the plaintiff be ready and willing to perform. Salam's payment of BDT 40 lakh and his tender of the balance (at whichever price is found) supports willingness.
Salam's position:
- If the variation is upheld, he must show readiness to pay BDT 35 lakh (the balance of BDT 75 lakh).
- If the variation fails, he must show readiness to pay BDT 72 lakh (the balance of BDT 80 lakh).
His claim for specific performance at the original price is viable, but he must plead and prove continuous readiness and willingness. The court may grant specific performance with an abatement or allow him to pay the balance into court.
3. What is the effect of Karim's refusal in May 2024, and what remedies are available to Salam in the alternative?
Read the worked answer
Karim's refusal to complete amounts to an anticipatory breach if it occurred before the time for performance and was communicated as a clear intention not to perform. Salam may elect either to:
- Treat the contract as at an end and sue immediately for damages; or
- Affirm the contract and wait for the time of performance, while remaining ready and willing.
Because Salam seeks specific performance, he has effectively affirmed the contract and is asking the court to compel performance. He cannot simultaneously treat the contract as discharged and claim specific performance; the remedies are inconsistent.
Damages: Under section 73 of the Contract Act 1872, Salam may recover compensation for loss naturally arising from the breach, including the difference between the contract price and market price at the date of breach, plus incidental losses. He must mitigate. The BDT 8 lakh earnest money may be recoverable, and the BDT 40 lakh paid must be refunded if the contract is rescinded.
Specific performance: Because land is unique, the court is likely to grant specific performance if Salam proves readiness and willingness. The court may also grant injunction restraining Karim from selling the plot to a third party, and may order the balance to be paid into court.
Practical advice: Salam should plead specific performance as the primary relief and damages in the alternative, and should deposit the balance (at the original price, to be safe) to demonstrate readiness.