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ABDUL SAMI ABDUL LATIF (TECHNICAL TRAINER)     30 November 2011

Tenent agrement

I read the case of the tenant and the owner in which the tenents daughter got married to the son of the owner and after few days went back to her parents, my question related to the agrement is"is it possible to include a clause which allows for per month penalty if the tenent does not vacate the house according to the agrement? example: If the tenent fails to vacate the house untill agreed date a penalty of 10% of rent value of previous month  will be payable by the tenent .Note that every month there will be increase of 10% on the accumulated value of the rent of previous month). If the rent is 1000, and tenent did not vacate in June suppose, then july rent will be Rs1100/, in august it will be 1210, in september it will be 1331, oct will be 1464, like this it will keep on increasing untill the tenent vacates. Is is allowed to be included in the agrement?



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 5 Replies

H. S. Thukral (Lawyer)     30 November 2011

Such damages can not be claimed on asking. Any clause in an agreement imposing a penality is not enforceable without adjudication. Courts award damages at the market rate only. 

ABDUL SAMI ABDUL LATIF (TECHNICAL TRAINER)     01 December 2011

I did not ask about damages but if that clause is accepted by the tenant at the time of agrement,can it be included in the agrement?

H. S. Thukral (Lawyer)     01 December 2011

The agreement containing such clause may be accepted parties. But the fact remains that this clause has been inducted into the agreement as a penality clause or as a measure of damages. It can not be enforced.  

ABDUL SAMI ABDUL LATIF (TECHNICAL TRAINER)     02 December 2011

Dear Harbhajan singh

thanks for the valued answers, I still have some doubts, could you please let us know the definitions of the following with respect to tenent owner agrements.-

(1) "Conditions" as applied to agrements and "agreed conditions".

(2) Non complience of conditions of agrement.

(3) Damages.

(4) adjudication

Once again thanks for your highly appreciable answers.

H. S. Thukral (Lawyer)     02 December 2011

It appears that the question which is bothering you that if there is an accepted clause in the agreement by all parties then why it should not be given effect to.

The Indian Contract Act provides that when ever there is a clause in the agreement by way preassessed liquidated damages or penality, the courts are inclined to see whether the clause stipulates genuine damages or it is mentioned by way of a penality. If it is genuine damages the court may award up to the amount mentioned in the agreement and if it is by way of penality, the court shall adjudicate the quantum of damages and substitute its own opinion. For example in the present case, the agreement provides for 10% increase every month. Now it is clear that the landlord wants his house back after the original agreement expires after one year and the increase mentioned is in terrorem to get the house vacated. If the tenant stays there in for couples of years he shall be paying a rent far higher than the market rent. If there is a dispute then certainly courts shall come to the rescue of tenants and allow only market rent to be paid for the period. 


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