Mukul Sharma v. Orion India (P.) Ltd.
Background
The appellant had filed a civil suit for specific performance of a 1992 agreement under which he was to receive specified built-up areas in a building complex. The core dispute was whether the term "built-up area" in the agreement included common areas like lift wells, corridors and lobbies, or excluded them. The trial court decreed in the appellant's favour, but on the respondent's first appeal, the High Court held that the common areas were included within "built-up area," relying on an earlier letter where the appellant himself had used that understanding.
Decision Breakdown
The Supreme Court held that the High Court had erred by relying only on the appellant's earlier letter (Ex.'H') while ignoring two later letters (Ex.3 and Ex.4) in which the respondent itself had expressly agreed that "built-up area" would exclude common areas. Applying the principle that extrinsic evidence of the parties' subsequent conduct can clarify an undefined contractual term (citing Abdulla Ahmed vs. Animendra Kissen Mitter and Godhra Electricity Co. vs. State of Gujarat), the Court found it was the respondent, not the appellant, who had shifted position and then could not resile from its own later admission under Section 5 of the Indian Contract Act. The Court allowed the appeal, set aside the High Court's finding on "built-up area," and restored the trial court's finding on that point, directing the trial court (to which the matter had already been remanded for the ministerial task of recalculating the exact area) to complete that calculation using this clarified definition.
Lesson Learnt
When a contract uses an undefined term, courts look to what the parties actually did and said about its meaning afterward, and a party's later written acceptance of a definition can bind it even if an earlier letter suggested otherwise; you cannot go back on a position you clearly agreed to in writing.