Introduction 

• Essential Conditions are provided under the Indian Contract Act, 1872 (ICA) which are required for a valid contract. 
• To make an agreement legally valid it must be enforceable. 
• There are some agreements which needs not to be performed even after the agreement is valid and enforceable due to novation, alteration, rescission, remission of the contract. 

Section 62 of ICA 

• Section 62 of the ICA states the effect of novation, rescission, and alteration of contract as 
  • If the parties to the contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed. 
  • This section is further explained with the help of the illustrations as under: 
    • A owes money to B under a contract. It is agreed between A, B and C that B shall thenceforth accept C as his debtor, instead of A. The old debt of A to B is at an end, and a new debt from C to B has been contracted.  
    • A owes B 10,000 rupees. A enters into an arrangement with B and gives B a mortgage of his (A’s) estate for 5,000 rupees in place of the debt of 10,000 rupees. This is a new contract and extinguishes the old.  
    • A owes B 1,000 rupees under a contract. B owes C 1,000 rupees B orders A to credit C with 1,000 rupees in his books, but C does not assent to the arrangement. B still owes C 1,000 rupees, and no new contract has been entered into. 

What is Novation? 

• It occurs when a contract is substituted for the old contract between the same or new parties.  
• In order to enforce novation, the conditions mentioned under Section 62 of the ICA must be followed. 
• There must be a valid reason for substituting the contract. 
• Consent of all the parties is required. 
• The old contract must be substituted before the expiry or breach of the contract. 

What is Alteration? 

• It means changing one or more contract terms, thereby discharging the old contract and forming a new one. Alterations to a contract must take place with the consent of all the parties to the contract. 

Section 63 of ICA 

• Remission occurs when parties to a contract accept a lesser amount or lesser degree of performance than what was initially agreed upon in the contract. Section 63 of the act states that a party may; 
  • Remit the performance stated wholly or in part. 
  • Extend the time for performance. 
  • Accept any other kind of performance apart from the one mentioned in the contract. 
• Section 63 of ICA states that the promisee may dispense with or remit performance of promisee. 
  • As every promisee may dispense with or remit, wholly or in part, the performance of the promisee made to him, or may extend the time for such performance or may accept instead of it any satisfaction which he thinks fit. 
• This section is further explained with the help of the illustrations as under: 
  • A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform the promise.  
  • A owes B 5,000 rupees. A pays to B, and B accepts, in satisfaction of the whole debt, 2,000 rupees paid at the time and place at which the 5,000 rupees were payable. The whole debt is discharged.  
  • A owes B 5,000 rupees. C pays to B 1,000 rupees, and B accepts them, in satisfaction of his claim on A. This payment is a discharge of the whole claim.  
  • A owes B, under. a contract, a sum of money, the amount of which has not been ascertained. A, without ascertaining the amount, gives to B, and B, in satisfaction thereof, accepts the sum of 2,000 rupees. This is a discharge of the whole debt, whatever may be its amount.  
  • A owes B 2,000 rupees and is also indebted to other creditors. A makes an arrangement with his creditors, including B, to pay them a composition of eight annas in the rupee upon their respective demands. Payment to B of 1,000 rupees is a discharge of B’s demand. 

Section 64 of ICA 

• Rescission takes place when the parties in the contract agree to dissolve the contract. In this case, the old contract stands discharged and no new contract is formed. 
• Section 64 of ICA states consequences of rescission of voidable contract as  
  • When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is promisor.  
  • The party rescinding a voidable contract shall, if he have received any benefit thereunder from another party to such contract, restore such benefit, so far as may be, to the person from whom it was received.

Miscellaneous Provisions in Support of the Novation, Rescission, and Alteration of Contract 

• Section 65 of ICA 
  • Section 65 states obligation of person who has received advantage under void agreement, or contract that becomes void as 
    • When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it to the person from whom he received it.  
  • This section is further explained with the help of illustrations as:  
    • A pays B 1,000 rupees in consideration of B’s promising to marry C, A’s daughter. C is dead at the time of the promise. The agreement is void, but B must repay A the 1,000 rupees. 
    • A contracts with B to deliver to him 250 maunds of rice before the first of May. A delivers 130 maunds only before that day, and none after. B retains the 130 maunds after the first of May. He is bound to pay A for them.  
    • A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for two nights every week during the next two months, and B engages to pay her a hundred rupees for each night’s performance. On the sixth night, A wilfully absents herself from the theatre, and B, in consequence, rescinds the contract. B must pay A for the five nights on which she had sung.  
    • A contracts to sing for B at a concert for 1,000 rupees, which are paid in advance. A is too ill to sing. A is not bound to make compensation to B for the loss of the profits which B would have made if A had been able to sing but must refund to B the 1,000 rupees paid in advance.  
• Section 66 of ICA 
  • Section 66 states that mode of communicating or revoking rescission of voidable contract 
    • The rescission of a voidable contract may be communicated or revoked in the same manner, and subject to the same rules, as apply to the communication or revocation of a proposal 
• Section 67 of ICA 
  • Section 67 states effect of neglect of promisee to afford promisor reasonable facilities for performance as  
    • If any promisee neglects or refuses to afford the promisor reasonable facilities for the performance of his promise, the promisor is excused by such neglect or refusal as to any non-performance caused thereby.  
  • This section is further explained with the help of illustration as under: 
    • A contracts with B to repair B’s house. B neglects or refuses to point out to A the places in which his house requires repair. A is excused for the non-performance of the contract if it is caused by such neglectful refusal. 

Conclusion 

It is required that all the parties to the contract consent to a change in the parties and to vary the terms of the contract. It is to be noted that the new contract must be valid and enforceable.