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Contract 1
FY L.L.B. Academic Year: 2020-2021

PROJECT TOPIC

Discharge of Contract by Novation, Rescission, Remission or Waiver.

Submitted by:
Roll No. 31, Div. A
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Section 62 of the Indian Contract Act 1872, states that “if the parties to the contract agree to substitute a new
contract for it or to rescind it or alter it, the original contract need not to be performed.”

1. DISCHARGE OF CONTRACT BY NOVATION

The novation of the contract means the creation of a new contract, while the previous one is cancelled and does
not have to be executed. It is an act that replaces a new obligation or part of a contract with the previous one.
Additionally, the newly superseded agreement must be valid, enforceable, considerable and mutually agreed
between the parties.
Essentials of Novation:
The original contract must be completely replaced by a new contract. 1
The original contract must remain intact, which means that novation can only take place before the original
contract is breached. 2
The essence of novation lies in the intention and consent of both parties 3 to replace the old with the new and not
in the similarity / dissimilarity between the terms of the old and the new contract.
By creating a new contract, the parties can excuse the performance of the original contract. 4
Kinds of Novation:
In Ramdayal v. Maji Devdiji it was stated that a novation can occur in two situations, by introducing new terms
or new parties. As follows:
Novation in the terms of the contract: If the contracting parties decide to use a new contract to make changes
to the terms of the original contract. In addition, minor changes to the contract without the intention of creating
a new contract would not constitute a novation.
Novation for change in Parties: If the original contract is enforceable and the parties are replacing one of the
parts with another, newly added party will be liable and the party being replaced will be released from its
obligations under the original contract.

2. DISCHARGE OF CONTRACT BY RESCISSION

Rescission5 means termination or revocation of a contract by the consent of both the contracting parties, legally.
The parties to a pending or incomplete contract can terminate it at any time by mutual agreement, even if the
contract itself contains a contrary provision. The right of withdrawal is limited to the contracting parties or the

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Lata Construction v Rameshchandra Ramniklal Shah
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Manohur Koyal v Thakur Das
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City Bank N. A. v Standard Chartered Bank
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Raja Shiba Prasad Singh v. Tincouri Banerji.

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Section 62 of the Indian Contract Act 1872.
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legally authorized persons to act on their behalf. As with other contracts, the parties to the termination contract
must be mentally competent

Important aspects of Rescission

Communication: The rescission agreement can be made in writing or orally. An express rescission of a
contract as a whole is appropriate and effective without expressly naming each of the clauses to be terminated.
Unless otherwise provided by law, an oral termination agreement also applies if the rescission agreement
contains a provision that can only be changed in writing.
Assent: All contracting parties must agree to its recission, as mutual termination implies the implementation of
a new contract. An agreement can be reached through an offer for termination and acceptance by the other
party. A contracting party cannot withdraw from the contract. simply by letting the other party know that you
intend to do so. Although the breach of contract by either party does not constitute an offer to rescind, the other
party may treat the rejection as an offer of termination which it may accept. which lead to the termination of the
contract by mutual agreement. However, the decision must be made clear and the behaviour of the parties must
be incompatible with the existence of the contract. The returned contract is inconclusive as to whether the
termination has occurred.
Consideration: An agreement to rescind an earlier contract must be based on sufficient consideration, an
incentive. If a contract remains in execution by both parties, an agreement to terminate it by one of the parties is
sufficient to terminate the agreement by the other party and vice versa. If the contract has been executed on the
one hand, a termination agreement that is made without further consideration is void, i.e., without legal force or
binding force.
Operation and Effect
The mutual rights of the parties are governed by the terms of rescission agreement. The parties will usually
regain their original rights in relation to the issue in question. Either parties, no longer have any rights or
obligations under the terminated/rescinded contract and there are no claims or actions. The waiver of rights or
obligations already accumulated in the course of performance upon termination of the contract depends on the
intentions of the parties arising from all simultaneous facts and circumstances and on whether the parties have
reserved these rights. However, recovery can be allowed for partial execution.

3. DISCHARGE OF CONTRACT BY REMISSION

Remission means acceptance of lesser fulfilment of the promise made, acceptance of a lesser sum than what
was contracted for, in discharge of the whole debt. It is not necessary that there must be some consideration for
the remission of the part of the debt.
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Example: Peter takes a loan from John and agrees to pay instalments every month for the next five years.
However, he does not pay even a single instalment. John calls him a few times but then gets busy and takes no
action. Three years later, Peter only repays a part of the money he owes to John. However, John agrees to
accept it as a final settlement of the debt. John’s act of remission discharges the contract.

4. DISCHARGE OF CONTRACT BY WAIVER

The waiver6 allows a promise to dispense with or remit wholly or in part the performance of the promise made
to him or to extend the time for such performance or accept, instead of it, any satisfaction which he thinks fit. It
involves abandonment of right, voluntarily by one party under the contract, but doesn’t give up the entire right
to performance by the other side. The agreement of waiver need not be express, it may be inferred from the
conduct of the parties.
Types of Waiver’s:
Waiver by Contract or Deed: This happens where a gathering explicitly consents to surrender their lawful
rights. Such an understanding will tie gave the ordinary prerequisites of an agreement have been met.
Example: 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 Rs. 2,000. This is a
discharge of the whole debt, whatever may be its amount.

Waiver by the Decision: This applies to agreements which contain an express right or alternative to end or
repel it in specific circumstances, or when one gathering submits a genuine reason which gives the other party
the privilege to end the agreement right away.
Example: A gives a loan to B. A has the right to recover the money from B; but by an agreement or free
consent (s)he may give up that right and frees B from the obligation of returning the money.

5. CONCLUSION
As mentioned earlier, novation, recession, remission and waiver, occurs when the terms of the contract
change or when the parts of the contract change or the contract itself is dissolved. It is also required that all
parties have agreed to the changes and have not responded unilaterally to the contract. It has been
emphasized and affirmed throughout the various chapters of this research that the role of intent in
determining whether or not a novation has occurred is extremely critical and crucial should be pretty
explicit i.e., animus novandi. The new agreement must contain the requirements of a valid contract.

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Section 63 of the Indian Contract Act 1872.
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6. BIBLIOGRAPHY
 indiancode.nic.in
 legalservicesindia.com
 indiankanoon.org
 blog.ipleaders.in
 Law of Contract & Specific Relief, 12th Edition by Avtar Singh.