Since a contract is
created by mutual agreement, it can also be discharged by mutual
agreement. A contract can be discharged by mutual agreement in any of
the following ways:
a) Novation [Section 62] Novation means the substitution of a new contract for the original contract. Such a new contract may be either between the same parties or between different parties. The consideration for the new contract is the discharge of the original contract.
Example
i) A owes money to B under a contract. It is agreed between A, Band C that B shall henceforth accept C as his debtor, instead of A. The old debt of A to B no longer exists and a new debt from C to B has been contracted.
ii) A owes B Rs 10,000. A enters into an agreement with B, and gives B a mortgage of his (A’s) estate for Rs 5,000 in place of the debt of Rs 10,000. This is a new contract and extinguishes the old.
(c) Rescission [Section 62] Rescission means cancellation of the contract by any party or all the parties to a contract.
Example X promises Y to sell and deliver 100 Bales of cotton on 1st Oct. at his god own and Y promises to pay for goods on 1st Nov. X does not supply the goods. Y may rescind the contract.
(d) Alteration [Section 62] Alteration means a change in the terms of a contract with mutual consent of the parties. Alteration discharges the original contract and creates a new contract. However, parties to the new contract must not change.
Example X promises to sell and deliver 100 bales of cotton on 1st Oct. and Y promises to pay for goods on 1st Nov. Afterwards, X and Y mutually decide that the goods shall be delivered in five equal installments at Z’s godown. Here, original contract has been discharged and a new contract has come into effect.
(e) Remission [Section 63] Remission means acceptance by the promisee of a’ lesser fulfillment of the promise made. According to Section 63, “Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit.”
Example i) A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform the promise.
ii) A owes B Rs 5,000. A pays to B, and B accepts, in satisfaction of the whole debt, Rs 2,000 paid at the time and place at which Rs 5,000 were payable. The whole debt is discharged.
ii) 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.
iii) A owes B Rs 2,000, and is also indebted to other creditors. A makes an arrangement with his creditors, including B, to pay them a composition of 50 paise in a rupee upon respective demands. Payment to B of Rs 1,000 is a discharge of B’s demand.
(f) Waiver: Waiver means intentional relinquishment of a right under the con-tract. Thus, it amounts to releasing a person of certain legal obligation under a contract.
Example A promises to supply goods to Y. Subsequently, Y exempts X from carrying out the promise. This amounts to waiving the right of performance on the part of Y.
a) Novation [Section 62] Novation means the substitution of a new contract for the original contract. Such a new contract may be either between the same parties or between different parties. The consideration for the new contract is the discharge of the original contract.
Example
i) A owes money to B under a contract. It is agreed between A, Band C that B shall henceforth accept C as his debtor, instead of A. The old debt of A to B no longer exists and a new debt from C to B has been contracted.
ii) A owes B Rs 10,000. A enters into an agreement with B, and gives B a mortgage of his (A’s) estate for Rs 5,000 in place of the debt of Rs 10,000. This is a new contract and extinguishes the old.
(c) Rescission [Section 62] Rescission means cancellation of the contract by any party or all the parties to a contract.
Example X promises Y to sell and deliver 100 Bales of cotton on 1st Oct. at his god own and Y promises to pay for goods on 1st Nov. X does not supply the goods. Y may rescind the contract.
(d) Alteration [Section 62] Alteration means a change in the terms of a contract with mutual consent of the parties. Alteration discharges the original contract and creates a new contract. However, parties to the new contract must not change.
Example X promises to sell and deliver 100 bales of cotton on 1st Oct. and Y promises to pay for goods on 1st Nov. Afterwards, X and Y mutually decide that the goods shall be delivered in five equal installments at Z’s godown. Here, original contract has been discharged and a new contract has come into effect.
(e) Remission [Section 63] Remission means acceptance by the promisee of a’ lesser fulfillment of the promise made. According to Section 63, “Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit.”
Example i) A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform the promise.
ii) A owes B Rs 5,000. A pays to B, and B accepts, in satisfaction of the whole debt, Rs 2,000 paid at the time and place at which Rs 5,000 were payable. The whole debt is discharged.
ii) 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.
iii) A owes B Rs 2,000, and is also indebted to other creditors. A makes an arrangement with his creditors, including B, to pay them a composition of 50 paise in a rupee upon respective demands. Payment to B of Rs 1,000 is a discharge of B’s demand.
(f) Waiver: Waiver means intentional relinquishment of a right under the con-tract. Thus, it amounts to releasing a person of certain legal obligation under a contract.
Example A promises to supply goods to Y. Subsequently, Y exempts X from carrying out the promise. This amounts to waiving the right of performance on the part of Y.
Discharge of contract by Mutual Agreement
![Discharge of contract by Mutual Agreement]()
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