4. Discharge by Agreement — Novation, Remission, and Accord and Satisfaction

Not every contract ends through performance or breach — very often, the parties themselves simply agree to end it, change it, or replace it with something else. This post covers the four related but distinct routes the Act recognises: novation, rescission, alteration, and remission, along with the common-law idea of accord and satisfaction.

The Problem This Topic Solves

Students often treat "novation," "rescission," "alteration," and "remission" as interchangeable synonyms for "cancelling a contract." They are not. Each involves a different combination of who consents, whether the original contract survives, and whether new consideration is needed — and exam questions are frequently built to test exactly this confusion.

Discharge by Mutual Consent — Section 62

Section 62 lays the foundation: if the parties to a contract agree to substitute a new contract for it, or to rescind it, or to alter it, the original contract need not be performed. The section covers three distinct situations under one roof — novation (substitution), rescission (cancellation), and alteration (modification).

Novation — Substituting a New Contract

Novation happens when an existing contract is replaced by a new one — either between the same parties on new terms, or between different parties on the same (or similar) terms, with the original parties' consent. Novation requires the consent of all parties involved, including any new party being brought in. Once a valid novation happens, the original contract is completely discharged, and only the new contract can be enforced. The English case Scarf v. Jardine (1882) is a classic illustration of the underlying idea: once a party validly elects to accept a substituted arrangement as a novation, they cannot later fall back on the original contract as well — it is one or the other, not both.

Rescission — Cancelling the Contract Altogether

Rescission is simply the parties agreeing to cancel the contract, releasing each other from all obligations under it, without replacing it with anything. No new contract comes into being.

Alteration — Changing a Term Without New Parties

Alteration means changing one or more terms of the contract, with the consent of all the same parties, while the parties themselves remain unchanged. The original contract is discharged in its old form, and the altered version takes its place.

Remission — Accepting Less Than What Was Promised (Section 63)

Section 63 gives every promisee an important power: a promisee may dispense with or remit, wholly or in part, the performance of the promise made to him; may extend the time for such performance; or may accept, instead of it, any satisfaction which he thinks fit. This is a genuine exception to the general rule (from Unit I) that "no consideration, no contract" — a promisee can validly let a promisor off the hook, or accept a lesser amount in full settlement, without needing any fresh consideration from the promisor.

Waiver

Waiver is closely related to remission — it is the deliberate giving up of a right that a party is entitled to under the contract. Like remission, once validly waived, the right cannot ordinarily be revived and enforced later.

Accord and Satisfaction

"Accord and satisfaction" is the common-law name for what happens when a promisee agrees to accept a different kind of performance in place of what was originally promised. The "accord" is the new agreement to accept different consideration; the "satisfaction" is the actual carrying out of that new agreement. In Indian law, this idea is absorbed into Section 63's "any satisfaction which he thinks fit" — a promisee is free to agree to accept, say, a smaller cash sum, or goods instead of money, in full discharge of the original debt.

Comparing the Four Routes

• Section 62 — novation, rescission, and alteration all mean the original contract need not be performed
• Novation needs the consent of all parties, including any new party
• Section 63 — a promisee can dispense with, remit, extend time for, or accept different satisfaction for a promise, without needing fresh consideration. This is an exception to the general consideration rule

• "Accord and satisfaction" is not a separate Indian Contract Act term — it is the common-law label for what Section 63 already permits

A Practical Example

A furniture-maker owes a client a hand-carved dining table worth ₹80,000, but is running badly behind schedule. The client, tired of waiting, agrees to accept a ready-made table worth ₹60,000 instead, "in full and final settlement." This is accord and satisfaction — under Section 63, the client (as promisee) is free to accept this different, lesser satisfaction, and once accepted, the furniture-maker is fully discharged of the original ₹80,000 promise, with no need for any fresh consideration to be given by the furniture-maker.

Quick Revision Points

• Section 62 covers novation, rescission, and alteration under one umbrella rule
• Novation = new contract (same or new parties); Rescission = cancellation, nothing new; Alteration = same parties, changed terms
• Section 63 = remission/waiver/extension/different-satisfaction — the promisee's own choice, no consideration needed
• "Accord and satisfaction" is Section 63 in common-law clothing — accord is the new agreement, satisfaction is carrying it out