Remission
Section 63 of the Indian Contract Act, 1872
In one minute
Remission means the promisee gives up, wholly or in part, his right to have a promise performed. Under section 63 he may also extend the time for performance, or accept some other satisfaction instead. The promisor is then freed to that extent.
The right belongs to the promisee, so he may give it up. In exams, the four powers in section 63 and the five illustrations earn the marks. In real life, it is the law behind a creditor settling a debt for less.
Exam focus
- Frequency: No data
- Usually asked as: No data
Legal provision
- Section 63: every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him. He may extend the time for performance. He may accept instead of it any satisfaction which he thinks fit.
- Illustration (a): A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform.
- Illustration (b): A owes B Rs 5,000. A pays, and B accepts, Rs 2,000 in satisfaction of the whole debt, paid at the time and place at which the Rs 5,000 were payable. The whole debt is discharged.
- Illustration (c): A owes B Rs 5,000. C pays B Rs 1,000, and B accepts it in satisfaction of his claim on A. The whole claim is discharged.
- Illustration (d): A owes B a sum of money whose amount has not been ascertained. A, without ascertaining the amount, gives B, and B in satisfaction accepts, Rs 2,000. The whole debt is discharged, whatever its amount.
- Illustration (e): A owes B Rs 2,000 and also owes other creditors. A arranges with all of them, including B, to pay a composition of eight annas in the rupee. Payment to B of Rs 1,000 discharges B's demand.
Meaning and definition
Remission is the promisee's act of giving up, wholly or in part, the performance of a promise made to him. The Act uses the verbs "dispense with" and "remit". It does not define remission as a separate term.
The law lets the promisee do this because the right is his. It also removes a harsh English rule. In English law, a promise to accept a smaller sum for a larger debt was not binding without fresh consideration. Section 63 does not follow that rule. The tree shows the four powers and the Act's illustrations.
- Promisee's powers section 63
- Dispense with performance
- Promisee forbids the workThe promisor is no longer bound (illustration (a)).
- Remit performance, wholly or in part
- Accepts Rs 2,000 for a debt of Rs 5,000The whole debt is discharged (illustration (b)).
- Extend the time for performance
- By agreement with the promisorThe promisee cannot extend time alone for his own benefit.
- Accept any satisfaction he thinks fit
- A third person pays partThe whole claim is discharged (illustration (c)).
- An unascertained sum is paidThe whole debt is discharged (illustration (d)).
- A composition with all creditorsPayment discharges the demand (illustration (e)).
- Dispense with performance
Detailed explanation
Step 1: who may remit
Only a promisee can remit, because the right to performance is his. A stranger to the contract cannot give up the right for him. The promisee must act with free consent. A remission obtained by coercion, fraud or undue influence can be avoided like any other consent that is not free.
Step 2: dispensing with performance
The promisee may tell the promisor that he need not perform at all. The promisor is then no longer bound.
Example. Arun promises to paint a portrait for Bhavna. She later tells him not to. Arun is no longer bound to paint it (section 63, illustration (a)).
Step 3: remitting in whole or in part
The promisee may give up part of what is owed, and accept the rest as full satisfaction. The part he gives up is gone for good. A creditor who has accepted a lesser sum in full satisfaction cannot later sue for the balance.
Example. Chitra owes Deepak Rs 5,000 on 1 May. She pays him Rs 2,000 on that day, and he accepts it in full satisfaction of the debt. The whole Rs 5,000 is discharged (section 63, illustration (b)).
Step 4: extending the time
The promisee may allow more time. An extension rests on an agreement between the parties. The promisee cannot extend time alone for his own benefit. The agreement need not be written and can be shown by conduct.
Example. A builder and an owner agree that the handover date moves from 1 March to 1 May. The extension binds both. The builder is not late if he hands over by 1 May.
Step 5: accepting other satisfaction
The promisee may accept something else in place of the promise. It may be a smaller sum, goods, or a payment by a third person. Illustration (c) shows that the payment may come from a stranger. Illustration (d) shows that the debt is discharged even if the amount was never worked out. Illustration (e) shows a composition (a part-payment settlement with all the debtor's creditors).
Example. Ela owes Faisal Rs 5,000. Her brother pays Faisal Rs 1,000, and Faisal accepts it in satisfaction of his whole claim on Ela. The whole claim is discharged (section 63, illustration (c)).
Step 6: no fresh consideration
Under English law, as stated in Foakes v. Beer (1884), a promise to take less than the whole debt needs fresh consideration, because the debtor already owes the whole. Section 63 does not require it. The illustrations show that the debt is discharged when the lesser sum is accepted in satisfaction. Courts have held that an agreement to extend time under section 63 also needs no consideration.
Step 7: what remission is not
Remission puts no new contract in place of the old one. That is the difference from novation. It is the promisee's own act. Where the parties agree on a substituted performance and carry it out, the act is called accord and satisfaction, which the comparison below explains.
The illustrations at a glance
| Illustration | What the promisee does | Result |
|---|---|---|
| (a) | Forbids the promisor to perform | The promisor is no longer bound |
| (b) | Accepts Rs 2,000 for Rs 5,000, at the time and place payable | The whole debt is discharged |
| (c) | Accepts Rs 1,000 from a third person in satisfaction | The whole claim is discharged |
| (d) | Accepts Rs 2,000 for an unascertained sum | The whole debt is discharged |
| (e) | Accepts a composition with all creditors | Payment discharges his demand |
Don't confuse: remission, novation and accord and satisfaction
All three end the old duty by agreement. They work differently.
| Point | Remission | Novation | Accord and satisfaction |
|---|---|---|---|
| What happens | The promisee gives up all or part of the right | A new contract replaces the old | The promisee agrees to take a different performance and receives it |
| New contract | No | Yes | The accord is an agreement for the substitute |
| Section | 63 | 62 | 63 (any satisfaction he thinks fit) |
Inside the idea. A landlord says to his tenant, "Pay me Rs 8,000 and I will forget the other Rs 2,000 of rent." The tenant pays Rs 8,000. The landlord has remitted the Rs 2,000.
Just outside it. The landlord and the tenant sign a new lease at a lower rent, ending the old lease. This is a novation. A new contract replaces the old.
Common mistakes
- Saying remission needs fresh consideration. Section 63 does not require it.
- Saying the promisee can extend time alone, for his own benefit. An extension rests on agreement.
- Calling remission a novation. Remission creates no new contract.
- Forgetting that a creditor who accepts a lesser sum in full satisfaction cannot sue for the balance.
Apply it
Problem
Raju owes Sunita Rs 60,000 for goods supplied. Sunita agrees in writing to accept Rs 45,000 by 30 June in full settlement. Raju pays Rs 45,000 on 30 June. Sunita then sues Raju for the remaining Rs 15,000. Will she succeed?
Issue. Can a promisee who accepted a lesser sum in full satisfaction sue for the balance?
Rule. A promisee may remit performance wholly or in part, or accept any satisfaction he thinks fit (section 63). Illustration (b) shows that acceptance of a smaller sum in satisfaction discharges the whole debt.
Application. Sunita agreed to take Rs 45,000 in full settlement and accepted it. She remitted the balance of Rs 15,000. No fresh consideration was needed.
Conclusion. The whole debt is discharged. Sunita cannot recover the Rs 15,000.
Leading case laws
- Kapurchand Godha v. Mir Nawab Himayat Ali Khan Azamjah (1962)
Facts. The Supreme Court, [1963] 2 SCR 168, considered a creditor who accepted a payment offered in full satisfaction of a larger claim and afterwards sued for the balance.
Principle. Under section 63, a promisee who accepts payment in full satisfaction of his claim cannot afterwards sue for the rest.
Why it matters. It applies the part-payment rule of section 63 to a real debt.
- Keshavlal Lallubhai Patel v. Lalbhai Trikumlal Mills Ltd. (1958)
Facts. The Supreme Court, AIR 1958 SC 512, considered whether the promisee had extended the time for performance by a letter of his own.
Principle. An extension of time under section 63 must rest on an agreement between the parties. The promisee cannot extend time alone, for his own benefit. The agreement need not be in writing.
Why it matters. It sets the limit on the promisee's power to extend time.
- Foakes v. Beer (1884)
Facts. The House of Lords, (1884) 9 App Cas 605, considered a judgment debt of £2,090 19s. The creditor signed a memorandum agreeing not to take proceedings if the debtor paid £500 at once and £150 every half year until the whole was paid.
Principle. A promise to accept part payment of a debt is not supported by consideration, because the debtor already owes the whole. This is the English rule that section 63 does not follow.
Why it matters. It shows what Indian law changed. In India the debt is discharged under section 63 when the creditor accepts the lesser sum in satisfaction.
How to write this answer in the exam
5-mark answer
- Define remission and cite section 63.
- List the four powers: dispense with, remit, extend time, accept other satisfaction.
- Give illustration (b) on part payment.
- State the effect: the promisor is freed to that extent, without fresh consideration.
10-mark answer
- Meaning and the reason for the rule.
- Section 63 and its five illustrations.
- The four powers explained one by one.
- Departure from the English rule in Foakes v. Beer.
- Kapurchand Godha and Keshavlal Lallubhai Patel.
- Comparison with novation and accord and satisfaction, then a conclusion.
Key points to remember
- Remission is the promisee's giving up of performance, wholly or in part (section 63).
- The promisee may also extend time or accept any satisfaction he thinks fit.
- Acceptance of a lesser sum in satisfaction discharges the whole debt.
- Section 63 does not follow the English rule in Foakes v. Beer.
- An extension of time rests on agreement. The promisee cannot extend time alone.
- Remission creates no new contract. Novation does.
Quick self-test
1. What four things may a promisee do under section 63?
Dispense with or remit performance wholly or in part, extend the time, and accept any satisfaction he thinks fit.
2. A owes B Rs 5,000. B accepts Rs 2,000 in full satisfaction at the time and place payable. Is the debt discharged?
Yes. The whole debt is discharged (section 63, illustration (b)).
3. Can a promisee extend the time for performance alone?
No. An extension must rest on an agreement between the parties (Keshavlal Lallubhai Patel).