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Indian Contract Act, 1872 · Chapter IV: Of the Performance of Contracts · Contracts which need not be performed

Section 62: Effect of novation, rescission, and alteration of contract

In plain words

If the parties agree to replace a contract with a new one (novation), or to cancel or change it, the original contract no longer needs to be performed.

Example: A owes money to B. A, B and C agree that C will be B's debtor instead of A. A's old debt ends and a new debt from C to B begins.

A simplified explanation, prepared with AI assistance from the official text below and checked automatically against it for numbers and cross-references. The official text is the law and prevails over this summary. Not legal advice.

Read the in-depth explanation, with key Supreme Court rulings ↓

Official text

If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract, need not be performed.

Illustrations

(a) 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.

(b) 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.

(c) 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.

Source: India Code (indiacode.gov.in), the consolidated text published by the Legislative Department, Government of India. Text as updated on India Code on 15 October 2026. Words in square brackets [ ] were inserted or substituted by later amending Acts, and *** marks words omitted by an amendment. The amendment footnotes are not reproduced here. Official text on India Code.

Understanding this section

Section 62 covers novation, rescission and alteration. If the parties agree to substitute a new contract for the old one, or to rescind or alter it, the original contract need not be performed.

Three ways to change a contract by agreement

  • Novation: a new contract replaces the old one, either between the same parties on new terms or with a new party.
  • Rescission: the contract is cancelled.
  • Alteration: some terms are changed.

Key points

  • All parties must agree; one side cannot novate or alter unilaterally.
  • The new contract must be intended to replace the old, not merely to add to it. If the parties keep the old contract alive, there is no novation.
  • Novation must happen before the time for performance of the original contract has passed.
  • If the new contract is itself invalid, the old one is not discharged.

Key Supreme Court rulings

  • Lata Construction v. Dr. Rameshchandra Ramniklal Shah 1999 INSC 326

    A builder who could not deliver a flat signed a fresh agreement to pay compensation, which stated that the earlier agreement remained unaffected until payment. The Court held this was not a novation: because the old agreement was expressly kept alive, the buyers could still enforce it.

  • Citibank N.A. v. Standard Chartered Bank 2003 INSC 534

    Accepting a different performance with full knowledge discharged the original obligation under section 63. Novation, rescission or alteration under section 62 can only be done with the agreement of both parties.

Common mistakes

  • Assuming any later agreement is a novation; check whether the old contract was meant to survive.
  • Treating a unilateral change as an alteration.

Read with: Section 63 Indian Contract Act, 1872, Section 64 Indian Contract Act, 1872

Prepared with AI assistance as a study aid. Every ruling listed was checked against the Supreme Court's own judgments on this site, and quoted words appear in those judgments; linked names open the full judgment. Read the judgments themselves before relying on them. Not legal advice.

Supreme Court judgments citing the section 62