Principle: Novation of contract occurs when parties substitute a new contract for an existing one, discharging the original contract.
Facts: A owes ₹10,000 to B. A, B, and C agree that C will pay ₹10,000 to B instead of A. Does A liability extinguish?
Answer and explanation
Correct answer: B. Yes, novation under Section 62 discharges the original liability of A
- Step 1: Refer to Section 62 of the Indian Contract Act 1872.
- Step 2: 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.
- Step 3: The mutual tripartite agreement substituting C for A constitutes valid novation, discharging A completely.
Answer
Yes, novation under Section 62 discharges the original liability of A.
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