Chapter IV - Of the Performance of Contracts
Section 62
Section 62: Novation, rescission and alteration
Section 62 addresses an agreed replacement, rescission or alteration of a contract. When the parties make the qualifying agreement, the original contract need not be performed.
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This article is for general information. Refer to the Indian Contract Act, 1872 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
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.
Rule and business relevance
The alternatives are substituting a new contract, rescinding the old one or altering it. The illustrations emphasise the necessary agreement, including the assent of relevant parties where a new debtor or creditor arrangement is proposed.
Limits and related provisions
A unilateral instruction, bookkeeping entry or proposed amendment does not itself establish agreement to novation. Distinguish a true replacement from an added security or a performance arrangement, and document exactly which obligations are discharged.
Hypothetical business example
Hypothetical: a debtor proposes that another person replace it as the borrower. The parties obtain the relevant agreement rather than assuming an internal ledger transfer releases the original debtor.
Practical decision flow
Identify the original obligations and the intended substitute, rescission or alteration.
Establish assent of the relevant parties and satisfy applicable formalities.
Record which obligations cease and which new or altered obligations continue.
Check the applicable legal framework
This guide explains the central provision. Applicable State amendments, the agreement, transaction date and other governing laws can affect its application. Check the current legal framework before relying on it for a commercial decision.
Practical checklist
Do
- Identify the original obligations and the intended substitute, rescission or alteration.
- Establish assent of the relevant parties and satisfy applicable formalities.
- Record which obligations cease and which new or altered obligations continue.
Avoid
- A unilateral instruction, bookkeeping entry or proposed amendment does not itself establish agreement to novation. Distinguish a true replacement from an added security or a performance arrangement, and document exactly which obligations are discharged.
Glossary
- Novation
- Substitution of a new contract for the existing one through the required agreement.
- Rescission by agreement
- The parties' agreement to bring the original contract to an end.
Frequently asked questions
Can one party alone declare a novation?
Section 62 requires the parties to agree to the relevant change.
Does a proposed ledger transfer necessarily release the original debtor?
No. The statutory illustration shows the importance of the relevant person's assent.
Must the old contract still be performed after a qualifying replacement?
The section states that the original contract need not be performed.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026