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CMA Foundation · Fundamentals of Business Laws and Business Communication · Discharge of Contracts

Anil owes Bharat Rs 10,000. Bharat orders Anil to credit Chandra, to whom Bharat owes Rs 10,000, with that amount in his books, but Chandra does not assent. What is the position?

Bharat still owes Chandra Rs 10,000 and no new contract has come into existence. Novation requires the agreement of all the parties, and Chandra did not assent to the credit entry in Anil's books, so the original liability continues.

  1. ANovation has occurred and Bharat is free from liability to Chandra
  2. BBharat still owes Chandra Rs 10,000 and no new contract has been entered intoCorrect
  3. CAnil is now liable to both Bharat and Chandra
  4. DChandra's silence is treated as assent to the arrangement

Explanation

Substituting a new contract needs the agreement of all the parties concerned. Under the illustration to Section 62, where C does not assent, B still owes C and no new contract is made. The option claiming novation fails because Chandra never agreed.

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