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

Kiran owes Anil Rs 1,000. Anil owes Charu Rs 1,000. Anil orders Kiran to credit Charu with Rs 1,000 in Kiran's books, but Charu does not assent. What is the position?

Anil still owes Charu Rs 1,000 and no new contract exists. Novation needs the agreement of all parties, and since Charu did not assent to the book entry, the original obligation is not substituted or discharged under Section 62.

  1. AAnil's debt to Charu is discharged because Kiran made the entry
  2. BKiran now owes Charu and Anil owes nothing
  3. CAnil still owes Charu Rs 1,000 and no new contract has been madeCorrect
  4. DCharu's debt becomes voidable at Kiran's option

Explanation

Section 62, illustration (c) says that without the assent of the third party no new contract is entered into, so the original debt of Anil to Charu remains. Novation requires the agreement of all parties concerned, so the entry alone does not discharge it.

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