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CS Professional · Drafting, Pleadings and Appearances · Commercial Contract Management

Nisha Foods owes Rs 10 lakh to Gupta Suppliers. By a tripartite agreement among Nisha Foods, Gupta Suppliers and Omkar Retail, Gupta Suppliers agrees to accept Omkar Retail as its debtor in place of Nisha Foods. Later, Gupta Suppliers sues Nisha Foods on the original debt. What is the position?

Gupta cannot sue Nisha. Under the Indian Contract Act, 1872, when parties agree to substitute a new contract, the original need not be performed. Gupta, Nisha and Omkar agreed that Omkar replaces Nisha as debtor, so the old debt ended and a new one arose.

  1. AGupta can sue Nisha, as novation needs a court order
  2. BGupta can sue Nisha, because Omkar's liability is only additional
  3. CGupta cannot sue Nisha, as the original contract need not be performed and a new debt from Omkar has arisenCorrect
  4. DGupta can sue Nisha only if Omkar has not paid within the first month

Explanation

If the parties agree to substitute a new contract for the old one, the original contract need not be performed. The tripartite agreement makes Omkar the debtor in place of Nisha, so the old debt ends and a new one arises. Option B wrongly treats the substitution as merely additional.

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