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

Ravi owes Sheela Rs. 50,000. Sheela owes Tarun Rs. 50,000. Sheela instructs Ravi to credit Tarun with Rs. 50,000 in his books, but Tarun never agrees. Which statement is correct under the Indian Contract Act, 1872?

Sheela still owes Tarun Rs. 50,000, because no novation happened. Section 62 requires the parties to agree to the substitution; as illustration (c) shows, without the creditor's assent no new contract is formed and the old obligation continues.

  1. ASheela's debt to Tarun is discharged because Ravi has agreed
  2. BRavi now owes Tarun and Sheela's liability ends
  3. CNo novation occurs; Sheela still owes Tarun Rs. 50,000Correct
  4. DA new contract arises between Ravi and Tarun automatically

Explanation

Under section 62, a new contract substitutes the old only if the parties agree. Illustration (c) shows that without the creditor's assent no new contract exists. Tarun did not assent, so Sheela remains liable to him.

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