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

Under the Indian Contract Act, 1872, if the parties to a contract agree to substitute a new contract for it, what is the effect on the original contract?

The original contract need not be performed. Under Section 62, when the parties agree to substitute a new contract for the old one, or to rescind or alter it, the earlier obligation is discharged by that agreement and the new arrangement takes its place.

  1. AThe original contract must still be performed first, and then the new one
  2. BThe original contract need not be performedCorrect
  3. CThe original contract is voidable at the option of the court
  4. DThe original contract continues alongside the new one

Explanation

Section 62 provides that where the parties agree to substitute a new contract, or to rescind or alter the original, the original contract need not be performed. The option requiring performance first contradicts this rule.

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