Remission of a Contract
Definition:
Remission of a contract refers to the acceptance by a creditor of less than what is actually due under the contract, thereby discharging the debtor from the full liability.
It is essentially a reduction or forgiveness of the obligation owed under a contract.
Legal Reference:
Section 63 of the Indian Contract Act, 1872 deals with remission of performance of a contract.
Key Features:
Voluntary Acceptance: The creditor voluntarily accepts less than the full performance.
Discharge of Liability: The debtor is discharged to the extent of the remission.
Mutual Consent: Both parties must agree to the remission.
Consideration Not Necessary: Remission may occur even without fresh consideration, as it is a benefit to the debtor.
Partial or Full: Remission can be partial (less amount) or complete (full forgiveness of debt).
Types of Remission:
Remission of Debt: Creditor accepts less than the owed amount.
Remission of Performance: Creditor accepts something different or lesser than originally promised.
Example:
A owes B ₹10,000. B agrees to accept ₹7,000 as full settlement.
Here, remission occurs, and A is discharged from the remaining ₹3,000.
Legal Effect:
Discharge of Obligation: Once remission is accepted, the debtor cannot be compelled to pay the remainder.
No Compulsion: Creditor cannot claim the full amount unless there was fraud, coercion, or undue influence in obtaining remission.
Illustrative Case Law:
Pinnel’s Case (1602) 5 Co Rep 117a (UK)
Facts: Part payment of debt cannot discharge the whole debt unless:
Payment is made earlier than due date
Payment is made at a different place
Payment is made in kind instead of money
Principle: Remission by consent is valid; unilateral acceptance without consent does not bind the creditor.
Indian Perspective:
Indian courts generally follow the principle that voluntary acceptance of less discharge the debt under Section 63.
Key Points to Remember:
| Feature | Remission of Contract |
|---|---|
| Definition | Acceptance of less than what is due, discharging debtor |
| Legal Reference | Section 63, Indian Contract Act, 1872 |
| Requirement | Voluntary consent of creditor |
| Effect | Discharges debtor from remaining obligation |
| Consideration | Not necessary |
| Example | Creditor accepting ₹7,000 instead of ₹10,000 |
| Case Law | Pinnel’s Case (UK), applied in India |
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