REMISSION OF PERFORMANCE

REMISSION OF PERFORMANCE (SECTION 63)

Section 63 enables the promisee to agree to dispense with or remit performance of promise. The Section reads as under: "63. Promisee may dispense with or remit performance of promise. Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit."

Illustrations

(a)   A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform the promise.

(b)   A owes B 5,000 rupees. A pays to B and B accepts, in satisfaction of the whole debt, 2,000 rupees paid at the time and place at which 5,000 rupees were payable. The whole debt is discharged.

(c)   A owes B 5,000 rupees, C pays to B 1,000 rupees, and B accepts them in satisfaction of his claim on A. This payment is a discharge of the whole claim.

(d)   A owes B, under a contract, a sum of money, the amount of which has not been ascertained. A without ascertaining the amount, gives to B, and B, in satisfaction thereof, accepts, the sum of 2,000 rupees. This is a discharge of the whole debt, whatever may be its amount.

(e)   A owes B 2,000 rupees, and is also indebted to other creditors. A makes an arrangement with the creditors including B, to pay them a composition of eight annas in the rupee upon their respective demands. Payment to B of 1,000 rupees is a discharge of B's demand".

The Section permits a party, who is entitled to the performance of a contract, to:

(i) dispense with or remit, either wholly or in part, the performance of the contract, or,

(ii) extend the time of performance, or,

(iii) accept any other satisfaction instead of performance.

 

(i)                 Dispensing with or remitting performance

The promisee has been authorized, by the above stated provision, to remit or dispense with the performance of the contract without any consideration. He may fully forego his claim, or may agree to a smaller amount in full satisfaction of the whole amount. Thus, if A promises to paint a picture for B, B may forbid him to do so, or if A owes Rs. 5,000 to B, B may accept from A only Rs. 2,000 in satisfaction of the whole of his claim. In such cases, A is discharged. It means that if B agrees to accept Rs. 2,000 in lieu of Rs. 5,000 from A, he cannot thereafter ask A to pay the balance of Rs. 3,000. In Lala Kapurchand v. Himayatali Khan ALR. 1963 S.C. 250, B had executed a promissory note in favour of A. A was offered a sum of Rs. 20 lacs in full satisfaction of his claim of Rs. 27 lacs under the aforesaid note. It was made clear to A that unless he recorded full satisfaction, payment would not be made to him. After some initial protests, A agreed to accept the sum of Rs. 20 lacs in full satisfaction of his claim and duly discharged the promissory note by endorsement on the promissory note indicating full satisfaction of his claim. A then sued B to recover the balance of Rs. 7 lacs. It was held that the case was completely covered by Section 63 and Illustration (c) thereof. A having accepted the payment in full satisfaction of his claim was not entitled to sue B for the balance.

Accepting performance from a third party promisee, if he so likes, may accept performance from a third party, and while accepting such performance, he may agree to forego his claim in part. Once the promisee accepts a smaller amount in lieu of the whole of his claim, the promisor would be thereby discharged. This is clear from Illustration (c) to Section 63, which is as follows:

A owes B 5,000 rupees. C pays B 1,000 rupees, and B accepts them in satisfaction of his claim on A. This payment is a discharge of the whole claim.

(ii)              Extending the time of performance

Section 63 permits the promisee to grant extension of time for the performance of the contract, and no consideration is needed for the same. The extension of time must be by a mutual understanding between the parties. A promisee cannot unilaterally extend the time of performance for his own benefit. Thus, if a certain date of delivery of goods has been fixed in a contract of sale of goods and the seller fails to supply the goods on such date, the buyer cannot unilaterally extend the time of delivery so as to claim compensation on the basis of rates prevailing on the extended date. He will be entitled to compensation only on the basis of the rates prevailing on the actual date of performance.' For a valid extension of time, the agreement between the two parties should be there. Thus, if the buyer wrote to the seller extending the time of performance and the seller neither replied to that letter nor did he supply the goods within the extended time, it was held that by a mere letter from the buyer the time of supply of goods did not get extended.

If the promisee grants the extension of time, he becomes bound thereby. Therefore, if the creditor allows sometimes for making the payment to a debtor, he cannot bring an action against the debtor to recover the debt, and if such an action is brought, it will be dismissed by the court as being premature.

 

(iii)            Accepting any other satisfaction instead of performance

Section 63 permits the promisee to accept any other satisfaction in of agreed performance, and this would discharge the promisor. For example, A owes B, under a contract, a sum of money, the amount of which has not been ascertained. A, without ascertaining the amount gives B, and B, in satisfaction thereof, accepts the sum of 2,000 rupees. This is a discharge of the whole debt, whatever may be its amount."

 

Accord and Satisfaction-Payment of Lesser than Amount Due

 

Accepting some other satisfaction instead of actual performance is known as the principle of "Accord and Satisfaction" under English law, and this results in the discharge of obligation under the contract. "Accord and Satisfaction" has been defined as the "purchase of a release from an obligation, whether arising from the contract or tort by means of any valuable consideration but being the actual performance of the obligation itself. The accord is the agreement by which the original obligation is discharged. The discharge of the substituted obligation is the satisfaction. Satisfaction is thus the consideration which makes the agreement operative." If the promisor pays less than the amount claimed and the promisee does not consider it to be in full and final satisfaction of his claim, the promisor's liability under the contract is not discharged, and the promisor is free to sue for the balance In Union of India v. Babulal Uttamchand, some goods belonging to the plaintiffs were lost during transit due to the negligence of the railway administration. The plaintiffs made various claims and the railway administration sent cheques along with printed letters mentioning that the said payments were in full and final satisfaction of the plaintiffs' claims. The plaintiffs', however, informed the railway administration that this payment was being accepted only as part payment of their claims. In an action to recover the balance of the amount of claims, the defendants pleaded that the plaintiffs could not sue for the balance as the payment already made was in full and final satisfaction of the claims. It was held that the plaintiffs' suit for the balance of the amount was maintainable, as the amounts were not accepted in full satisfaction of the claim.

When there is full and final settlement, which is acknowledged by a receipt in writing and the amount is received unconditionally, there is accord and satisfaction by final settlement of the claims,' and on that no claim survives.

It is thus settled position that payment of lesser than the amount would not ordinarily amount to satisfaction of the debt.'

 

Discharge by Neglect

Section 67 says that the promisor is excused of performing his part of the contract if the promisee either neglects or refuses to afford the promisor reasonable facilities for the performance of his promise. But where the obligation on the part of the promisee is not a condition precedent for the promisor to perform his part, he is not excused by virtue of Section 67.

In Municipal Corporation, Chandigarh v. M/s. Shantikunj Investment Pvt. Ltd., as per the terms of allotment of commercial sites, the respondents had claimed that they were excused from paying instalment/ground rent, interest and penalty charges until amenities were provided by the appellant corporation. Holding that there was no specific promise or obligation on the part of the administration to provide amenities, etc., there being neither any condition in the lease nor any obligation the auction, which could be enforced by any mandanus, the Apex Court ruled that Section 67 of the Indian Contract Act, 1872 had no application in the case and the respondents were not excused from performing their part as to the payment of instalments/rent, interest and other charges.