Law and You > Business Laws > Indian Contract Act, 1872 > Effect of Remission and Dispensation of Contract (Ss. 63 and 64 ICA)
The Indian Contract Act, 1872, provides a comprehensive framework governing contractual relationships, including the rights and obligations of the parties involved. Among these provisions, the concepts of dispensation and remission of performance by the promisee are significant, as they offer flexibility and adaptability in the enforcement of contractual duties. Together, these concepts highlight the importance of mutual understanding and accommodation in contractual relationships. By allowing the promisee to dispense with or remit performance, the Indian Contract Act acknowledges the dynamic nature of human interactions and the need for agreements to be flexible. This adaptability is crucial in facilitating smoother transactions, reducing the likelihood of disputes, and ultimately ensuring that contracts serve their intended purpose of promoting economic and social stability. Understanding these principles is essential for anyone engaged in contractual dealings, as they underline the importance of negotiation and cooperation in fulfilling contractual obligations. In this article, we shall discuss the effect of remission and dispensation of contract.
Promisee may Dispense with or Remit Performance of Promisee (S. 63):
Every promisee may dispense with or remit, wholly or in part, the performance of the promisee 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 the 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 his creditors, including B, to pay them a 3 [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.
Section 63 permits the promisee to take any other satisfaction in lieu of the agreed-upon performance, which discharges the promisor.
Remission:
Remission means the acceptance by the promisee of a lesser sum than what was mentioned in the contract. Section 63 of the Indian Contract Act, of 1872 establishes the discharge of a contract via remission. This involves accepting a sum less than the originally owed by the promisor or agreeing to a partial fulfillment of the promise made. The time for the performance can also be extended.
For example, if A owes B Rs 5,000, B may only accept Rs 2000 from A. That is, if B agrees to accept Rs. 2000 in lieu of Rs. 5000 from A, he cannot subsequently ask A to pay the balance of Rs. 3000. .
Remission occurs when parties to a contract accept a lesser amount or lesser degree of performance than what was initially agreed upon in the contract. Section 63 of the act states that a party may;
- Remit the performance stated wholly or in part.
- Extend the time for performance.
- Accept any other kind of performance apart from the one mentioned in the contract.
In Keshavlal Lallubhai Patel and Others v. Lalbhai Trikumlal Mills Ltd case, it was determined that a change in the date of performance by express representation by the defendants, agreed to by the plaintiffs’ forbearance, was permissible.
Merger:
A merger happens when a party with lesser rights under a contract obtains superior rights by the same party under a new contract. As inferior and superior rights may coincide in the same party, in such a case both the rights combined lead to the discharge of the contract governing the inferior rights.
For example, X rents Y his property for a tenure of 20 years. 5 years after the contract, Y offered X to buy the property, and X agreed to it. Here, X has two rights; i.e., one accorded by the rent agreement, making them the renter, and the second by the sale agreement, making them the owner. The former being an inferior right merges with the superior one and discharges the rent contract.
Waiver or Dispensing:
The term waiver means abandonment of rights. Waiver means abandonment of rights. When one party to the contract deliberately abandons their right under the contract, the other party is released from his part of obligations, else binding upon it. Under the waiver, either a few or all the rights can be abandoned.
For example, X advanced ₹3 lakhs to Y. On the due date, Y made a default on the payment of the loan amount and only paid ₹2 lakhs instead of 3 lakhs. However, X accepted ₹2 lakhs in full as the final settlement and also, waived their right to recover the loan amount.
Section 63 of ICA states that the promisee may dispense with or remit performance of promisee. As every promisee may dispense with or remit, wholly or in part, the performance of the promisee made to him, or may extend the time for such performance or may accept instead of it any satisfaction which he thinks fit.
Conclusion:
Under the Indian Contract Act, 1872, the concepts of dispensation and remission of performance by the promisee play a vital role in the dynamics of contractual obligations. These principles allow a promisee to either waive the performance of a promise or to accept a lesser fulfillment, thereby promoting flexibility and practicality in contractual dealings.
Dispensation occurs when the promisee voluntarily waives their right to demand performance from the promisor. This can happen for various reasons, such as a change in circumstances or the realization that strict enforcement of the contract may not be necessary or beneficial. By dispelling the requirement of performance, the promisee retains the ability to manage relationships and agreements in a way that aligns with their interests, fostering goodwill and cooperation.
Remission, on the other hand, involves the promisee accepting a lesser performance than what was originally stipulated in the contract. This might arise in scenarios where the complete performance is impractical or where partial fulfillment suffices to meet the promisee’s needs. By allowing for remission, the Act encourages a pragmatic approach to contracts, recognizing that inflexible adherence to terms may not always serve justice or the parties’ intentions.
In conclusion, the ability of the promisee to dispense with or remit performance under the Indian Contract Act underscores the importance of flexibility in contractual relationships. These provisions reflect a practical understanding of human behaviour and the complexities of real-life transactions. By allowing promisees to adjust their expectations and obligations, the Act promotes equitable solutions and enhances the efficacy of contractual agreements. Ultimately, these principles contribute to a more adaptable and responsive legal framework, benefiting all parties involved in a contract.