Remission and Waiver of Performance

In one line

A promisee may let the promisor off, wholly or partly, and in India he need be given nothing in return for doing so.

In the words a student can write in an exam: section 63 of the Indian Contract Act 1872 provides that "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." No consideration is required for any of these, and the section is a deliberate departure from the English rule in Pinnel's Case.

Why India departed from English law

English law held, in the rule associated with Pinnel's Case, that payment of a smaller sum is not satisfaction of a larger. The reasoning was pure consideration doctrine: the creditor who accepts five thousand rupees for a debt of ten thousand receives nothing in return for giving up the other five thousand, so his promise to forgo it is unsupported and he may sue for the balance.

The result is unattractive and commercially useless. A creditor who has settled, and been paid, may turn round and sue for the rest. Businesses compound with their creditors all the time, and English law had to soften the rule with a series of exceptions.

The Indian Act cut through it. Section 63 lets a promisee give up part or all of his right without consideration, and it says so by simply not requiring any. Section 25's rule that an agreement without consideration is void does not touch it, because section 63 is not an agreement to do something: it is a release, and the Act treats it as effective on its own terms.

The provision itself

"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."

Its 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 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."