Remission and Waiver of Performance

Illustration (b) is the whole point of the section, because on the English rule the acceptance of two thousand for five thousand would have discharged nothing.

Broken down: four powers in one section

The section gives the promisee four distinct powers.

1. Dispense with performance, wholly or in part. Illustration (a): B forbids A to paint the picture, and A is no longer bound.
2. Remit performance, wholly or in part. Remission means giving up a claim. Illustration (b) is remission of part of a debt.
3. Extend the time for performance. This is why an extension of time needs no fresh consideration in India.
4. Accept any satisfaction he thinks fit instead of performance. Illustration (d): accepting two thousand rupees for an unascertained sum discharges the whole debt whatever it turns out to be.

The features that decide problems

No consideration is required. This is the headline, and it should be stated with the contrast to Pinnel's Case.

The satisfaction may come from a third person. Illustration (c): C pays a thousand rupees and B accepts it in satisfaction of his claim on A, and the whole claim is discharged. Compare section 41, which discharges the promisor where the promisee accepts performance from a third person; here the third person pays less than the debt and the acceptance still discharges it.

A composition with creditors binds. Illustration (e): a composition of eight annas in the rupee, that is fifty paise in the rupee, discharges each creditor's demand on payment.

Part payment, once accepted in satisfaction, is final. The creditor cannot sue for the balance.

The remission must be voluntary and complete. A creditor who accepts part payment on account, without agreeing that it discharges the whole, has remitted nothing. The question in every case is what was agreed at the time of acceptance.

Section 63 and its neighbours

Section 63 against section 62. An extension of time under section 63 is a unilateral indulgence by the promisee and needs no consideration. A variation of the contract under section 62 is an agreement of both parties. In practice they overlap, and the safe answer is to note that where the promisee alone gives way, section 63 is the provision.

A worked example

Neelam owes Omar eight lakh rupees, due on 1 March.

• Omar writes on 1 March saying he will accept five lakh in full and final settlement, and Neelam pays five lakh, which he accepts. Section 63 and illustration (b). The whole debt is discharged, and Omar cannot sue for the remaining three lakh. In England, before the exceptions, the rule in Pinnel's Case would have let him.
• Omar accepts five lakh "on account", saying nothing about the balance. No remission. He has taken part payment and may sue for the rest.
• Neelam's brother pays Omar four lakh and Omar accepts it in satisfaction of his claim against Neelam. Illustration (c). The whole claim is discharged, even though the payment came from a third person and was less than the debt.
• Omar agrees to extend the date to 1 June, and Neelam gives him nothing for the extension. Valid under section 63; no consideration is needed for an extension of time.
• The amount owing is disputed and unascertained, and Omar accepts three lakh in satisfaction. Illustration (d): the whole debt is discharged, whatever its amount turns out to be.
• Neelam is in difficulty and all her creditors, Omar included, agree to accept fifty paise in the rupee. Illustration (e), a composition. Payment of four lakh discharges Omar's demand.

What it does NOT mean

"Part payment never discharges the whole debt." That is the English rule. Illustration (b) to section 63 is the opposite, and it is the Indian position.

"A remission needs consideration." It does not, and that is the section's central point.

"An extension of time is a variation requiring both parties' agreement and fresh consideration." Under section 63 the promisee may simply extend the time.

"Accepting part payment always discharges the debt." Only where it is accepted in satisfaction. Money taken on account remits nothing.

"Satisfaction must come from the promisor." Illustration (c) shows a third person's payment accepted in satisfaction discharging the whole claim.

"Section 63 is an exception to section 25." It is better put as lying outside section 25 altogether: section 25 makes an agreement without consideration void, whereas section 63 confers a statutory power on the promisee to give up his right.

Quick revision

• s.63: every promisee may dispense with or remit, wholly or in part, the performance of the promise; or extend the time for it; or accept instead of it any satisfaction which he thinks fit.
• No consideration is required. India departs from Pinnel's Case.
• Illustration (a): B forbids the painting, A is released. (b): two thousand accepted for five thousand discharges the whole. (c): a third person's payment of one thousand accepted in satisfaction discharges the whole claim. (d): two thousand for an unascertained sum discharges it whatever the amount. (e): a composition of eight annas in the rupee.
• The remission must be accepted in satisfaction; money taken on account remits nothing.
• Compare s.62: novation and alteration are agreements; s.63 is the promisee's own indulgence, needing nothing in return.

Test yourself

1. State section 63 and identify the four powers it gives. 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. The four powers are to dispense with performance, to remit it wholly or in part, to extend the time, and to accept any satisfaction the promisee thinks fit.

2. How does section 63 depart from English law? English law held in Pinnel's Case that payment of a smaller sum is not satisfaction of a larger, because the creditor receives no consideration for giving up the balance. Section 63 requires no consideration at all, and illustration (b), where two thousand rupees accepted in satisfaction discharges a debt of five thousand, is the direct contradiction of that rule.

3. Can a third person's payment discharge the debtor's whole liability? Yes. Illustration (c) has C paying B one thousand rupees, which B accepts in satisfaction of his claim on A for five thousand, and the payment discharges the whole claim. It is not necessary that the satisfaction move from the promisor, and it need not equal the debt.

4. A creditor accepts part payment "on account". Has he remitted the balance? No. Section 63 operates where performance is dispensed with or remitted, or where satisfaction is accepted instead of performance. Money taken on account is taken in part payment and not in satisfaction, so the creditor may still sue for the balance. Everything turns on what was agreed at the time of acceptance.

5. Does an extension of time require fresh consideration in India? No. Section 63 expressly empowers the promisee to extend the time for performance, and no consideration is required for any of the powers the section confers. That is a further point of difference from the English approach, which would treat a variation as requiring consideration unless made by deed.