Section 63 of The Indian Contract Act, 1872
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 performance1 , 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 claim2 .
- (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.
Summary
- Every promisee, meaning the person receiving the promise, has the right to dispense with or remit, which means excuse or reduce, the performance made to him, either entirely or partially.
- The promisee has the authority to extend the time for performing the promise.
- The promisee can choose to accept any satisfaction, which means any agreed-upon substitute performance, that they think fit instead of the original performance.
- Accepting a smaller payment in satisfaction of a larger debt operates as a complete discharge of the entire debt under Section 63.
- If a creditor accepts a smaller payment from a third person in satisfaction of their claim, it discharges the entire debt of the debtor under Section 63.
Practical examples
FAQ
1. Can a creditor accept a smaller sum to settle a larger debt under Section 63 of the Indian Contract Act, 1872?
Yes. Under Section 63 of the Indian Contract Act, 1872, if a creditor accepts a smaller sum of money in satisfaction of a larger debt, the entire debt is discharged and no further amount can be claimed.
2. Does a promisee have the power to extend the time of performance under Section 63 of the Indian Contract Act, 1872?
Yes. Under Section 63 of the Indian Contract Act, 1872, the promisee may extend the time for performing the promise made to him.
3. What happens under Section 63 of the Indian Contract Act, 1872, if a creditor accepts a composition from a debtor who is in financial distress?
Under Section 63 of the Indian Contract Act, 1872, if a creditor agrees to accept a composition, which means a reduced percentage like eight annas in the rupee, that payment is a complete discharge of their demand.
Test yourself
Q1.Under Section 63 of the Indian Contract Act, 1872, which of the following is NOT a right that a promisee has regarding the performance of a promise?
Q2.Under Section 63 of the Indian Contract Act, 1872, if A promises to paint a picture for B, and B afterwards forbids him from doing so, what is the legal result?
Q3.Under Section 63 of the Indian Contract Act, 1872, if A owes B 5,000 rupees, and C pays B 1,000 rupees which B accepts in satisfaction of his claim on A, what is the legal effect?
Q4.Under Section 63 of the Indian Contract Act, 1872, if a debtor owes several creditors and makes an arrangement to pay them a composition of eight annas in the rupee, what is the effect of paying this reduced amount to a creditor who accepts it?