Question

....... is the process of substituting a new contract in place of an existing contract, with the consent of the parties.

• A. Rescission
• B. Alteration
• C. Novation
• D. Remission

Hint:

Novation is different from alteration as it involves a complete replacement of the contract, not just changes.

Answer 1

The Correct Option is C

Novation refers to the substitution of an old contract with a new one, with the consent of all the parties involved. This replaces the original contract and discharges the previous agreement.

Answer 2

The correct answer is Novation.

Definition:
Novation is the legal process of replacing an existing contract with a new one, wherein the original contract is discharged, and a new contract takes its place. This substitution is done with the consent of all parties involved and may involve a change in the terms of the contract or the parties to the contract.

Legal Provision:
In Indian law, novation is recognized under Section 62 of the Indian Contract Act, 1872, which states:
"If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed."

Key Features of Novation:
- Requires the consent of all parties involved
- Results in the discharge of the original contract
- Creates a new, legally enforceable agreement
- May involve a change in parties (e.g., new debtor or creditor) or terms

Example:
If A owes B ₹10,000, and with B’s consent, A enters into an agreement with C to pay the amount instead, and B accepts C as the debtor in place of A — this is novation.

Conclusion:
The process of substituting a new contract in place of an existing one, with the consent of the parties, is called Novation.