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Analyzing, Acceptance To An Offer Is What A Lighted Matchstick To A Train Of Gun Powder Through The Lens Of Novation, Alteration And Recession

Sir William Anson, in his statement, Acceptance to an Offer is What a Lighted Matchstick to a Train of Gun Powder, equated gunpowder to an offer and lighted matchstick to an acceptance. Suggesting that when a lighted matchstick is brought close to a gun powder explosion takes place, i.e. when an acceptor accepts an offer, it triggers the formation of promise, supplemented by few other elements, becomes an agreement, and on force becomes a contract.[1]

The only way explosion can be prevented either by not bringing matchstick close to gunpowder, i.e. revocation[2] or if the gun powder does not have required ingredients[3], i.e. conditions under section 10 of ICA. Thus, the offer can be scraped before the acceptance, implying the absoluteness of the contract.

However, even after bringing matchstick close to gunpowder, the explosion might not occur if we have to account for section 62[4] of the Indian contracts act (Hereinafter ICA):- novation rescission and alteration. Thus, the paper analyses the three terms, conditions for them to form a proper legal arrangement and their effect on the original contract. In doing so, the paper will try to determine if said terms defy the statement made by Sir William Anson.

Novation rescission and alteration
Section 62 of ICA, under the header of Contracts which need not be performed, 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. —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.[5]

Novation here essentially refers to a substitution of old contract by a new one, with the consent of both the parties[6]Novation can also happen by a change in the party, e.g. If Debtor D and creditor C agrees to accept B as the debtor, then novation has taken place. For a novation of contract to occur, right under the original contract needs to be surrendered or replaced by a new contract; a person cannot hold rights given under both original and substituted contract.[7] e.g.

In Ram Singh v Shop Tek Chand Niamat Rai[8], In this case, the plaintiff signed a bond for a debt owed by the defendant. Subsequently, after the contract, it was agreed that the defendant would pay a portion of the loan in instalments and execute a mortgage for the remainder. Defendant made some payments but did not follow through on the commitment. The case went to the court where it was held plaintiff, by virtue of subsequent agreement defendant has resolved his liability, and the breach of the new agreement is no ground for a revival of old liability.

Recession requires parties to either expressly or impliedly rescind the earlier agreement so that the original contract doesn't bind them. Rescission is also an equitable remedy and is often used by the court in a case where a party is unjustly enriched so as to bring back the party in its original footing.[9]

Alteration is defined as an act done upon a contract or some document introducing change in its terms, meaning, language but sticking to the identity of a document. i.e. The original terms settle to be part of the original contract and are not rescinded or superseded except when they are in at loggerheads with the modification[10]. Amongst all, Alteration directly challenges the absoluteness of the contract by giving flexibility to the party to deviate from the original terms which they agreed on, all this while keeping the identity of the contract intact.

Condition for novation, recession and alteration to form a proper legal arrangement
  1. A novation, alteration or rescission of the contract cant be done unilaterally and requires the consent of all the parties to the original contract. Though terms of the contract may be altered, modified or rescind unilaterally if there is any provision in the original contract which gives the power to do so.[11]All the terms and conditions mentioned in section 10[12] of ICA must apply if any substituted or altered contract is effective. But if by any procedural formality, the document containing the new contract is inadmissible as evidence, the original contract can still be relied on.[13]
  2. The contract as for consideration requires nothing more than relinquishing mutual obligations under the original contract.[14] Consideration can also be: endowing new benefits or sustaining new liabilities or assumption of an additional obligation, a release from an existing obligation can be a good consideration for a promise to undertake a fresh obligation and so is the breach of a contract(recognised in recession but in a dispute concerning novation)[15]etc. But if the original contract is fully performed, then any alteration or novation or rescission will have no consideration and will become unenforceable in the eyes of law.[16]
  3. Once a contract is substituted, the party cannot rely back on the terms and conditions of the original contract, however, the original contract can get revived: if the new contract is unenforceable in the eyes of the law and held void.[17] But the mere non-performance of the new agreement doesn't revive the old contract.[18] This acts as a very strong point in proving the applicability of Sir William Anson statement, as in this case explosion is contingent upon the legal validity of the substituted agreement.
  4. The changes to the contract can be communicated orally or in written evidence. Section 92 of The Indian Evidence Act, 1872[19] doesn't admit oral evidence to vary, adding to or subtracting from the terms of a contract or any matter required by law to be in writing. Nevertheless, it allows oral evidence for such alteration except in case the law requires it.[20]

Can novation happen after a breach?
Breach of contract as consideration for restitution is well settled, but when it comes to novoation high courts differ in this particular issue.[21] In some cases, the High court has held that section 62 applies even though the new agreement was made after a breach of the contract. Whereas in other it hasn't e.g.

In Manohur Koyal v Thakur Das Naskar,[22], The plaintiff filed a lawsuit against the defendant for the recovery of Rs 1100 owed on a bond. After the bond's due date, the plaintiff consented to take Rs 400/- in cash and a new bond for Rs 700/- from the defendant in fulfilment of the bond. However, the defendant failed to pay the requisite amount. As a result, the case went to court, where the court held that It was held that section 62 does not apply as, as the agreement was made after a breach of contract.

Interestingly 13th Law Commission has favoured making section 62 applicable to fresh agreements, saying that it's very common for mediators to strike a compromise between parties even after breaching of contract.[23]

Thus, the paper has analysed the three terms mentioned under section 62 of the contract, looked at the essentials they need to fulfil to form a fresh agreement, and looked at if novation can happen after breaching of contract. While doing so, it can reasonably be held that recession and alteration stands a strong chance to defy the statement of Sir William Anson.

  1. Indian Contract Act 1872
  2. Indian Evidence Act 1872
  1. Ram Singh v Shop Tek Chand Niamat Rai, AIR 1933 Lah 464.
  2. Unikol Bottlers Ltd v Dhillon Kool Drinks, AIR 1995 Del 25
  3. Manohur Koyal v Thakur Das Naskar (1888) ILR 15 Cal 319.
  1. Pollock F and Mulla D F, The Indian Contract Act (R Yashodh Vardhan ed, 15th edn, Lexis Nexis 2018)
  1. India legal Service (Rescission of contract) accessed May 19, 2021
  2. Kanwar J, 'Revocation' (Law Times Journal, 15 June 2019) < l,offer%20is%20now%20not%20possible. > accessed 16 May 2021
  1. Jeetu Kanwar, 'Revocation' (Law Times Journal, 15 June 2019) < l,offer%20is%20now%20not%20possible. > accessed 16 May 2021
  2. Indian Contract Act 1872, s 6.
  3. Indian Contract Act 1872, s 10.
  4. Indian Contract Act 1872, s 62.
  5. Ibid.
  6. R Yashod Vardhan and Chitra Narayan, Pollock & Mulla: The Indian Contract and Specific Relief Acts, (16th Lexis Nexis, 2019
  7. Ibid.
  8. Ram Singh v Shop Tek Chand Niamat Rai, AIR 1933 Lah 464.
  9. India legal Service (Rescission of contract) accessed May 19, 2021
  10. Lata Construction v Dr. Rameshchandra Ramniklal Shah, (2000) 1 SCC 586.
  11. Supra note (n6).
  12. Supra note (n3).
[13] Supra note (n6).
[14] Ibid.
[15] Unikol Bottlers Ltd v Dhillon Kool Drinks, AIR 1995 Del 25
[16] Supra note (n6).
[17] Nalini Singh Associates v Prime Time—IP Media Services Ltd ( 2008)
[18] Supra note (n6).
[19] Indian Evidence Act 1872, s 92.
[20] Supra note (n6).
[21] Supra note (n6).
[22] Manohur Koyal v Thakur Das Naskar (1888) ILR 15 Cal 319.
[23] View taken from Kumaramaswami opinion in KMPRNM Firm v P. Theperumal
Chetty Merchant, (1922) 42 MLJ 236

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