Does Section 62 allow one party to stop performing if they claim the other party agreed to alter the contract?

No. Section 62 requires clear, mutual consent from both parties to discharge the original contract. Unilateral claims of alteration are not sufficient. A party cannot stop performing based on alleged informal agreement alone; courts require demonstrable evidence that both parties genuinely intended to modify or rescind the original contract.

If we verbally agree to change the contract terms, does Section 62 automatically protect us from the original obligations?

A verbal agreement can trigger Section 62 if it shows clear mutual intention to alter or rescind the original contract, but it is risky and often leads to disputes. Best practice is to document all modifications in writing, signed by both parties and clearly referencing Section 62, to eliminate ambiguity about what was agreed.

What is the difference between novation and rescission under Section 62?

Novation replaces the old contract with a new one (parties may change, terms change, but obligations continue in new form). Rescission cancels the contract entirely with no replacement, returning parties to the position before the contract. Both discharge the original contract; the difference is whether something replaces it.

Should I include language in my contract to prevent easy modification under Section 62?

Yes. Insert a clause requiring that any amendments be in writing, signed by both parties, and explicitly reference this clause and Section 62. This creates a paper trail and reduces the risk that informal discussions or conduct will be misconstrued as a novation, rescission, or alteration under Section 62.

Section 62 of the Indian Contract Act, 1872: Effect of novation, rescission, and alteration of contract

Section 62 Indian Contract Act: mutual agreement to replace, rescind, or alter contracts discharges original obligations. Drafting and negotiation guidance.

The provision

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.

Indian Contract Act, 1872, Section 62. Official text.

What Section 62 of the Indian Contract Act Means

Section 62 establishes that when both parties to a contract mutually agree to replace, cancel, or modify the original contract, neither party is obligated to perform the original contract anymore. This is a foundational principle: the law recognises the freedom of parties to undo or reshape their contractual obligations through fresh consent. The key requirement is that BOTH parties must agree. Unilateral action by one party does not trigger Section 62 protection.

The Three Scenarios: Novation, Rescission, and Alteration

The section covers three distinct situations. Novation means substituting an entirely new contract in place of the old one, typically with different terms or parties. Rescission means both parties agreeing to cancel the contract completely, returning it to zero. Alteration means modifying specific terms while keeping the contract alive. In all three cases, the original contractual duties fall away once agreement is reached. These are not informal changes; they are deliberate, mutual modifications that discharge prior obligations.

Key Practical Implications for Contract Drafting and Negotiation

When drafting contracts, recognise that Section 62 creates a risk if you rely on original terms being performed unchanged. Parties who want to prevent easy modification should include explicit language requiring any changes to be documented in writing and signed by both parties, with clear reference to Section 62. Without this, oral agreements or informal conduct by both parties could be argued as novation, rescission, or alteration, potentially invalidating performance obligations.

Negotiators should also understand that Section 62 protects flexibility: if business circumstances change and both parties want a fresh arrangement, this section provides legal cover for moving away from the original contract without breach. However, document the new agreement carefully. Many disputes arise because parties informally agree to changes but fail to record them clearly, leading to disagreement about whether Section 62 actually applied.

Critically, Section 62 does NOT permit unilateral escape. One party cannot simply stop performing because it claims the other party impliedly agreed to alter the contract. Courts require clear, demonstrable consent from both sides. In contracts involving payment, delivery schedules, or warranties, explicitly define the amendment process to avoid later claims that informal conduct constituted a Section 62 modification you never intended.

This page explains the law in general terms for information only. It is not legal advice. Always read the provision in its official source and take advice on your specific facts.

Frequently asked questions

Does Section 62 allow one party to stop performing if they claim the other party agreed to alter the contract?: No. Section 62 requires clear, mutual consent from both parties to discharge the original contract. Unilateral claims of alteration are not sufficient. A party cannot stop performing based on alleged informal agreement alone; courts require demonstrable evidence that both parties genuinely intended to modify or rescind the original contract.
If we verbally agree to change the contract terms, does Section 62 automatically protect us from the original obligations?: A verbal agreement can trigger Section 62 if it shows clear mutual intention to alter or rescind the original contract, but it is risky and often leads to disputes. Best practice is to document all modifications in writing, signed by both parties and clearly referencing Section 62, to eliminate ambiguity about what was agreed.
What is the difference between novation and rescission under Section 62?: Novation replaces the old contract with a new one (parties may change, terms change, but obligations continue in new form). Rescission cancels the contract entirely with no replacement, returning parties to the position before the contract. Both discharge the original contract; the difference is whether something replaces it.
Should I include language in my contract to prevent easy modification under Section 62?: Yes. Insert a clause requiring that any amendments be in writing, signed by both parties, and explicitly reference this clause and Section 62. This creates a paper trail and reduces the risk that informal discussions or conduct will be misconstrued as a novation, rescission, or alteration under Section 62.

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