📜 The Indian Contract Act 1872: Section 59 – 65
Application of payment
Section 59
Where a debtor owing several distinct debts to one person makes a payment to him either with express intimation or under circumstances implying that payment is to be applied to discharge of some particular debt the payment must be applied accordingly.
Illustrations
(a) A owes B, among other debts. 1,000 rupees upon a promissory note which falls due on the first June. He owes B no other debt of that amount. On first June, A pays to B 1,000 rupees. This payment is to be applied to discharge of the promissory note.
(b) A owes to B, among other debts a sum of 567 rupees. B demands payment of this sum. A sends 567 rupees to B. This payment is to be applied to discharge of the debt of which B had demanded payment.
Debt to be discharged is not indicated
Section 60
Where the debtor has omitted to intimate and there are no other circumstances indicating to which debt payment is to be applied creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor whether its recovery is or is not barred by the law of limitation.
Section 62
Effect of novation, rescission and alteration
If 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
Illustrations
(a) A owes money to B under a contract. It is agreed between A, B and C that B shall thenceforth accept C as his debtor, instead of A. The old debt of A to B is at an end, and a new debt from C to B has been contracted.
(b) A owes B 10,000 rupees. A enters into an arrangement with B and gives B a mortgage of his (A’s) estate for 5,000 rupees in place of the debt of 10,000 rupees. This is a new contract and extinguishes the old.
Doctrine of Accord and satisfaction
Promisee may dispense with performance Section 63
Every promisee may dispense with or remit 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.
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 claim.
(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 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.
Consequences of rescission
Section 64
When a person at whose option a contract is voidable rescinds it the other party need not perform any promise therein contained in which he is the promisor Party rescinding a voidable contract shall restore any benefit received under the contract to the person from whom it was received
NOTE:
Parties rescinding to do equity Section 30 SRA
On adjudging rescission of a contract: Court may require the party to whom such relief is granted to restore any benefit which he may have received from the other party and to make any compensation to him which justice may require
Obligation under void agreement, contract
Section 65
When an agreement is discovered to be void or a contract becomes void any person who received any advantage under such agreement or contract is bound to restore it or to make compensation for it to the person from whom he received it.
NOTE:
Section 33(2)(b) SRA
Where a defendant successfully resists any suit on the ground that the agreement sought to be enforced against him in the suit is void by reason of his not having been competent to contract u/s 11 of the Contract Act court may if the defendant has received any benefit under the agreement from the other party require him to restore, so far as may be such benefit to that party to the extent to which he or his estate has benefited.
Illustrations
(a) A pays B 1,000 rupees in consideration of B’s promise to marry A’s daughter A’s daughter is dead at the time of promise. The agreement is void but B must repay A the 1,000 rupees.
(b) A contracts with B to deliver to him 250 maunds of rice before first May A delivers 130 maunds only before that day, and none after B retains the 130 maunds after first May. He is bound to pay A for them
(c) A, a singer, contracts with B, manager of a theatre to sing for two nights every week. B engages to pay her 100 rupees for each night. On sixth night, A wilfully absents herself. B, in consequence, rescinds the contract. B must pay A for the five nights on which she had sung.
(d) A contracts to sing for B at a concert, for 1000 rupees which are paid in advance. A is too ill to sing. A need not compensate B for loss of profits which B would have made if A had been able to sing but must refund to B the 1,000 rupees paid in advance
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📘 FAQs on Indian Contract Act 1872 (Sections 59–65)
Section 59 explains the application of payments. If a debtor owes several distinct debts and makes a payment with a clear indication of which debt it should apply to, the creditor must apply it accordingly.
If the debtor gives no indication, the creditor may apply the payment at his discretion to any lawful debt actually due and payable — even if its recovery is barred by limitation.
If parties agree to substitute a new contract, or to rescind or alter the old one, then the original contract need not be performed.
Yes ✅. A promisee may dispense with or remit performance, extend the time for performance, or accept any satisfaction he deems fit instead of full performance. This is known as the Doctrine of Accord and Satisfaction.
When a voidable contract is rescinded, the other party need not perform any promises therein, and the rescinding party must restore any benefit received under the contract.
If an agreement is discovered to be void or a contract becomes void, any person who received an advantage under it must restore or compensate the other party for it.
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