I.

RENEWAL OF THIS SALE CONTRACT AMOUNTS TO MERE

CONTINUATION OF THE CONTRACT
It is submitted that amendment to a sale contract does not amount to novation as it involves
mere extension and continuation of the original sale contract 1. The final contract of sale was
entered between Mr. Vasanappa Reddier and Ms. Leela Kumari on 28.09.2016. Thereafter, the
first delivery of goods for 5 unique designer sarees were duly inspected and full payment was
happened on 25.10.2016. Subsequently, after the first consignment till April 2018 there were
15 consignments delivered. However, the sale contract was coming to an end in the month of
April 2018. With the consent of Mr. Vasanappa Reddier, the sale contract was renewed with
minor amendments with respective to delivery and number of working hours by not affecting
the principle object of the contract.
In the renewal of sale contract (Exhibit-2), it has clearly specified that the parties want to extend
and continue the said agreement and it was also agreed that the agreement is extended upon
additional terms commencing upon the expiration of the original term from April 2018 to
30thApril, 2020.
AMENDMENT TO SALE AGREEMENT DOES NOT SATISFY THE INGREDIENTS OF
A NOVATION
The essential requirement of novation as contemplated by Section 62 of the Contract Act is
that there should be complete substitution of a new contract in place of old one. It is only in
that situation that the original contract need not be performed. But, in the present case, it is a
clear case of few amendments which does not affect the main contract. Substitution of new
contract in place of old contract, which would have the effect of rescinding or completely
altering the terms of the original contract, has to be by an agreement between the parties. The
substituted contract should rescind or alter or extinguish the previous contract and if the terms
are different, they could not stand together and subsequent contract cannot be said to be in
substitution of the earlier contract. The term novation implies that there being a contract in
existence some new contract has been substituted of the new contract for the old is the core of
novation. The essential feature of novation is that a right under the original contract is
extinguished and new rights referable to new contract are created.2
In the case of Producers Fruit Co. v. Goddard, "The question of whether or not the second
contract rescinded the first is one of intent. If you find that the parties did not intend to
destroy the first contract without establishing a new enforceable contract in its place, the
second contract, which is unenforceable, did not rescind the first, and you will find for the
party relying on the first contract as a cause of action or defense. If the parties entered into
the second agreement with the intention of rescinding the first in any event, the first contract
was rescinded though the second was unenforceable, and you will find against the party
relying on the first contract.” In LalaBunseedhur v Government of Bengal, the government
of Bengal filed a law suit against the defendant as surety for the treasurer of a collectorate on
four surety bonds executed by the defendant. The collector after examining the account struck
the balance as correct, and on each event the defendant executed a new bond without giving

1
Avtar Singh
2
Ram Singh v. Jethanand Wadhumal, 1964 Ker L.J 530
up or cancelling the old bond. The Privy Council held that mere execution of new bond does
not constitute novation.
Here there was no mutual intention to annul the old contract and substitute it with a new one.
Thus mere action of defendant to execute a new bond does not constitute novation because
for novation to occur, intention to rescind the prior contract is needed.
AMENDMENT TO SALE CONTRACT IS NOT A MATERIAL ALTERATION
Any alteration is material which affects either the substance of a contract expressed in the
document,3 or which alters the legal effect of the document,4 or imposes greater liability on
the promisor, or which affects the identification of the document itself, at all events where
identification may be important in the ordinary course of business. The fact that a person
takes the trouble of altering a number may indicate that in his opinion, at any rate, it is
material for some purpose.5 Alternatively, the old and the new obligations must be
incompatible in each and every point with each other as mere or slight modifications only do
not constitute novation.6
Alterations are not material if they merely express what was already implied in the document
or add particulars consistent with the document as it stands, though superfluous,7 or are
innocent attempts to correct clerical errors.8 An alteration made in good faith to carry out the
intention of the parties does not vitiate the deed.
MERE ALTERATION OR VARIATION DOES NOT AMOUNT TO NOVATION
Novation has been defined that, there being a contract in existence, some new contract is
substituted for it either between the same parties or between different parties, the consideration
mutually being the discharge of the old contract. Novation of a contract comprises two
elements: the discharge of an old agreement and the substitution for a new terms of
agreement.’9 It is well settled that the parties to an original contract can, by mutual agreement,
enter into a new contract in substitution of the old one.10 Novation is a substitution of the
contract and not mere variation of some of its terms. It should rescind or extinguish the previous
contract.11
Novation under Section 62 of the Indian Contract Act, 1872 is brought by either introduction
of new parties or by alteration between the same parties by introduction of new terms.
Substitution of a new contract is the core of novation. Its essential feature is that a right under
the original contract is relinquished or replaced by a new contract. Where these essentials are
missing there is no novation.12 Under Indian law, one of the requisities of such novation is the

3
Gardner v. Walsh, (1855) 5 E & B 83, 103 RR 377; Pachkodi Gulab Badhai v. Krishnaji, AIR 1947 Nag 145.
4
Ibid.
5
Suffell v. Governor and Company of the Bank of England, [1882] 9 QBD 555
6
Ibid
7
Lowe v. Fox, (1887) 12 App Cas 206
8
Howgate and Osborn’s Contract, [1902] 1 Ch 451
9
Scarf v. Jardine, (1882) 7 App Cas 345 at 351, [1881-85] All ER Rep 651; State of Bihar v. Ram Ballabh Das
Jalan, AIR 1960 Pat 400.
10
Payana Reena Swaminathan v. Pana Lana Palaniappa, (1914) 41 IA 142, [1914] AC 618 (PC); Morris v. Baron
& Co. [1918] AC 1
11
Indian Bank v. S. Krishnaswamy, AIR 1990 Mad 115; Vishram Arjun v. Irukulla Shankariah, AIR 1957 AP 784
12
State Bank of India v. TR Seethavarma, AIR 1995 Ker 31.
agreement of all the parties to the new contract.13 The consent of the parties may be established
by circumstances showing that such assent as well as by express words.14
Moreover, a novation happens when the parties to the contract mutually agree to substitute a
new contract for the original sale agreement and the original contract gets discharged and need
not be performed anymore. One of the important and necessary points to be noted is that the
application of this principle to the original contract must be subsisting and unbroken. Hence,
for novation to take place there must be an irreconcilable incompatibility between the old and
the new one. While changing the object or principal conditions of the original sale agreement,
it amounts to novation.15
Therefore, Novation would occur when the substituted contract should rescind or extinguish
the previous contract, such that the terms of the two contracts should be so inconsistent that
they cannot stand together or render impossible the performance of the former. Thus, the
essence of novation lies not in the dissimilarity of terms between the two contracts, but in the
intention of the parties to supersede the old by the new one.16
The difference between the amendments of sale contract and the original sale contract
(Exhibit 1 & Exhibit 2) clearly shows that, there are changes only in respect to delivery and
right to inspection. The delivery period has reduced from 20 days from date of order to 15
days and the power to inspect the goods has increased from 24 hours to 36 hours and can
notify the seller within 5 days to 10 days. These changes does not effect the contract as to the
delivery of the same sarees or the change in parties.
Therefore, Mere alteration or modification of the terms of the contract are not enough, the
modification must be read into and become a part of the original contract. The original terms
continue to be part of the contract and are not rescinded or superceded except in so far as they
are inconsistent with the modifications.17
BOOKS:
AVTAR SINGH, LAW OF SALE OF GOODS, EASTERN BOOK COMPANY, INDIA,
2011, 7TH EDITION
AVTAR SINGH, LAW OF CONTRACTS, EASTERN BOOK COMPANY, INDIA, 2011,
7TH EDITION

13
Gyarsilal Jagannathprasad Mor. v. Pandit Sitacharan Dubey, AIR 1963 MP 164.
14
Ibid.
15
Ibid
16
Kaduso Onkarlal Firm Seoni v. Surajmal Narayanji, AIR 1936 Nag 37; Bhabhuti Prasad v. Parbati Kaur, AIR
1935 Oudh 366
17
Supra Note No. 28