Remission under Section 63 and Restitution under Sections 64 to 66 of the Indian Contract Act, 1872: Dispensing With Performance, Extension of Time, Accepting Lesser Satisfaction, Waiver, and the Meaning of 'Discovered to Be Void'

Section 63 is one of the shortest provisions in the Act and one of the most consequential. It permits a promisee to give up what is owed to him, to extend time, or to take something else instead, and to do all of that without any consideration. English law could not reach that result and struggled for three centuries with the rule that part payment cannot discharge a whole debt. Sections 64 to 66 then deal with what happens after a contract is unmade: who must restore what, in which direction, and how rescission is communicated. The provision most often misapplied is Section 65, and the phrase that does the damage is discovered to be void.

The kind of arrangement that failed decides which section governs restitution

1. Section 63: The Four Acts It Permits

Section 63, Indian Contract Act, 1872

Every promisee may dispense with or remit, wholly or in part, the 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. (b) A owes B five thousand rupees. A pays to B, and B accepts, in satisfaction of the whole debt, two thousand rupees paid at the time and place at which the five thousand rupees were payable. The whole debt is discharged. (c) A owes B five thousand rupees. C pays to B one thousand rupees, and B accepts them, in satisfaction of his claim on A. This payment is a discharge of the whole claim.

Dispensing with performance. The promisee tells the promisor he need not perform at all, or need not perform some part.
Remission. The release of a debt or obligation, wholly or in part. Illustration (b) makes clear that accepting two thousand in satisfaction of five thousand discharges the whole.
Extension of time. A variation of the date for performance, which requires no consideration and is binding once given.
Accepting any satisfaction the promisee thinks fit. Something different in kind may be taken in place of performance, and Illustration (c) shows that it may come from a third person, which links the section to Section 41.

The Supreme Court applied the section in Kapur Chand Godha v. Mir Nawab Himayatalikhan Azamjah, AIR 1963 SC 250, holding that where payment is accepted on the condition on which it is offered, the recipient cannot say that he accepted the money but not the condition, and cannot afterwards sue for the balance.

2. Section 63 and the English Rule

📖 Foakes v. Beer, (1884) 9 App Cas 605 (HL)

Facts: A judgment creditor agreed in writing that if the debtor paid a sum down and the balance by instalments, she would take no proceedings on the judgment. The debtor paid the whole principal in that manner. The creditor then claimed interest on the judgment debt, contending that her promise to forgo it was unsupported by consideration.

Held: The House of Lords allowed the claim for interest. Payment of a lesser sum on the day cannot be satisfaction for a greater, and an agreement to accept less is unsupported by consideration and is therefore not binding. The rule in Pinnel's Case was affirmed, notwithstanding criticism of it, because the doctrine of consideration required it.

Ratio: At common law an agreement to accept part payment in discharge of a larger debt is unenforceable for want of consideration. Something different in kind, or payment before the due date, or payment by a third party, is required to make it binding.

⚠ Section 63 reverses Foakes v. Beer for India

The Indian draftsman removed the difficulty at its root. Section 63 does not require consideration for a remission, so the whole English apparatus of finding a peppercorn of consideration to support a release is unnecessary here. Illustration (b) states the precise case that failed in Foakes v. Beer and declares the debt discharged. The practical consequences are two. A creditor who agrees to take less cannot resile on the ground that he received nothing in return. And a promise to remit binds in India even before it has been acted upon, whereas in English law an executory accord without satisfaction does not.

3. Section 63 and Accord and Satisfaction

	Accord and satisfaction at common law	Remission under Section 63
What is required	An accord, the agreement to accept something different, and a satisfaction, the consideration that makes it binding	The accord alone. No consideration is needed
Executory accord	Not binding until the satisfaction is rendered	Binding when made, since nothing further is required
Part payment of a debt	Not satisfaction, per Foakes v. Beer	Discharges the whole debt, per Illustration (b)
Payment by a third party	Recognised as an exception, the consideration moving from another	Expressly covered by Illustration (c) and by Section 41
Extension of time	A variation requiring consideration	Expressly permitted without consideration

4. Waiver and Remission

Waiver is the abandonment of a right, and it overlaps with remission without being the same thing. Remission under Section 63 gives up the performance itself; waiver gives up a right, benefit or advantage arising under the contract, such as the right to insist on a condition, on timely delivery or on a particular mode of performance.

	Remission under Section 63	Waiver
What is given up	Performance, wholly or in part, or the time for it	A right, benefit or procedural advantage
Source	Statutory	General law, resting on election and estoppel
Consideration	Expressly not required	Not required, though reliance may be needed to make it irrevocable
Can it be recalled?	No. A remission once made is binding	A waiver of a continuing requirement may be withdrawn on reasonable notice for the future
Effect on the contract	The obligation is extinguished to that extent	The contract stands; only the enforcement of a particular right is given up

One limit applies to both. A right conferred by statute in the public interest cannot be waived or remitted, since the parties cannot contract out of a provision enacted for the benefit of the public rather than of an individual. The Supreme Court applied that principle in Waman Shriniwas Kini v. Ratilal Bhagwandas & Co., AIR 1959 SC 689, in the context of rent control legislation. Where the provision exists solely for the benefit of one party, he may waive it.

5. Section 64: Rescission of a Voidable Contract

Sections 64 and 66, Indian Contract Act, 1872

64. When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is promisor.

The party rescinding a voidable contract shall, if he has received any benefit thereunder from another party to such contract, restore such benefit, so far as may be, to the person from whom it was received.

66. The rescission of a voidable contract may be communicated or revoked in the same manner, and subject to the same rules, as apply to the communication or revocation of a proposal.

The section applies only to a voidable contract, that is one avoidable under Sections 19 or 19A for coercion, undue influence, fraud or misrepresentation, or under Sections 39, 53 or 55.
The obligation to restore falls on the party rescinding. This is the feature that distinguishes Section 64 from Section 65, under which the obligation falls on anyone who has received an advantage, in either direction.
Restoration is required only 'so far as may be'. Where the benefit cannot be restored in specie, the court works out an equivalent, and where restoration has become wholly impossible the right to rescind may be lost altogether.
The other party is relieved from performing. Rescission operates on the contract prospectively; it does not treat the contract as never having existed.
Section 66 governs communication. Rescission takes effect when it comes to the knowledge of the other party, and may be revoked before it does, applying the rules on proposals in Sections 3 to 5.

6. Section 65: Restitution Where the Agreement Is Void

Section 65, Indian Contract Act, 1872

When an agreement is discovered to be void, or when a contract becomes void, any person who has 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.

Illustrations. (a) A pays B one thousand rupees in consideration of B's promising to marry C, A's daughter. C is dead at the time of the promise. The agreement is void, but B must repay A the thousand rupees. (c) A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for two nights in every week during the next two months, and B engages to pay her one hundred rupees for each night's performance. On the sixth night A wilfully absents herself from the theatre, and B, in consequence, rescinds the contract. B must pay A for the five nights on which she had sung.

6.1 The two limbs

An agreement discovered to be void. It was void from the outset, but the parties did not know it and the invalidity is established later. Illustration (a) is the model: the promise to marry a person already dead.
A contract that becomes void. It was valid when made and became void afterwards, principally under the second paragraph of Section 56 or under Section 32 where the contingency becomes impossible.

The first limb reaches an agreement void from its inception whose invalidity is discovered later, which the Supreme Court confirmed in Tarsem Singh v. Sukhminder Singh, (1998) 3 SCC 471 on the authority of Thakurain Harnath Kuar. But the word discovered carries a condition, and it is the condition most often overlooked.

📖 Kuju Collieries Ltd. v. Jharkhand Mines Ltd., (1974) 2 SCC 533

Facts: The appellant paid a large sum described as salami to the respondent in respect of a mining lease. The Mineral Concession Rules rendered any stipulation for the payment of salami illegal, so the arrangement was unlawful from the beginning and both parties were in a position to know it. The appellant afterwards sued for refund of the sum, relying on Section 65.

Held: The Supreme Court dismissed the claim. Sections 65, 70 and 72 did not apply. The payment had not been made lawfully, nor under any mistake or coercion. Section 65 applies where an agreement is discovered to be void, which imports that the parties did not know at the time of making it that it was void; where they knew from the beginning, or must be taken to have known, that the agreement was void, there is nothing to discover and the section does not assist.

Ratio: The words 'discovered to be void' require that the invalidity was unknown when the agreement was made. A party who knew, or must be taken to have known, that the transaction was void or illegal cannot recover under Section 65.

7. Sections 64 and 65 Compared

	Section 64	Section 65
When it applies	A voidable contract is rescinded by the party entitled to avoid	An agreement is discovered to be void, or a contract becomes void
Status of the arrangement	It was a valid contract until avoided	It was void from inception, or it has ceased to be enforceable
Who must restore	The party rescinding, as to benefits he received	Any person who has received an advantage, in either direction
What must be restored	The benefit, so far as may be	The advantage, or compensation for it
Effect on the other party	He need not perform any promise in which he is promisor	Neither party performs; the arrangement has no future force
Limit	Loss of the right to rescind where restoration is impossible or the contract has been affirmed	Does not apply where the parties knew of the invalidity, per Kuju Collieries, nor to a minor's agreement, per Mohori Bibee

⚠ Section 65 does not reach a minor's agreement or a knowingly illegal one

Two exclusions matter in practice. Mohori Bibee v. Dharmodas Ghose holds that Sections 64 and 65 presuppose a contract, or an agreement between parties competent to contract, and therefore do not apply where one party was a minor; relief there lies, if at all, under Section 33 of the Specific Relief Act, 1963. Kuju Collieries holds that Section 65 does not apply where the parties knew the transaction was void or illegal when they made it. The combined effect is that Section 65 is a remedy for parties who were honestly mistaken about validity, and not a route by which a party can recover money paid under a bargain he knew the law forbade.

8. The Position Stated Shortly

Section 63 permits dispensation, remission, extension of time and acceptance of any satisfaction, all without consideration.
Foakes v. Beer states the English rule that part payment does not discharge a larger debt; Illustration (b) to Section 63 reverses it for India.
Accord and satisfaction requires both elements at common law; Section 63 dispenses with the satisfaction, so a promise to remit binds when made.
Illustration (c) and Section 41 permit satisfaction to come from a third person.
Waiver gives up a right rather than performance, may be withdrawn on reasonable notice as to the future, and cannot extend to a statutory right conferred in the public interest.
Section 64 applies on rescission of a voidable contract and requires the party rescinding to restore benefits received.
Section 66 applies the rules on proposals to the communication and revocation of rescission.
Section 65 applies where an agreement is discovered to be void or a contract becomes void, and requires any person who received an advantage to restore it.
Kuju Collieries: 'discovered to be void' requires that the invalidity was unknown when the agreement was made.
Section 65 does not reach a minor's agreement, per Mohori Bibee, nor a transaction the parties knew to be void.

9. Related Topics and Provisions

Topic or provision	Connection
Discharge of Contract	The six modes and Sections 62 to 67 in outline
Novation, Rescission and Alteration under Section 62	Discharge by agreement
Exceptions to the Rule of No Consideration	Section 63 among the exceptions
Doctrine of Frustration under Section 56	Contracts that become void, and Section 65
Section 63, Indian Contract Act	Remission and its four limbs
Sections 64 to 66, Indian Contract Act	Restoration and communication of rescission
Sections 19 and 19A, Indian Contract Act	When a contract is voidable
Section 41, Indian Contract Act	Acceptance of performance from a third person
Section 33, Specific Relief Act, 1963	Restitution where a party pleads incompetence