by In contract law, remission refers to the acceptance by the promisee of a lesser fulfillment or performance than what was originally promised, thus releasing the promisor from further obligations. It is a form of waiver where the creditor agrees to reduce or give up part of the claim without requiring fresh consideration. Under Section 63 of the Indian Contract Act, 1872, the promisee may remit (wholly or in part) the performance of the promise made to them, extend the time for such performance, or accept any satisfaction they see fit.
This essentially means the promisee holds the right to let the promisor off from performing fully, either by accepting part payment, a lesser action, or even nothing at all, and such remission will be legally binding even without new consideration. For example, if a debtor owes ₹10,000 and the creditor agrees to accept ₹7,000 in full settlement, the balance is legally remitted.
Examples of Remission:
- Partial Payment Acceptance: A owes B ₹5,000. B tells A, “If you pay me ₹3,000 today, I will settle the whole debt.” A pays ₹3,000, and B cannot later claim the remaining ₹2,000. This is a classic remission example.
- Reduced Service Acceptance: A contractor agrees to paint a building but, due to some difficulty, only paints half. If the client agrees to accept half the work as full performance, they cannot later demand the remaining part.
- Time Extension: A landlord agrees to accept delayed rent payments without penalty. By extending the time, they remit the right to claim penalties.
- Waiver of Rights: A creditor, for personal reasons, tells a debtor they no longer want repayment. The creditor has remitted their right and cannot demand payment later.
- Bank Settlements: Banks often settle loans by agreeing to accept partial amounts as full settlement, legally remitting the balance.
Forms of Remission:
- Complete Remission
Complete remission occurs when the promisee voluntarily forgives the entire obligation owed by the promisor. This form of remission releases the promisor from all liability, even if the obligation is due. For instance, a creditor may tell a debtor that no repayment is necessary due to the debtor’s financial hardship. This complete release is valid under Indian contract law even without fresh consideration. It is based on the principle that a party can waive their rights voluntarily and legally relieve the other from performing any part of the agreement.
- Partial Remission
Partial remission involves the promisee agreeing to accept a part of the obligation as full satisfaction of the entire obligation. For example, if a debtor owes ₹10,000 and the creditor agrees to accept ₹6,000 as full settlement, the remaining ₹4,000 is legally waived. This is enforceable under Section 63 of the Indian Contract Act and does not require any additional consideration. The promisee has the discretion to reduce the contractual obligation, making this a widely used form of remission in personal settlements and commercial dealings.
- Remission by Extension of Time
This form allows the promisee to extend the deadline for the promisor’s performance. By doing so, the promisee waives their right to enforce strict timelines as per the original agreement. This type of remission is often granted in good faith to accommodate unforeseen circumstances or foster long-term business relationships. For example, if a borrower is unable to repay a loan on time and the lender extends the due date, the lender is remitting the right to timely performance without altering the core obligation.
- Conditional Remission
Conditional remission refers to waiving part or whole of the obligation under specific terms or conditions. For instance, a creditor may agree to reduce a debt if the debtor pays a certain amount within a specific timeframe. If the condition is fulfilled, remission becomes effective; otherwise, the original obligation stands. This form gives flexibility to the promisee and incentive to the promisor to comply promptly. It is legally binding if the conditions are clearly communicated and mutually agreed upon.
- Remission of Penalties or Damages
In this form, the promisee agrees to forego penalties or compensation even if the promisor fails to meet the contract’s terms. For example, a contractor delays completing work but the client, due to goodwill or ongoing relationship, chooses not to claim the penalty. The promisee’s acceptance of late performance without demanding penalty constitutes remission. This promotes cooperation and allows parties to maintain business ties while managing minor defaults amicably.
- Remission by Conduct
This occurs when the promisee, through repeated actions or behavior, implies a waiver of strict performance. For instance, if a landlord regularly accepts late rent without objection, the tenant may assume timely payment is not strictly required. Courts can interpret this behavior as implied remission. It is important that such conduct be consistent over time to establish legal standing. While not explicitly agreed upon, it is still legally valid and enforceable.
Limitations of Remission:
- No Remission After Full Performance
Once the promisor has completely performed the contractual obligation, the promisee cannot subsequently offer remission. The principle behind this limitation is that remission is only valid when the promisee accepts a lesser obligation in place of the original, before performance occurs. If the promisor already delivers as per the original contract, there is nothing left to remit. Attempting remission after performance is legally irrelevant and unenforceable, as the contract has already been discharged by full satisfaction of terms.
- Must Be Granted by Lawful Promisee
Remission must be offered by a person who is legally entitled to the benefit of the contract—known as the lawful promisee. If a third party or unauthorized agent attempts to remit a contractual obligation, the remission is invalid. The promisor remains fully liable under the original terms unless the rightful promisee consents. This ensures that rights are only relinquished by those who lawfully possess them. Unauthorized remission is not recognized under Indian Contract Law and offers no legal protection.
- Does Not Bind Co-Promisees Without Consent
When multiple persons jointly hold the right to a contract (co-promisees), remission granted by one without the consent of others may not be binding on all. Indian Contract Law requires that all promisees agree before a joint contractual right can be waived or reduced. Without mutual consent, remission offered by one party does not discharge the contract. This limitation protects co-promisees from losing their share of a claim without agreement and ensures collective decisions in joint contractual arrangements.
- Cannot Be Used to Evade Statutory Obligations
Remission cannot be used as a tool to bypass legal or statutory obligations imposed by law. For example, remission cannot excuse a party from compliance with statutory dues like taxes, public utility payments, or environmental liabilities. Such obligations are imposed by law and are non-negotiable through private contracts. Courts will not enforce remission clauses or settlements that conflict with public interest or mandatory statutory provisions. Any remission contrary to law is void and unenforceable under Section 23 of the Indian Contract Act.
- May Not Be Enforced Without Proper Evidence
Although remission does not require fresh consideration, proof of the remission agreement is essential in case of a dispute. If the remission is not documented clearly—preferably in writing—the promisor may be held liable for the full original obligation. Oral remission is legally valid but often challenged due to lack of clarity or proof. In such cases, courts may disregard the remission due to insufficient evidence. Hence, remission without documentation carries the risk of non-enforceability.
- Conditional Remission May Be Revoked
When remission is offered with certain conditions (e.g., partial payment by a specific date), failure to meet those conditions may nullify the remission. The promisee can revoke the concession if the promisor does not comply with the agreed terms. This makes conditional remission less secure unless both parties strictly adhere to the stipulated conditions. The promisor must perform as per the revised terms to benefit from the remission; otherwise, the promisee may enforce the original contract in full.
Key Conditions for Valid Remission:
- Voluntary Agreement by Promisee
The first and most essential condition for valid remission is that the promisee must agree to it voluntarily. There should be no coercion, fraud, or undue influence involved. The decision to remit wholly or partially must arise from the free will of the promisee. Courts recognize that a person can legally abandon a right or claim, provided the choice is deliberate and informed. This ensures fairness and that the promisor is not held liable for obligations already forgiven or waived by the promisee.
- No Need for New Consideration
According to Section 63 of the Indian Contract Act, 1872, a valid remission does not require fresh consideration. This is a notable exception to the general rule that a contract requires consideration to be enforceable. If a creditor agrees to accept a lesser amount than owed, or delays performance, the debtor need not offer anything extra in return. This facilitates simpler settlements between parties and helps reduce legal disputes where the creditor wishes to show leniency or maintain goodwill.
- Acceptance of Remission by Promisor
The remission must be accepted by the promisor for it to take effect. Although remission is generally initiated by the promisee, the promisor must also agree to and act upon the revised terms. For example, if a creditor says they’ll accept ₹5,000 instead of ₹10,000, the debtor must make the payment and the creditor must accept it. Once the promisor fulfills the obligation under the remitted terms, the original contract becomes discharged, and no claim can be made on the original obligation.
- Remission Must Be Clear and Unambiguous
The terms and scope of remission should be expressed clearly and leave no room for ambiguity. Whether the remission involves a partial payment, delayed performance, or complete waiver, the promisee’s intention must be explicitly communicated. Ambiguous remission may lead to legal confusion or disputes. A clear and well-documented remission ensures both parties understand their changed rights and duties. Written communication, though not mandatory, is recommended for legal clarity and to avoid misinterpretation or subsequent denial of remission.
- Timing of Remission
Remission must be granted before the promisor has fully performed their part under the original terms. Once the obligation is performed as per the original contract, remission cannot retroactively apply. The timing is especially important when the remission relates to reduced performance or relaxation of terms. Courts will not uphold remission offered after performance unless there’s mutual agreement and benefit shown. Thus, valid remission is prospective in nature and must be accepted and acted upon within the period of contractual obligation.
- Legal Capacity of Parties
Both the promisor and promisee must have legal capacity to enter into the remission. This means they must be of sound mind, not minors, and legally competent under contract law. If any party lacks capacity, the remission may not be legally binding. The principle is the same as in any valid contract—legal competence ensures both parties understand the implications of their actions. If the promisee lacks capacity, any remission offered may later be challenged as invalid.
