What is Novation of Contract

What is Novation of contract?

Novation means substitution. So could be substitution of the contract or its parties , however it has be with the consent of the parties.

Substitution of contract : Now if the parties to contract agree to substitute the contract with another contract , and in such case the earlier contract need not be performed. Please note that the entire contract has be substituted and not parts of it.

 Substitution of parties:  One party is substituted by for another in contract.in such case it is trilateral agreement, ie the original parties and  new parties which is replacing once of the existing parties.

When Novation takes place, the original contract stands annulled,

Covered in section 62 of Indian Contract Law. 

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What is ¬†difference between Novation and Assignment of Contracts

What is difference between Novation and Assignment

Novation: Transfer of both rights and obligation

Assignment : Transfer of only rights and not the obligation.
Novation: Consent of both parties is must

Assignment : Consent of both parties is no

What is the difference between Lease and Leave and Licence Agreement

What is the difference between Lease and Leave and Licence Agreement:

Point of difference Lease Leave and Licence

Right Transfer of Right to Enjoy the Property, ie right to posses and enjoy the property is transfered No transfer of Rights, mere permission to use the property.

Transferable Lease is transferabel, ie one can sub-lease it Cannot be transferable

Heritable Can be inherited Cannot be inherited

Termination Cannot be terminated till the lease period comes to end Can be be terminated at convenience 
Above are the major difference, highlighted in brief. The difference betwwen the two concepts is very thin line , hence   few more points should  be considered while getting into agreement:

1. Merely writing/using the words Lease or Leave and Licence will note be decisive, whiat is important is the real  intention of the parties and this intention is determined through various  terms in the contarct, for eg if the intention was not to transfer any rights and that is how all the terms are then it would be understood as a Leave and licence Agreement.

2. Also conduct of the parties after and before the Agreement is used to understand the real intention referred above.

3. Exclusivity is also important : If teh agreement lets transferee to enjoy   the property without any interference,  the n it is a Lease agreement , so in case of Lease  the  person who gets possession enjoy exclusive rights, unlike the licence agreement. . So if the Owner does not give That means, if exclusive right to enjoy that means it is not a Lease but a Licence Agreement..

Ref: http://www.legalservicesindia.com/article/article/difference-between-lease-and-licence-1765-1.html 

Time is the essence of the contract

Time is the Essence of the Contract

                                                                  

Lets look it from the perspective of a Buyer, There is contract between a Buyer and seller wherein the Seller agrees to deliver the material by 30th June. However, Seller delivers it on    

1st July. 
Now what!!!

Buyer: As mentioned in the Contract , Time is the essence, you did not deliver in Time , so I terminate the contract.

Seller :  Wait you cannot terminate the Contract , just because this clause is mentioned in the contract. I will go the court.

The two go to court.

Buyer: As mentioned in the Contract , Time is the essence, Seller  did not deliver in Time , so I terminated the contract.

Court: It all depends on the intention of the parties Learning – Merely mentioning that Time is Essence, does not make it essential, It depends in whether the partied intended to make it essential.
The court looks at other terms The decided what was the intention of the parties

Taking the example forward, going through the contract the court found that there was clause for penalty in case of delay.
   Court :  On going through the contract  the court has found two thungs, firstly there is a clause whish states the penalty in case of delay,  this indicates  that  Time was not “THE” essential factor.

Further , there is provision in contarct for extention of Time on approval of Buyer, this further supports the understanding that Time was not essential .

 

Let’s take another example. 

Seller agrees to deliver material to Buyer by 30th July. Both parties understands that Time is very critical in this case , hence they have added the  clause of Time is essential, there is not clause for penalty for delay or time extension. 

The seller could not deliver the by 30th July for some reason, he delivered it on 1st July. Buyer accepted the goods . But later on claimed for compensation.
Buyer:  In spite of Time being Essence , you delayed. I have accepted the material but is all reduce 20% from teh invoice.

Seller : The contract does not prove for any compensation.

Seller approached the Court.

 Court :  After having seen the Contract in entirety , it is evident that both partied understood that Time was essential. However, Buyer has accepted the material, and the Buyer can rightly do so as the Buyer has the option of terminating the contract , it may or may not terminate. In this case Buyer accepted the material , meaning buyer let go the option of termination. Now after having accepted the material buyer cannot claim compensation. Buyer could have claimed compensation if both the parties have agreed on compensation before accepting the material 

 

Lets looks t scenarios where Buyer could claim compensation, , exactly like the above case Seller agrees to deliver material to Buyer by 30th July. Both parties understands that Time is very critical in this case , hence they have added the clause of Time is essential, there is not clause for penalty for delay or time extension. 

The seller could not deliver the by 30th July for some reason. On 1st Seller calls Buyer that material is ready and he shall dispatch, Buyer says he will accept with 20% deduction  price . Seller agrees and accepts the deduction. Seller delivers material. Buyer deducts 20%. Seller pleads to court that deduction was never a part of the contract. However court says that Buyer has right if deduction as it had notified Seller before accepted material and seller had also agreed to this deduction.