Novation of contract

2024 CLD 829 ISLAMABAD Judicial Precedent

S. 62Suit for recovery of damagesNovation of contractEffectRespondent / plaintiff company filed suit for recovery of damages against appellant / defendant companyTrial Court decreed the suit in favour of respondent / plaintiff companyValidity

Discharge of original contract under S. 62 of Contract Act, 1872, was only to the extent it was novated, rescinded or altered

Such novated contract did not override intention of parties to novate original contract only partially

Original contract to the extent it was not novated or altered remained binding and operative

For novation excusing performance of previous agreements, it first needed to be established that parties agreed to substitute new contract wholly for the earlier one but it could not be so if accrued obligations under previous contract were kept alive in express terms despite new contract, all the more so where new contract was occasioned due to breach of first contract and injured party included a term in new contract that its claims under the old contract would remain alive

High Court declined to interfere in judgment and decree passed by Trial Court as novation did not excuse performance of accrued obligations under previous settlement agreements

Appeal was dismissed, in circumstances.

2024 CLC 1478 ISLAMABAD Judicial Precedent

S. 62Suit for recovery of damagesNovation of contractEffectRespondent / plaintiff company filed suit for recovery of damages against appellant / defendant companyTrial Court decreed the suit in favour of respondent / plaintiff companyValidity

Discharge of original contract under S. 62 of Contract Act, 1872, was only to the extent it was novated, rescinded or altered

Such novated contract did not override intention of parties to novate original contract only partially

Original contract to the extent it was not novated or altered remained binding and operative

For novation excusing performance of previous agreements, it first needed to be established that parties agreed to substitute new contract wholly for the earlier one but it could not be so if accrued obligations under previous contract were kept alive in express terms despite new contract, all the more so where new contract was occasioned due to breach of first contract and injured party included a term in new contract that its claims under the old contract would remain alive

High Court declined to interfere in judgment and decree passed by Trial Court as novation did not excuse performance of accrued obligations under previous settlement agreements

Appeal was dismissed, in circumstances.

2022 SCMR 1074 SUPREME-COURT Judicial Precedent

S. 62Novation of contract

Conditions for novation of contract in terms of section 62 of the Contract Act, 1872 stated.

2021 CLC 892 KARACHI-HIGH-COURT-SINDH Judicial Precedent

S.62Novation of contractPrinciplesAdjudication to determine whether there was novation of contractScope

When parties agreed to substitute a new contract in place of a pervious one, then performance of original contract was dispensed with, and Court had to examine the fact whether original agreement was validly rescinded, whether all rights and liabilities in the old contract were extinguished by such novation, and said questions were questions of fact depending on circumstances of each case.

2020 CLC 2108 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

S.62Novation of contractPrinciples

To establish novation of contract, it must be established that there existed a previous valid agreement, that there existed an agreement of parties to cancel previous valid agreement, that there existed agreement of parties that second agreement replaced first agreement and finally that the validity of second subsequent agreement must be established.

2020 CLD 269 KARACHI-HIGH-COURT-SINDH Judicial Precedent

S. 62Novation of contract

Where there existed no agreement between parties to a contract with regards to a subsequent offer, then such offer could not be considered as having materialized

Where there was non-acceptance of a subsequent offer by one party to the other party, then there was no novation of contract.

2019 PLD 333 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

S. 62Qanun-e-Shahadat (10 of 1984) Art. 102Novation of contractProof of novation of contract, essential ingredientsScope

"Novation of contract" was where new contract was substituted for a contract in existence, either between the same parties or between different parties, and the consideration mutually being the discharge of the old contract

When an agreement was substituted, both such agreements were supposed to be read together to form a complete subsisting agreement

For proving of novation of contract it must be shown that firstly there was existence of a previous valid agreement; secondly, there was an agreement of the parties to cancel the first agreement; thirdly that there was agreement of the parties that the second agreement replaced the first one; and fourthly to prove validity of the second agreement

Novation was a form of affirmative plea and the party who canvassed the same had the burden of proving it by satisfactory evidence

Article 102 of the Qanun-e-Shahadat, 1984 forbade proving contents of writing otherwise than by writing itself and best evidence about contents of a document was the document itself and production of the same was required by law in proof of its contents and basic requirement of law was to see the terms incorporated in such a document.

2019 MLD 1914 KARACHI-HIGH-COURT-SINDH Judicial Precedent

S. 62Novation of contractParties to earlier agreement, rights of

Plaintiff sought recovery of balance amount from defendants on basis of agreement executed between parties in an earlier litigation

Validity

Earlier agreement/arrangement stood novated in terms of S. 62 of Contract Act, 1872

Subsequent agreement did not contain any such clause or covenant that earlier agreement/arrangement between parties would continue and was not effected by terms of subsequent agreement

On the contrary, subsequent agreement expressly stated that even plaintiff and defendant had released each other from any claim, obligation and undertaking

High Court declined to give any finding on relevant issues as defendants had already paid share of plaintiff to him

Suit was dismissed in circumstances.

2017 PLC(CS)N 85 KARACHI-HIGH-COURT-SINDH Judicial Precedent

S. 42Civil Procedure Code (V of 1908), S.80Suit for declarationGolden Handshake SchemeAd hoc reliefNovation of contractScope

Employer-Bank announced Golden Handshake Scheme; plaintiffs-employees accepted the said option but management of Bank persuaded them to continue their service in view of exigency

Bank announced ad hoc relief but same was not extended to the employees

Validity

Golden Handshake Scheme was an agreement where an offer was given by the management of Bank which was accepted against some consideration

Plaintiffs-employees were conveyed the undertaking that all benefits accruing/admissible in the normal service regulation with Golden Handshake Scheme whichever was higher would be paid to them at the time when Bank would relieve them

Bank could not break a promise or resile unilaterally rather it was bound to remain faithful to the terms and conditions on which plaintiffs-employees were retained in job

Novation of contract was available to all employees including the plaintiffs

Plaintiffs submitted their option like other employees but they were called upon to continue

Non-tendering of notice was not fatal to the suit except that in such a situation Court was to allow not less than three months to submit written statement

Benefit of ad hoc relief was included in the full and final settlement dues of plaintiffs for which claim they filed suit and their suit was decreed

Appeal was dismissed in circumstances.

2016 CLCN 126 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

Ss. 12, 21(h), 22 & 25Contract Act (IX of 1872), S. 62Qanun-e-Shahadat (10 of 1984), Art. 129 (e)Suit for specific performance of contractDiscretionary reliefNovation of contract

Contention of defendant was that before novation of contract suit property was purchased by him through registered sale deed

Suit was decreed by the Trial Court

Validity

Plaintiff was bound to prove the novated contract and then he could press for performance of original agreement to sell

Registered sale deed which was prior in time was in existence against the novated contract

Vendees were not owners of suit property at the time of novated contract and they could not enter into agreement with the plaintiff

Plaintiff was in knowledge of sale of suit property at the time of novation of contract

Suit property was sold by one of the defendants to the plaintiff being attorney of others but no such power of attorney had been placed on the file

Plaintiff was bound to produce Petition Writer along with his register to prove date of execution of agreement to sell and Stamp Vendor to prove the issuance of stamp paper on specific date

Best evidence had been withheld by the plaintiff and presumption would be that same was against him

Impugned agreement to sell was executed by a person who was not having any title and same was not specifically enforceable

Grant of decree for specific performance was a discretionary relief and court could exercise such discretion in favour of a person who had proved his entitlement for the same

Defendant could not be burdened to prove the bona fide purchaser of suit property when possession was also delivered to him under the sale

Plaintiff was bound to prove the knowledge of defendant about his original contract at the time of sale deed but no such evidence was produced

Appeal was accepted in circumstances and suit was dismissed with costs throughout.

2016 CLD 527 KARACHI-HIGH-COURT-SINDH Judicial Precedent

S. 62Novation of contractObject, import and scope

Novation means and be construed when contract already in existence is extinguished and a new contract is created, whereunder new rights emerge in favour of parties

Unless rights under old contract are explicitly relinquished, no new contract comes into force

Procrastination by a party to abide by terms of contract and to gain benefit out of it does not mean novation of contract

Novation comes about where parties to contract mutually agree to substitute it with new contract

If a party alleges novation of contract, it has to establish such prerequisites.

2016 CLC 351 KARACHI-HIGH-COURT-SINDH Judicial Precedent

S. 62Novation of contractObject, import and scope

Novation means and be construed when contract already in existence is extinguished and a new contract is created, whereunder new rights emerge in favour of parties

Unless rights under old contract are explicitly relinquished, no new contract comes into force

Procrastination by a party to abide by terms of contract and to gain benefit out of it does not mean novation of contract

Novation comes about where parties to contract mutually agree to substitute it with new contract

If a party alleges novation of contract, it has to establish such prerequisites.

2015 PCrLJ 1240 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

Ss. 5(r) & 18Contract Act (IX of 1872), S. 62Companies Ordinance (XLVII of 1984), S. 284(2)Constitution of Pakistan, Art. 199Constitutional petitionQuashing of referenceWilful defaultNovation of contract

Petitioners availed finance facility from financial institutions and reference was filed by National Accountability Bureau on the allegation of wilful default

Plea raised by petitioners was that there was a novation of contract between parties and no amount was outstanding against them

Validity

Subsequent contract based on mutual agreement of parties was novation of original contract between petitioners and creditor banks and other institutions

Once original contract had been novated, right and obligations thereunder stood extinguished and were replaced by rights and obligations under the novated contract

Novation of contract in fact had created a new contractual obligation and variation in terms of original contract, therefore, if there was any default simplicitor or wilful, stood extinguished by virtue of subsequent agreement between the parties which came under judicial consideration of High Court in civil suit

As the arrangement between the parties was already pending between the parties before competent Court of law, therefore, there was no occasion or cause of action available with financial institution to file a complaint with National Accountability Bureau or National Accountability Bureau authorities to proceed against petitioners under National Accountability Ordinance, 1999

Petitioners had paid all outstanding amount to creditor banks along with mark-up and authorities had no objection to quashing of reference

Petition was allowed in circumstances.

2013 CLC 76 ISLAMABAD Judicial Precedent

Ss. 42 & 54Contract Act (IX of 1872), S.62Suit for declaration and injunctionAgreement to sell and sale-deedNovation of contract

Plaintiffs relying on agreement to sell claimed their right over suit property and asserted that sale-deed referred by defendants was registered in furtherance of agreement to sell in question

Validity

Agreement to sell in question was executed between vendor and plaintiffs, whereas registered sale-deed was executed between vendor and defendants

Purchasers mentioned in agreement to sell and registered sale-deed were different persons except plaintiffs

Sale-deed, nowhere mentioned that the same was executed in furtherance or in consequence of agreement in question, therefore, registered sale-deed in question was not outcome of the agreement

Even if sale-deed in question was executed in pursuance of sale agreement, then too according to section 62 of Contract Act, 1872, after execution of registered sale-deed, the same did not require its performance and sale agreement had no binding effect and plaintiff could not ask for any relief

Findings of two Courts below did not suffer from jurisdictional defect nor the same were result of misreading and non-reading of evidence and did not call for interference

Plaintiffs failed to point out any illegality, irregularity or jurisdictional defect in the judgments of the courts below warranting interference by High Court in its revisional jurisdiction

Revision was dismissed in circumstances.