63. Effect of novation, rescission and alteration of contract

If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.

Illustrations

A owes money to B under a contract. It is agreed between A, B and C that B shall henceforth accept C as his debtor, instead of A. The old debt of A to B is at an end and a new debt from C to B has been contracted.

A owes B $10,000. A enters into an arrangement with B and gives B a mortgage of his (A’s) estate for $5,000 in place of the debt of $10,000. This is a new contract and extinguishes the old.

A owes B $1,000 under a contract. B owes C $1,000. B orders A to credit C with $1,000 in his books, but C does not assent to the agreement. B still owes C $1,000 and no new contract has been entered into.