Novation is one of the important modes of discharge of a contract under the Indian Contract Act, 1872. The term ‘novation’ means the substitution of a new contract for an existing contract. In other words, when the parties agree to replace an old contract with a new contract, the original contract comes to an end and the new contract becomes enforceable. Novation may take place either between the same parties or by changing one or more of the parties to the contract. The essential idea is that the old contractual obligation is extinguished and replaced by a new obligation. Section 62 of the Indian Contract Act, 1872 provides that 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. Thus, novation is based on the mutual consent of the parties. A party cannot ordinarily bring about novation unilaterally because it requires an agreement between the parties concerned. For example, A owes ₹50,000 to B under a contract. A, B and C agree that B will accept C as the person liable for the debt and that A will be released from his liability. The old agreement between A and B is replaced by a new agreement involving C. This is a case of novation by change of parties. Novation can also occur without changing the parties. Suppose A agrees to sell certain goods to B for ₹1,00,000, but before the performance of the contract both parties mutually agree to cancel that agreement and enter into a new agreement under which A will supply different goods to B for ₹1,20,000. If the new agreement is intended to replace the earlier agreement, there is novation. The important requirements of novation are as follows. First, there must be a valid and subsisting contract. There must be an existing contractual obligation which is capable of being replaced. Secondly, there must be an agreement between the parties to substitute the old contract with a new one. Mutual consent is therefore essential. Thirdly, the new contract must be legally valid and enforceable. If the new agreement is void, it may not effectively operate as a substitute for the old contract. Fourthly, the intention to replace the old contract must be clear. A mere alteration in one term of a contract does not necessarily amount to novation. The parties must intend that the old contractual relationship should be replaced