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Section 41: Effect of accepting performance from third person

Indian Contract Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1872
Section 40 All 266 Sections of Indian Contract Act Section 42

Legal Commentary & Landmark Judgments: Section 41

Section 41 of the Indian Contract Act, 1872 enacts the doctrine of discharge by third-party performance, providing that when a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the original promisor.

  • Voluntary Acceptance of Performance by Promisee: The promisee must knowingly and voluntarily accept actual performance tendered by a third party in satisfaction of the contractual obligation.
  • Absolute Extinguishment of Promisor's Liability: Once third-party performance is accepted, the promisor's liability towards the promisee is completely and irrevocably extinguished; the promisee cannot subsequently demand performance or sue the promisor.
  • Independence of Promisor-Third Party Recourse: The statutory discharge operates strictly between the promisee and promisor; it does not impair independent subrogation, indemnity, or contribution rights between the third party and the promisor.
Key Landmark Precedents:
  • Kapurchand Godha v. Mir Nawab Himayatalikhan Azamjah (1963) 2 SCR 168 / AIR 1963 SC 250: The Supreme Court held that where a creditor accepted a lesser sum from a third-party committee in full satisfaction of a claim against the debtor, Section 41 operated as an absolute bar against recovering the balance from the original debtor.
  • Union of India v. Chaman Lal Loona & Co. 1957 SCR 1039: The Supreme Court affirmed that acceptance of contractual performance from an authorized third party operates as an absolute discharge of the primary promisor under Section 41.
Courtroom Practice & Strategic Litigation Guidance:

When representing a borrower or corporate entity where a parent company, director, or affiliate settled a vendor invoice or bank liability, plead Section 41 accompanied by bank credit receipts or no-dues acknowledgments. Argue that the creditor's acceptance of performance from the third party extinguished the cause of action, barring any residual claim against the primary debtor.

Section 40 All 266 Sections of Indian Contract Act Section 42