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Section 64: Consequences of rescission of a voidable contract

Indian Contract Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1872
Section 63 All 266 Sections of Indian Contract Act Section 65

Legal Commentary & Landmark Judgments: Section 64

Section 64 of the Indian Contract Act, 1872 mandates the statutory consequences of the rescission of a voidable contract, providing that the counterparty is excused from performing any executory promise, and the rescinding party must restore any benefit or advantage received under the contract to the person from whom it was received.

  • Discharge of Counterparty's Executory Obligations: Upon valid rescission of a voidable contract by the party entitled to do so, the other contracting party is completely relieved from executing any further promise contained therein.
  • Mandatory Restitution of Benefits (Restitutio in Integrum): The rescinding party is under a strict statutory duty to restore any benefit, advance consideration, or property received under the contract to the party from whom it was received, so far as may be.
  • Prevention of Unjust Enrichment across Contractual Rescissions: Applies not only to contracts voidable for vitiated consent (Sections 19, 19A), but also to rescissions executed under Section 39 (repudiation), Section 53 (prevention of performance), and Section 55 (time of essence).
Key Landmark Precedents:
  • Murlidhar Chatterjee v. International Film Co. Ltd. AIR 1943 PC 34 / (1942-43) 70 IA 35: The Privy Council ruled that Section 64 applies to rescission under Section 39; a party who terminates a contract on account of the other party's breach must restore the money or benefit received, subject to its right to claim damages under Section 75.
  • Union of India v. Raman Iron Foundry (1974) 2 SCC 231: The Supreme Court recognized that upon rescission, rights and duties are adjusted under the restitutionary framework of Section 64, barring arbitrary unilateral retention of counterparty funds.
  • Kailash Nath Associates v. DDA (2015) 4 SCC 136: The Supreme Court held that earnest money or advance payments can only be forfeited where actual loss is proved; in the absence of loss, Section 64 read with Section 74 mandates restitution of unearned benefits.
Courtroom Practice & Strategic Litigation Guidance:

When advising a client rescinding a contract for repudiatory breach or misrepresentation, perform an immediate benefit audit. Concurrently with the rescission notice, offer restitution of advance payments or unutilized materials under Section 64, less verified damages. This prevents the counterparty from obtaining an injunction or claiming wrongful forfeiture.

Section 63 All 266 Sections of Indian Contract Act Section 65