Substituted satisfaction can discharge an original contractual obligation when accepted consciously and without protest under contract law

A promisee who consciously accepts a substituted form of satisfaction in place of the original promised performance may be treated as having discharged the promisor, especially where discharged receipts are returned and the surrounding correspondence shows unconditional acceptance. The text distinguishes novation, which requires agreement of all concerned parties, from acceptance of satisfaction under the contract rule allowing the promisee to accept any satisfaction it thinks fit. It also notes that an implied warranty or conditional acceptance argument fails where it is not consistently pleaded and is contradicted by the parties' conduct.

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Issues: (i) Whether the bank was discharged from its obligation to deliver the bonds when the purchaser returned the banker's receipts and accepted the other bank's SGL transfer forms as satisfaction. (ii) Whether the purchaser could still enforce the original obligation on the basis of novation, conditional discharge, implied warranty, or the argument that the acceptance of the SGL forms did not amount to final satisfaction.

Issue (i): Whether the bank was discharged from its obligation to deliver the bonds when the purchaser returned the banker's receipts and accepted the other bank's SGL transfer forms as satisfaction.

Analysis: The purchaser returned the banker's receipts duly discharged and accepted the SGL transfer forms, including the dishonoured form of the mutual fund, without protest. The possession of the discharged receipts by the bank raised a rebuttable presumption of discharge under the law of evidence, and the purchaser failed to explain why it accepted an unrealizable instrument or to rebut that presumption. The surrounding correspondence showed that the purchaser consciously sought the SGL forms and acted upon them, including by receiving interest from a third party, which supported the inference that the original obligation was displaced by the substituted satisfaction.

Conclusion: The bank was discharged from its obligation under the original receipt-based arrangement.

Issue (ii): Whether the purchaser could still enforce the original obligation on the basis of novation, conditional discharge, implied warranty, or the argument that the acceptance of the SGL forms did not amount to final satisfaction.

Analysis: Novation under the contract law provision dealing with substitution of contracts required agreement of all concerned parties and was not established. The provision dealing with acceptance of performance from a third person was inapplicable because there was no actual performance by a third party. The court treated the case as falling within the provision permitting the promisee to accept any satisfaction it thinks fit. The plea of implied warranty was abandoned before the trial court and, in any event, was inconsistent with the purchaser's own conduct and correspondence. The plea that the acceptance was only conditional was rejected because the facts showed a conscious and unconditional acceptance of the substituted instrument.

Conclusion: The original obligation could not be enforced against the bank, and the purchaser's contrary contentions failed.

Final Conclusion: The appeals succeeded, the decrees against the appellants were set aside, and the connected suits were dismissed, with restitution and costs ordered consequentially in each matter.

Ratio Decidendi: When a promisee consciously accepts a different satisfaction in place of the original promised performance, the promisor is discharged under the rule permitting remission or substitution of performance, and the promisee cannot later fall back on the original obligation absent proof that the acceptance was merely conditional.

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