Section 63 is not limited in its scope to novation as it is understood under English law alone, but also covers situations where the parties have rescinded the earlier contract, by substituting a new one. If there is an 1994 3 MLJ 127 at 151 intention on the part of both the parties to
substitute a new contract, the old need not be performed, even if the new merely alters certain terms of the old. The test basically is this: if a new contract is entered into by the parties, whatever its terms, the old contract is extinguished.
It does not, however, cover a situation where the terms of the old contract are merely altered or varied, without a new contract in substitution of it being entered into. In such a case, the old contract, as altered or varied, remains in force.