Novation Dictionary

Novation is the process by which the original contract is extinguished and replaced with another, under which a third party takes up rights and obligations duplicating those of one of the parties to the original contract. This means that the original party transfers both the benefits and burdens under the contract.

The criteria for novation comprise the obligee's acceptance of the new obligor, the new obligor's acceptance of the liability, and the old obligor's acceptance of the new contract as full performance of the old contract.

Three Kinds of Novation An expromissio novation that engages a new debtor who is now called expromissor: With the creditor's consent, the expromissor replaces the original debtor and takes on his obligations. A delegation type of novation: This engages a new creditor who replaces the original creditor.

Novation in real estate occurs when a party, term, or obligation in a contract is replaced with another. When this happens -- and it happens quite often in both residential and commercial real estate transactions -- the original contract is voided and replaced with the new agreement.

Novation in real estate occurs when a party, term, or obligation in a contract is replaced with another. When this happens -- and it happens quite often in both residential and commercial real estate transactions -- the original contract is voided and replaced with the new agreement.

An assignment transfers the benefit of a contract from one party to another, but only the benefit, not the burden. In contrast, a novation will transfer both the benefit and the burden of a contract from one party to another. A novation creates a new contractual relationship - a 'new' contract is entered into.