Novation
Replacing an original party or contract with a new one, which releases the original party from liability.
Quick flashcard
What does Novation mean on the Texas real estate exam?
Answer: Replacing an original party or contract with a new one, which releases the original party from liability.
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Novation definition
Novation substitutes a new contract or a new party for an existing one, with the agreement of all parties. When a party is replaced through novation, the original party is released from further liability under the contract.
This is the key difference from assignment. In an assignment, the original party usually remains secondarily liable. In a novation, the original party is fully released.
Source basis
Definition checked against the official sources below on .
On the exam
Exam trap
Tested in
Contracts & Agency (16 of 80 National)
From definition to recall
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