A novation is

A novation is

• A. A substitution of rights through assignment.
• B. A delegation of duties without changing party identities.
• C. Agreement to substitute a new party for an existing one.
• D. A release of the original party from liability.

Answer: (C)

Novation is the substitution of a new party for an existing one in a contract, with the original party released from liability and the new party stepping into the rights and duties of the agreement. This requires the consent of all involved parties, and it creates a new contract in which the substitute assumes the obligations and gains the benefits. This is distinct from assignment, which transfers the right to receive performance but not the underlying obligations of the original party unless the obligor agrees to be released. It’s also different from delegation, where duties are handed off but the original party remains liable if the new party fails to perform. And it’s not merely a release, which ends the obligation without bringing in a substitute party. An example helps: if A owes B under a contract and A and B agree that C will take over the contract, with C now obligated to perform and B releasing A from further liability, that’s novation.

Novation is the substitution of a new party for an existing one in a contract, with the original party released from liability and the new party stepping into the rights and duties of the agreement. This requires the consent of all involved parties, and it creates a new contract in which the substitute assumes the obligations and gains the benefits.

This is distinct from assignment, which transfers the right to receive performance but not the underlying obligations of the original party unless the obligor agrees to be released. It’s also different from delegation, where duties are handed off but the original party remains liable if the new party fails to perform. And it’s not merely a release, which ends the obligation without bringing in a substitute party.

An example helps: if A owes B under a contract and A and B agree that C will take over the contract, with C now obligated to perform and B releasing A from further liability, that’s novation.