The substitution of a new contract for an old one. The new agreement extinguishes the rights and obligations that were in effect under the old agreement.
A novation ordinarily arises when a new individual assumes an obligation to pay that was incurred by the original party to the contract. It is distinguishable from the situation that occurs when another individual makes a guarantee that a debtor will pay what he or she owes to a creditor. In the case of a novation, the original debtor is totally released from the obligation, which is transferred to someone else. The nature of the transaction is dependent upon the agreement between the parties.
A novation also takes place when the original parties continue their obligation to one another, but a new agreement is substituted for the old one.
"Novation." West's Encyclopedia of American Law. . Encyclopedia.com. (September 18, 2018). http://www.encyclopedia.com/law/encyclopedias-almanacs-transcripts-and-maps/novation
"Novation." West's Encyclopedia of American Law. . Retrieved September 18, 2018 from Encyclopedia.com: http://www.encyclopedia.com/law/encyclopedias-almanacs-transcripts-and-maps/novation