Also known as: novations · novate · novates · novated · novating
Written by attorneys · grounded in primary & secondary sources — see below
A substituted contract that includes as a party one who was neither the obligor nor the obligee of the original duty. The new contract immediately discharges the prior duty and creates a fresh obligation enforceable only under its own terms.
Elm Grain contracted with Field Rural to deliver wheat. After drought reduced yields, Elm Grain, Field Rural, and Neighbor Farm signed a three-way writing under which Neighbor Farm would deliver its own crop directly to Field Rural. The writing substituted Neighbor Farm as the new obligor, discharging Elm Grain from any further duty under the original contract.
Lena and Priya formed a limited partnership that signed a data-center lease with personal guarantees from both. After Lena dissociated, the landlord dealt only with Priya and the partnership defaulted. Lena remained liable on the lease because the landlord never agreed to substitute Priya or the entity alone for Lena's original obligation.
Select any source to read its text and confirm it supports the definition.
Novation replaces the original duty with a new contract that immediately discharges the prior obligation. An accord is merely a promise to accept different performance. Discharge occurs only upon actual performance of the accord.
Supporting sources
No. Delegation leaves the original obligor liable unless the obligee expressly agrees to release that party and accept the delegate as the sole obligor. Such an agreement is required to form a novation.
The parties must demonstrate a previous valid contract, an agreement among all three parties including the new party, immediate extinguishment of the original duties, and formation of a valid new contract. Clear evidence of mutual assent to the substitution is required.
Supporting sources
No. The promoter remains personally liable even after the corporation is formed and adopts the contract. Only a novation among the promoter, the corporation, and the third party releases the promoter.
…contract was modified by a subsequent oral agreement—presents a purely legal question having nothing whatever to do either with novation, as the district judge suggested, or reformation, as suggested by the respondents here. Such a defense goes to the question of just what, under the law, the contract between the respondents…