Definition of novation

1. substitution of a new contract or obligation for an existing one, and the discharge of the existing obligation. The exchange adjusting or altering existing mutual obligations is by mutual agreement, with either buyer or seller paying the difference in market value to equalize the exchange.
2. substitution of one of the principals to an agreement, either the creditor or debtor. Contrast with assignment.

substitution of another party for one of the original parties to a contract, with the consent of the remaining party. The old contract is then extinguished, and a new contract, with the same content but with at least one different party, is created. A novation often involves a transaction whereby the original debtor is discharged from liability to his creditor by substitution of a second debtor.

1. agreement to replace one party to a contract with a new party. The novation transfers both rights and duties and requires the consent of both the original and the new party.
2. replacement of an older debt or obligation with a newer one.

1. a 3-party agreement whereby one party is released from a contract and another party is substituted.
   Example: Baker wants to buy Abel's home and assume the mortgage. Abel wants to be released from all mortgage liability. Good Money Savings Association cooperates. The three sign a novation whereby Baker is substituted for Abel on the mortgage.

2. Substitution of one contract for another, with acceptance by all parties.