What Is Novation?
The substitution of a new contract or obligation for an existing one, where all parties agree to release the original party from liability. In real estate, novation commonly occurs when loan assumptions or contract modifications require the original obligor to be released with the consent of all parties involved.
Novation across 2 exams
Novation appears on the following exams. Each defines it in the context candidates are tested on:
- CA Salesperson
- The substitution of a new contract or obligation for an existing one, where all parties agree to release the original party from liability. In real estate, novation commonly occurs when loan assumptions or contract modifications require the original obligor to be released with the consent of all parties involved.
- FL Sales Associate
- The substitution of a new contract or a new party for an existing one, with all parties' consent, so that the original obligation is extinguished and replaced.