Substitution of an original party to a contract with a new party, or substitution of an original contract with a new contract. Upon substitution, the obligations of the withdrawing-party are automatically discharged and no express-release is required. To be effective, however, the substitution must be agreed-to by all the original and new parties to the contract. Novation is never presumed; if the novation agreement is not in writing, it must be established from the acts and conduct of the parties. Novation is not the same as assignment of an agreement where no new agreement is needed and the rights and duties are transferred from the assignor to the assignee.

Use novation in a sentence

  • If things go wrong with a business partner and you think its time for a change you can make a novation to a new party.

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  • If your partnership with a company comes to an end and you don't want to renew find a new company instead using novation.

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  • When the supplier's end of the deal fell through, it was up to the company to access its competitor for a novation, replete with the same terms; luckily the competitor agreed to the same deal.

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