Novation
Replacing one party in a contract with a new party, with everyone's consent. Different from assignment because the original party is fully released.
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Part 1 of 4
Why a seller cares
Novation swaps one party for another and lets the original party out completely. It matters if a buyer wants to hand your contract to somebody else and walk away from any duty under it.
Part 2 of 4
A simple example
The original buyer, an LLC, asks to be replaced by its partner's LLC with you agreeing the first one is released. That is a novation, and it takes your signature.
| How the contract changes hands | Who is still on the hook |
|---|---|
| Assignment | The new buyer, and often the original one too |
| Novation | Only the new buyer; the original is released |
| Neither, buyer stays the same | The buyer you signed with |
Novation needs everyone's consent because it lets somebody out.
Part 3 of 4
What people get wrong
That assignment and novation are the same. An assignment can leave the first buyer liable; a novation cannot.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
In your Room, this word explains itself where it appears.
Your Room defines novation in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
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