Definition, Meaning & Synonyms

novation

noun

/nəʊˈveɪ.ʃən/

Definition

The act of replacing an old obligation with a new obligation, typically involving at least three parties: the original party, the new party, and the party receiving the benefits.

Examples

After careful consideration, the company decided to pursue novation to transfer its contractual obligations to a third party.
The novation process enabled the supplier to change while maintaining the existing contract terms.

Meaning

In legal and contractual terms, novation refers to the process where one party transfers its rights and obligations under a contract to another party, thereby creating a new contract that extinguishes the old one.