Novation in a real estate contract means:
Correct Answer
B) Substituting a new party or obligation for an old one, completely releasing the original party from liability
Novation substitutes a new party or a new obligation for an existing one, with the consent of all parties involved, and completely releases the original party from any further liability. This distinguishes novation from assignment: in an assignment, the original party transfers their rights but typically remains secondarily liable. In a novation, the original party is fully discharged. In Rhode Island real estate, novation commonly arises when a buyer is substituted in a contract prior to closing.
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Related Concepts
A breach of contract occurs when one party fails to perform their obligations under the contract without a legal excuse. The non-breaching party is entitled to legal remedies including damages, specific performance, or contract rescission.
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
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