What is novation in the context of a real estate contract?
Correct Answer
B) Substituting a new party or obligation for an original one, fully releasing the original party from liability
Novation substitutes a new party or obligation for an original one, fully releasing the original party from liability. Unlike assignment — where the original party remains liable — novation requires the consent of all parties involved and completely discharges the original obligor. In Montana real estate, novation may occur when a buyer is replaced by a new buyer with the seller's consent, extinguishing the original buyer's obligations.
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Related Topics & Key Terms
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Related Concepts
A bilateral contract is an agreement in which both parties exchange promises and are both obligated to perform, while a unilateral contract is one in which only one party makes a promise and the other party is not obligated to act.
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.
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