What is the legal effect of a novation in a real estate contract?
Correct Answer
B) Substitutes a new party or obligation and releases the original party from liability
Novation substitutes a new party or new obligation for an existing one, with the consent of all parties, and completely releases the original party from liability. This distinguishes it from an assignment, where the original party may remain secondarily liable.
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Related Topics & Key Terms
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Related Concepts
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
Equitable title is the buyer's interest in a property after a purchase contract is signed but before closing, giving the buyer the right to acquire legal title in the future. The seller retains legal title until the deed is delivered at closing.
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